The Invasion of the Quants in the Gold Space
CEO & CIO of u.s. global investors, inc.
In the summer of 2016, I travelled to Toronto and New York where I met with many sell side gold fund analysts. Since retail investors were not big investors in gold mutual funds, then who were the buyers? The only serious people buying that early were quants and huge hedge funds. The question, then, was: What factors or models were the quants using to uncover gold’s meteoric rise last year?
From our thousands of hours of data mining, we discovered low SG&A-to-revenue. “SG&A” stands for “selling, general and administrative expenses” and refers to the daily operational costs of running a company that are not related to making a product. It includes everything from shipping fees to salaries to utilities. SG&A-to-revenue is an unusual factor, not typically used amount analysts and fund managers, so we were curious to apply it.
Using this information, we looked just at the first quarter to find the mining companies that spent the least amount of money on these daily operations relative to revenue. Mining companies, after all, have had trouble with expense discipline.
What we discovered was nothing short of astonishing. All combined, the top 10 gold companies for the quarter – led by South Africa’ based Harmony Gold – returned a spectacular 88 percent. That’s almost double what the Market Vectors Gold Miners ETF (GDX) returned over the same period (45.5 percent).
Frank Holmes is the CEO and chief investment officer of U.S. Global Investors. Mr. Holmes purchased a controlling interest in U.S. Global Investors in 1989 and became the firm’s chief investment officer in 1999. In 2006, Mr. Holmes was selected mining fund manager of the year by the Mining Journal, and in 2011 he was named a U.S. Metals and Mining "TopGun" by Brendan Wood International. In 2016, Mr. Holmes and portfolio manager Ralph Aldis received the award for Best Americas Based Fund Manager from the Mining Journal. He is also the co-author of The Goldwatcher: Demystifying Gold Investing. More than 30,000 subscribers follow his weekly commentary in the award-winning Investor Alert newsletter which is read in over 180 countries.
Under his guidance, the company’s mutual funds have received recognition from Lipper and Morningstar, two trusted independent financial authorities. In 2015, Mr. Holmes led the company into the exchange traded fund (ETF) business with the launch of the U.S. Global Jets ETF, which invests in the global airline sector.
Mr. Holmes was awarded the Huron Medal of Distinction from Huron University College in 2013, his alma mater for class of 1978. This award recognizes individuals whose life achievements set an example of excellence and reflect Huron’s arts and social sciences missions.
Mr. Holmes is a native of Toronto and is a graduate of the University of Western Ontario with a bachelor’s degree in economics. He is a former president and chairman of the Toronto Society of the Investment Dealers Association.
Mr. Holmes is a much-sought-after keynote speaker at national and international investment conferences. He has spoken at the Investing in African Mining Indaba conference, the Denver Gold Group’s European Gold Forum and numerous Money Show events, sat on panels with prominent industry leaders including the editor of Barron’s, and continues to be invited as a keynote speaker at conferences throughout the U.S., Canada and overseas.
Mr. Holmes is a regular commentator on the financial television networks CNBC, Bloomberg, BNN and Fox Business, and has been profiled by Fortune as well as The Financial Times. His thoughts on gold are captured each week on a program called Gold Game Film in collaboration with Kitco News and TheStreet.com. Mr. Holmes was also the feature spread in Barron’s during the commodity rally at the start of 2004. He is a regular contributor to Forbes, Business Insider, Seeking Alpha and Wall Street Journal’s Experts Corner.
A PERSPECTIVE ON GOLD EQUITIES IN THE CURRENT CYCLE
Partner, Paulson & Co.
Marcelo Kim has been a Partner at Paulson & Co. Inc. since 2011, where he oversees global natural resource investments, specializing in gold, base metals, bulk commodities and oil & gas. Prior to that, commencing in 2009, he was a generalist analyst covering event arbitrage investment opportunities across broad sectors and capital structures. Mr. Kim is a director at Midas Gold since March, 2016. He is the Chairman of International Tower Hill Mines. He is a graduate of Yale University, where he received his BA in Economics with honors.
Tactical Gold Allocation Within a Multi Asset Portfolio
Head of Multi Asset, Newscape Capital Group Ltd.
Having studied the gold market for two decades, I have brought together a range of studies that help to explain movements in the gold price. Everything is connected and gold has a close relationship with the bond market, not just in the US, but around the world. When conditions are most attractive, it makes sense to hold a larger position in gold. And knowing when to stay away, can make a real different to your returns. I will outline my process for allocating to gold, and also touch on gold’s relationship with the miners.
Charlie Morris is Head of Multi Asset at Newscape Group where he manages the Newscape Diversified Growth Fund. He publishes Atlas Pulse (www.atlaspulse.com free sign up) on a monthly basis where he analyses the gold market. There is a bull/bear regime, a valuation framework and further analysis on the drivers behind the gold price. He is also the editor of the Fleet Street Letter, Britain’s oldest financial newsletter that discusses financial markets. Until 2015, he spent 17 years at HSBC Global Asset Management as the Head of Absolute Return. There he managed a $3 billion multi-asset fund range which was active in the gold market. He is a familiar face in the financial media. Prior to fund management, Charlie was an officer in the Grenadier Guards, British Army.
Gold: the start of a new bull Market or just a dead cat bounce?
Managing Partner of Incrementum Liechtenstein
- Where do we currently stand in the cycle? At the beginning of a new bull market?
- Are Inflation dynamics changing?
- Why the “Narrative of Central Bank Omnipotence” is crumbling.
Every bear market is the foundation of a new bull market. Chrysophiles, i.e., friends of gold, have had little cause for joy in recent years. The first few months of 2016 restored smiles to the faces of long-suffering gold holders though: The first quarter of 2016 delivered the best quarterly performance in 30 years, while the second part of the year was rather disappointing. In our presentation, we want to determine where things stand and critically assess the question whether the recent rally was merely a bear market rally or whether it has ushered in a new phase of the bull market. Numerous developments are giving us confidence that the vale of golden tears has been left behind and that a formidable uptrend lies ahead.
Ronald, born 1980 in Vienna, Austria, is a Chartered Market Technician (CMT) and a Certified Financial Technician (CFTe). During his studies in business administration and finance at the Vienna University of Economics and the University of Illinois at Urbana-Champaign, he worked for Raiffeisen Zentralbank (RZB) in the field of Fixed Income/Credit Investments. After graduation, he participated in various courses in Austrian Economics.
In 2006, he joined Vienna-based Erste Group Bank, covering International Equities, especially Asia. In 2006, he also began writing reports on gold. His six benchmark reports called ‘In GOLD we TRUST’ drew international coverage on CNBC, Bloomberg, the Wall Street Journal and the Financial Times. He was awarded 2nd most accurate gold analyst by Bloomberg in 2011. In 2009, he began writing reports on crude oil. Ronald managed 2 gold-mining baskets as well as 1 silver-mining basket for Erste Group, which outperformed their benchmarks from their inception. In 2014 he published a book on Austrian Investing ("Österreichische Schule für Anleger – Investieren zwischen Inflation in Deflation")