Stock market

1 FTSE 250 stock that people are buying out of hand.

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I’m always interested in looking at stocks that have strong momentum behind them, because it shows that people are actively buying. I look for growth stocks that have gained in the past year, but also in the past month, to give an indication of what’s hot right now. Of course, the choice of Nvidia Pop up on my screener, rather one FTSE 250 A stock that has received little attention.

A miner in focus

I’m talking. Hochschild Mining (LSE:HOC). The FTSE 250 name has gained 131% over the past year, with 24% of that coming in the past month alone.

Before we get to the reasons why people are buying it now, I need to take a picture of the company. The firm focuses on gold and silver exploration, mining, processing and sales. It operates three mines, one of which is in the Ayacucho region in southern Peru.

Taking advantage of commodity prices

Right off the bat, I can see a reason the stock has outperformed over the past year. The prices of precious metals have increased during this period. For example, gold touched fresh all-time highs earlier this quarter. Silver prices are also about 20 percent higher than last year.

Naturally, the gold and silver that Hochschild mines is sold on the market. So a rise in the price of these metals is very good for business. It can achieve a higher selling price without producing more than in the past.

New project coming online.

Another factor that has helped the business is growth with new ventures. Earlier in the year, it said the Mara Rosa mine would soon be ready to start commercial production.

Last month, he confirmed it was a reality, doing so ahead of schedule. I have seen many other companies in the same area push back the timeframe of new projects and mining capacity. So it’s a big deal for someone to come ahead of schedule.

Hochschild expects the mine to produce 83,000 to 93,000 ounces of gold this year. If realized, this will add a decent chunk of productivity to the business as a whole. While this will only bring financial benefits in the next year, investors are clearly optimistic about the future.

Reasons for caution

Things are not all smooth sailing. The business lost money in 2023, blamed on exceptional items. This included impairment charges incurred on various different projects. Additionally, full-year production remained low in both gold and silver.

With the sharp rise in the share price, I think investors may have gotten a bit carried away here. Don’t get me wrong, Mara Rosa could be a big winner for me. But the shares look a bit overpriced given the low yield and disappointing financial results. Furthermore, the increase in precious metal prices is an external factor and is not the result of any actions taken by the Company.

I’m not going to follow the crowd here and instead sit on my hands and knees to see where this goes over the next couple of months.


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