Chris Mayer – Bonner Private Portfolio (USA) –
Happy New Year!
A few of you wrote in to say that you couldn’t – as non-U.S. citizens – buy the Tocqueville Gold Fund (TGLDX).
Well, I have an excellent alternative.
Buy the Sprott Gold Miners Exchange-Traded Fund (SGDM). Anybody who can buy U.S.-listed securities can buy this.
Let me explain why you should…
First, I think any gold portfolio ought to have a decent chunk of exposure to gold stocks. They can add sizzle and pop to any gold portfolio. When gold goes up, the right gold stocks will go up a lot more.
But I don’t think you should add just any old gold stocks. They have to be carefully selected.
If you bought, for example, the VanEck Vectors Gold Miners ETF (GDX) – a popular index made up of gold miners – you got your exposure to gold stocks… but you lost more than half of your money in the last 10 years, even while the price of gold is up more than 65%!
This is why I like Tocqueville.
John Hathaway is the portfolio manager. He has a long track record in the business. Since inception, his fund delivered a return of 263%… that’s over 7% compounded annually versus 2.6% for the benchmark Philadelphia Gold/Silver Index (XAU). And that is why we have a 15% allocation to gold stocks through the Tocqueville Gold Fund.
There is only one John Hathaway… but there are other ways to separate winners from losers in the gold-mining space.
What Sprott created was an index that uses a rule-based methodology to pick winners. These stocks are all listed on major U.S. exchanges. And the index seeks to find just 25 gold stocks – those that will go up the most when the price of gold goes up.
Sprott weighs each index stock according to its quarterly revenue growth on a year-over-year basis and the quality of its balance sheet, as measured by long-term debt to equity. Simple. Timeless.
They rebalance the index on a quarterly basis with fresh results from the screening process.
So this is a way to cut out the losers in the mining business. And it should easily outperform major gold indexes such as the GDX over the long term.