Banyan Gold Corp. (TSXV: BYN, OTCQB: BYAGF)
The New Yukon Gold Rush
Prem Watsa, known as Canada’s Warren Buffett, recently caught investors’ attention with his recent move to sell Micron Technology (NASDAQ:MU), a giant in the semiconductor space, and buy Orla Mining (TSX:OLA) afterwards.
Watsa is well known for perceiving when a stock’s upside potential is about to run out, as well as providing early insight into a stock’s upside opportunities.
As a giant in the semiconductor industry, Micron Technology reported 93% year-on-year revenue growth in the most recent quarter and a forward price-to-earnings (P/E) ratio of just 11.56, which at first glance seems undervalued.
However, careful investors will notice that the company’s profit margins are just 3.1% and its return on equity is just 1.74%. Meanwhile, Micron Technology’s market capitalisation has soared to $113 billion thanks to strong cyclical trends in the semiconductor industry. Given the recent slump in demand for memory chips and concerns about a global economic slowdown, Watsa clearly sees limited room for Micron’s shares to climb further.
In contrast, Orla Mining is offering investors a dazzling opportunity in the gold mining space. Orla’s quarterly revenue jumped 64.7% and earnings surged nearly 300% year-over-year, coupled with a forward P/E of 9.68. It’s worth pointing out that this TSX gold stock is heavily favoured by insiders, with more than 51% of the stock currently held by those closest to the company’s insiders, a sign of strong confidence in the company’s future.
Comparing these two stocks reveals that Micron’s outlook, while stable, lacks the explosive growth potential of Orla Mining. The semiconductor space is highly competitive, and Micron has only carved out a niche in memory chips and has yet to venture into high-margin areas like artificial intelligence (AI). Orla, on the other hand, is well positioned to capitalize on the rising demand for gold, which is the safe-haven asset of choice for investors in times of economic uncertainty.
Financially, Orla Mining’s debt-to-equity ratio is just 12.68% compared to Micron’s 31.19%. Orla also has a robust current ratio of 4.54, reflecting the ability to comfortably handle short-term debt, and with C$180.9 million in cash reserves, Orla can fund further growth without having to rely heavily on debt or equity financing.
The recent performance of Orla’s stock should also be one of the reasons why Watsa was attracted, with the share price approaching a 52-week high of C$7.16 and continuing its upward momentum, far outpacing other mining peers. Orla’s share price is expected to rise further as gold prices remain stable and central banks continue to hoard gold.
In contrast, Micron’s share price is recovering but is more volatile, with a beta of 1.18, indicating greater sensitivity to market volatility. The tech sector as a whole is facing unfavourable factors such as regulatory scrutiny and supply chain disruptions. As a result, Watsa may think it’s a good time to lock in Micron’s profits and then redeploy to more stable and promising assets.
