Gold stocks are set to boom thanks to the commodity's price and merger activity, with UBS slapping a buy on its entire gold coverage list with the exception of Newcrest and Independence Group.
UBS put out the note as the sector enjoys a boost from a wave of mergers and acquisitions this year, with 26 deals worth in total $1.7 billion.
Gold has recovered from its March lows of $US1150 an ounce and is now trading near $US1188 ($1533).
"With the exception of Newcrest and Independence Group, we have buy ratings on our entire gold coverage list," said UBS.
"On the flipside, Newcrest is one of the best-performing resource stocks this year, an attribute we believe is due to investors simply looking for the most liquid name.
"However, with significant doubt over the operating performance of Lihir, we simply can't get a valuation close to where the market is pricing Newcrest."
Newcrest has lifted by 33 per cent in the year to date to $14.51.
The company acquired the Lihir gold mine – which produced just over a quarter of Newcrest's output – in Papua New Guinea in 2010. However, it has widely been perceived as a disappointment, suffering a $3.49 billion write-down in 2013 and a $2.65 billion impairment charge in 2014. It costs 4 per cent above the group average.
Newcrest is rated by UBS as a sell, with a target price of $10.60. Independence Group is rated a neutral.
All other gold stocks – OceanaGold, Evolution, Endeavour Mining, Perseus Mining, Alacer, Silver Lake Resources, Regis Resources, and Beadell Resources – are rated a buy by UBS.
The company was particularly keen on Evolution Mining for its "operational diversity and free cashflow growth ... we expect Evolution to re-rate higher as the market gains comfort on its recent La Mancha transaction.
Alacer was another key pick, given its "strong free cashflow generation and quality sulphide expansion project".
Beadell, Perseus and Oceanagold were other UBS preferences.
Gold miners are launching a wave of merger and acquisition activity in 2015 as the gold price picks up. Reuters says there have been 26 deals in gold mining worth more than $1.7 billion in 2015, compared with $2.2 billion of deals in the previous two years.
In the most recent deal, Evolution Mining snapped up Barrick Gold's Cowal mine on Monday for $550 million, putting it ahead of Northern Star Resources to be the No. 2 Australia-listed gold miner.
"It's made people more confident from an investor point of view," said Gavin Wendt, an analyst with MineLife. "They're earning more, they've got more cash in the bank. It's a perfect time for these cashed-up companies to do deals.
"The gold sector contrasts with other areas of the resource sector, in particular coal and iron ore.
"Most of the mid-cap gold companies are very profitable and the Australian-dollar gold price has performed strongly."
