If ever there was an area in which to do the exact opposite of that which government and the media urge you to do, that area is the purchasing of gold.
— Robert Ringer
ETFs or Exchange Traded Funds are all the rage now. Theoretically they offer individual investors an improved investing experience over the traditional mutual fund. In practice things aren’t so crystal clear.
One ETF that’s a terrible vehicle to buy is the Van Eck Vectors Junior Gold Miners ETF (GDXJ). It is an exchange traded fund that is supposed to hold a large number of junior gold miners. It is a very succesful ETF and attracted a lot of investors. There aren’t enough junior gold mining companies to satisfy the demand from the ETF and therefore it recently started including larger gold mining companies.
My first complaint is that it doesn’t do what its name suggests: invest in junior gold miners. My second complaint that its success attracts so much capital into the underlying companies are pushed up in price. Meaning; you pay too much when you buy in now.
The fundamental problem is that an ETF can’t be more liquid than the shares of the companies that are inside of it. Many junior gold miners are not liquid at all.
What if you want to invest in the junior gold mining space and don’t want to do research on gold miners but understand enough to know buying the gold miner ETFs is a bad idea?
One solution is to ride the coattails of highly succesful value investors. Myers e.a 2001 have shown that copycat strategies work. There are several other studies indicating the same thing and it makes sense. After all, if you pick the same stock as a highly succesful investor why shouldn’t you make money too?
I screened a set of highly succesful managers who primarily invest for the long term. Every manager takes care of a portfolio over $1 billion in size. To make sure we only got juniors or small companies at least, I’ve excluded any picks $3 billion and above.
As an alternative to a gold miner ETF like the GDXJ, someone wanting exposure to this type of companies, could just buy a basket of Guru picks:
|Company||Symbol||Market Cap||Count||Total Shares||Gurus that own it|
|Eldorado Gold Corp||EGO||1964.57||4||7646580||First Eagle Investment, Ray Dalio, Joel Greenblatt, Mario Gabelli, Ronald Muhlenkamp, Paul Tudor Jones|
|Novagold Resources Inc||NG||1483.24||3||35426981||John Paulson, Seth Klarman, Murray Stahl, First Eagle Investments|
|Alamos Gold Inc||AGI||2014.65||3||2314750||Donald Smith, Chuck Royce, First Eagle, Mario Gabelli|
|Iamgold Corp||IAG||2390.44||3||49126853||Donald Smith, Jim Simons, Jeremy Grantham, John Paulson, Joel Greenblatt|
|New Gold Inc||NGD||1724||3||19736570||First Eagle Investment, Donald Smith, Ray Dalio|
|B2Gold Corp||BTG||2674.57||2||7900800||First Eagle Investment, Ray Dalio, Gabelli, Jim Simons|
|Asanko Gold Inc||AKG||317.23||2||3018914||Donald Smith, Jim Simons, Mario Gabelli|
|Yamana Gold Inc||AUY||2374.31||2||64562913||Donald Smith, Ray Dalio, John Buckingham, Joel Greenblatt|
|Osisko Gold Royalties Ltd||OR||1338.37||1||3991137||First Eagle Investment|
|Primero Mining Corp||PPP||65.36||1||17040961||Donald Smith, Jim Simons|
|Gold Resource Corp||GORO||238.15||1||20659||Charles Brandes, Jim Simons|
|Comstock Mining Inc||LODE||36.47||1||22233964||Arnold Van Den Berg, Chuck Royce|
|AuRico Metals Inc||ARCTF||151.56||1||12628982||Donald Smith|
|Gold Fields Ltd||GFI||3073.62||1||59780||Mario Gabelli, Jim Simons, Chuck Royce, Ray Dalio, Jeremy Grantham|
|Solitario Zinc Corp||XPL||29.95||1||254040||Robert Bruce, Jim Simons|
|International Tower Hill Mines Ltd||THM||90.13||1||55487842||John Paulson|
|Pershing Gold Corp||PGLC||81.51||1||3251500||Donald Smith|
|Seabridge Gold Inc||SA||685.54||1||1598207||Arnold Van Den Berg, Jim Simons|
Disclosure: long THM and XPL
P.S. I really like the qoute at the top because I am sort of part of “The Media”