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Frank Holmes Says New ETF Could Outperform the GDX and GDXJ
Jun. 28, 2017 04:35PM PST
Precious Metals
Frank Holmes talks about US Global Investors’ new precious metals ETF and the future of gold.
US Global Investors (NASDAQ:GROW) launched its second ETF on Wednesday (June 28). Called the US Global GO GOLD and Precious Metal Miners ETF (ARCA:GOAU), it places special emphasis on North American royalty and streaming companies.
“[GOAU] is a very liquid portfolio, there are only 28 names focused on the value factors that over time outperform the market,” Frank Holmes said via phone.
“I believe it’s the only intelligent gold equity ETF out there,” he added, mentioning how the GDX (ARCA:GDX) and GDXJ (ARCA:GDXJ) imploded recently, hurting gold juniors. “Other precious metals ETFs are just buying names and not [looking at] the value creation per share. We focus on the value per share and the change in the value per share.”
GOAU tracks the US Global GO GOLD and Precious Metal Miners Index, which is designed to capture the performance of companies engaged actively or passively in the production of precious metals.
“The index we’ve created outperforms the GDX and GDXJ indices 95 percent of the time in a row on a 12-month basis,” said Holmes. Together with his team he spent spent 8,000 hours on research for GOAU and the index it tracks.
The index will be rebalanced and reconstituted quarterly, and as mentioned will focus on North American royalty and streaming companies. Holmes, who is bullish on gold, considers royalty and streaming companies the “smart money” of the mining space.
Royalty and streaming companies serve as specialized financiers that provide upfront capital to help fund projects. In return, they receive royalties on metal produced, or in the case of streaming, rights to an agreed-upon amount of gold, silver or other precious metal.
GOAU uses a smart factor model that emphasizes firms showing the highest revenue per employee. The top three companies included in the new ETF are Franco Nevada (TSX:FNV,NYSE:FNV), Wheaton Precious Metals (TSX:WPM,NYSE:WPM) and Royal Gold (NASDAQ:RGLD).
“The other [companies included] are based on their market cap and liquidity, and have other sets of factors that drive them,” he said. “The portfolio is also very inexpensive,” Holmes also noted, as the expense ratio is 0.6 percent.
In another recent interview with the Investing News Network, Holmes said that aside from gold he is watching copper and lithium very closely this year. Click here to watch the full interview.
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.
