#7 - Vectors Gold Miners ETF (NYSEARCA:GDX)
Year-to-Date Gain: 41%
The last mining play isn’t a mining stock, but an ETF. These funds are an exceptional way to invest in a basket of gold mining stocks without having to take possession of the physical bullion (which is often not an option for investors). And one of the best funds for that purpose is the Vectors Gold Miners ETF (NYSEARCA: GDX).
One of the best parts of owning this ETF however is that Barrick Gold and Newmont (two of the stocks in this presentation) make up 30% of the ETFs weighting. That means that as the outlook for these two companies remains bullish so should the ETF.
In the 12 months ending in February 2020, the Vectors Gold Miners ETF delivered a total return of 32.6%, more than double that of the S&P 500. Since then, the ETF has brushed off the selloff in March and is now up over 40% on the year.
About VanEck Gold Miners ETF
The Fund seeks to match as closely as possible the price and yield performance of the AMEX Gold Miners Index. The Fund, utilizing a passive or indexing investment approach, attempts to approximate the investment performance of the Index by investing in a portfolio of stocks that generally replicate the Index.
- Current Price
- $34.73
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 4 Buy Ratings, 7 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $34.73 (0.0% Downside)
Gold has been climbing to levels not seen since 2013. And as the cost of the precious metal continues to climb, so too does the price of gold stocks. I can make a case that gold should be a part of every investor’s portfolio. But in volatile times, many investors flee to the safety of gold as part of the “Fear Trade”.
The fear trade is an amalgam of three fears that are prominent among investors. These are the fear of war, the fear of a recession, and the fear of the unknown.
And mining stocks, like the ones in this presentation, can be a great way to invest in that fear trade for two reasons. First, they provide investors with leverage. For example, if gold goes up another $100 from its current level, investors will get right around a 5% boost. That same $100 would increase the cash operating margin of a gold miner by a double-digit percentage.
Second, mining companies are always responding to broader market conditions. This means they can bring mines online or rein in costs as market conditions dictate. With physical gold, you have less protection on the downside.
The uncertainty in our economy is not just about the effects of the novel coronavirus. Remember, we’re still in an election year.
That means that gold looks like a solid bet for the rest of 2020, and maybe further than that.
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