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Markets have gone through a lot of turmoil in 2016. It’s why we’ve “pounded the table” on owning gold…
Regular Daily readers know we view gold as “wealth insurance.” It’s a defensive position—a hedge against geopolitical uncertainty, currency debasement, and “black swan” events. You buy it and hope you never have to spend it.
But several subscribers have asked us about the best way to leverage the upside potential of a new gold bull market. So today we turn to longtime PBRG friend—and exceptional stock picker—Chris Mayer for his take…
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From Chris Mayer, chief investment strategist, Bonner & Partners: People often ask me for my favorite gold stock.
That’s easy. It’s not even close! In fact, this stock should be a core holding for anyone who wants some exposure to the yellow metal.
Last Wednesday, I was at Grant’s Spring Investment Conference in Manhattan. It’s a semiannual gathering of gold bugs and bearishly inclined investors.
One of the speakers was Pierre Lassonde, the chairman and co-founder of Franco-Nevada (FNV), a gold royalty business.
His talk was titled “Gold: The Investment You Never Knew.” It was a standard pitch on gold with a predictable conclusion: Lassonde is bullish on the metal.
But he was silent about the elephant in the room… the attractiveness of Franco-Nevada itself.
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Lassonde, 69, is a legendary character in gold circles thanks to the freakishly high performance of Franco-Nevada’s stock.
From its inception in 1982 to its purchase by Newmont Mining in 2002, Franco-Nevada delivered a 36% annualized rate of return to its stockholders.
This is an astounding return for a stock in an industry—gold mining—notorious for being unrewarding. In fact, it’s an astounding performance for a stock in any industry.
In 2007, Newmont spun out Franco-Nevada. It’s been on its own again ever since. And it continues its winning ways. Since 2007, the stock is up 345%.
By comparison, the GDX—an exchange-traded fund made up of gold miners—has lost half its value. The price of gold itself is up only 50%.
What’s Franco-Nevada’s secret? Well, it’s not a miner. It’s a gold royalty company.
In essence, it is a kind of financier. The company fronts the money for part of a mine’s development in exchange for a royalty, or a percentage of what the mine produces over time. As such, it escapes a lot of the dirty work of mining.
Franco-Nevada’s return on capital is better and more consistent than gold miners’… and it still makes money on gold’s upside.
But Franco-Nevada can generate a solid return on its capital even when the gold price goes nowhere. It’s also debt-free and loaded with cash.
I alerted my readers that Franco-Nevada was a good buy in December—when the stock was $46. Today its $67… a 40% gain.
Even at today’s level, Franco-Nevada is one to buy and hold for the long haul. It’s easily my favorite gold stock.
Reeves’ Note: Last week Agora Inc. founder Bill Bonner revealed the secrets behind Chris’ personal investment strategy. It’s the same strategy Chris used to beat the market by more than 2-to-1 over a decade. His readers had the chance to book gains of 41%, 114%, 233%, and more—in as little as three months.
Bill believes in this system so much, he’s committed $5 million of his family’s money to Chris’ recommendations. You can learn all about the strategy… and invest in the same companies Bill’s family trust will be investing in. Click here to watch this free video now.
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