The Canadian gold stocks in an American portfolio
One U.S. fund manager has earned strong returns by adjusting to the price of gold, says this advisory, and turning to Canadian gold stocks.
Where would you go to get a reliable reading on Canadian gold stocks?
The United States might not seem like the most logical answer at first glance, but it makes a good deal of sense.
In these days of record high gold prices, we find many U.S. analysts lining their portfolios with Canadian gold stocks.
Today we turn to one American fund manager who has had exceptional success with these stocks.
Our guide is a leading U.S. advisory we visit often, Personal Finance. In its “Fund Focus” segment, it turns the spotlight on Mr. Joseph Wickwire, the manager of Fidelity Select Gold (FSAGX).
While a U.S. mutual fund will not be on the shopping list of most Canadian investors, the contents of its portfolio are of great interest.
For one thing, it has only 5 per cent in bullion. Thus it is heavily invested in gold stocks — even though these have not generally kept up with the rising price of gold.
For another, it is heavily invested in Canadian gold stocks.
Long-term outlook for gold
Yesterday, gold prices and gold stocks slid as the U.S. dollar advanced. Today gold has jumped back up to $1,242.
But then we’ve become accustomed to regarding the market today like the weather in Ireland — wait a half an hour and it will change.
That uncertainty alone would seem to speak for the continuing allure of gold. Mr. Benjamin Shepherd, writing for the advisory, certainly expects gold to go higher. Interestingly enough, Mr. Wickwire is not quite as bullish as Mr. Shepherd — “but he’s in the ballpark.”
He constructs his portfolio on the long-term outlook for the price of gold. When he’s very bullish, he stocks up on junior exploration and production names.
When he’s less optimistic, he leans to established senior producers, like two Canadian giants. And that’s where he is now.
Moving up
Recently the manager has added to his positions in Barrick Gold (TSX/NYSE-ABX) and Goldcorp (TSX-G; NYSE-GG), which is in this advisory’s Growth Portfolio.
Both of these stocks fell yesterday, but each has been moving up lately. Barrick, whose shares have risen slightly today, is trading at $45.89 and yielding almost 1 per cent on its dividend of $0.41.
Goldcorp, which is down slightly today, is trading at $45.33 and yields 0.4 per cent on its 18-cent dividend.
The third major that has been bulked up in the portfolio is America’s Newmont Mining (NYSE-NEM). Considered a bit of a disappointment not long ago by some analysts, Newmont has been surging lately and reached a 52-week high last week. It is up again today, trading at $60.22 and yielding 0.7 per cent on the dividend of $0.40.
Not quite seniors
Mr. Wickwire reduced his positions in two not-quite-senior stocks in the portfolio. One is Canada’s Agnico-Eagles Mines (TSX/NYSE-AEM). Its share price was down earlier this year and has been climbing back toward its highs of last fall.
It is now trading at $63.07 and yielding 0.3 per cent on the $0.18 dividend.
The other is South Africa’s Anglogold Ashanti (NYSE-AU). This stock is not too far below its December high, trading at $44.20 with a yield of 0.5 per cent on a dividend of US$0.19.
Despite this shift, the fund is still weighted toward junior gold stocks, just not as heavily as in the past.
No hot start-ups
This fund manager does two things that keep his portfolio buoyant in changing markets, says Mr. Shepherd.
First, he avoids speculation and momentum trading and stays away from hot start-ups. If a company has no reserves, it has no place in his portfolio.
Second, he doesn’t restrict himself to gold. He occasionally adds precious metals like platinum, palladium and silver — and he’s even been known to pick up a little coal and steel. But he doesn’t have a large hoard of these other metals at the moment, the author tells us.
Mr. Wickwire “remains bullish about gold prices over the long term.” The fundamentals remain strong. “Production may be falling, but demand should continue to pick up in a world where key economies face large trade and fiscal deficits.”
This fund manager’s willingness to adjust his portfolio has given him strong returns — 18 per cent over the past year. He doesn’t always shine in bull markets, but his “commitment to quality” has been generating “impressive returns over the long haul” in all market conditions.
Which, when you think about it, is what gold is supposed to do.
And this fund manager is showing you can have a Midas touch with gold stocks. Especially Canadian gold stocks.
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