Editor’s note: if you’re not yet a subscriber of Golden Opportunity, you can sign up to receive my newest gold and gold stock analysis (for free) here.
Most gold investors ignore an entire class of gold stocks. Right now, this ignored sector is posting record revenues and earnings – even as the price of gold is 20% down from all-time highs earlier this year.
I wouldn’t call this sector “left for dead” but it’s been widely ignored even as Q2 earnings is nothing short of a blowout from the companies reporting so far.
Three specific companies posted record or near record financials in my Golden Portfolio service just this morning.
For the year, these stocks are all 5-30% less expensive than they were on January 1st, when the price of gold was only ~2% higher – on much higher revenues that are up 2x year over year.
That’s a massive discount – and additionally, many of these companies are aggressively buying back shares AND raising dividends.
But for investors, it’s almost like these companies are invisible.
Why?
Because this one sector of gold stocks is not at all like the typical gold miner.
I’m talking about gold royalty stocks.
And look: most gold investors glaze their eyes over whenever I bring up royalty stocks. I love the thrill and excitement of researching gold explorers, developers and miners. We’ve seen some amazing gains in short order from these kinds of “bonanza” stocks. There’s a list at the bottom of this page of my “hall of fame.” Many (not all) of them are miners.
But gold royalty firms are my favorite kinds of stocks to own.
I firmly believe royalties aren’t just the best type of gold stocks: they’re the best publicly traded businesses you’ll ever want to own.
It’s true that gold royalty companies don’t usually have the excitement of a big gold drilling result, or a discovery of a new Tier 1 mine.
Instead, they have all of the hallmarks of the kind of deep value stock that you would want to own forever:
They’re capital efficient. The biggest of these companies has fewer than 50 employees and annual revenues over $2 billion.
With these revenues, they reinvest them constantly into new royalties. So they have an incredible compounding effect that tends to increase as the royalty firm matures. New royalties come online faster than old ones peter out.
So for instance, in the case of one of my royalty holdings, Compound Annual Growth Rate is larger now (~35%) than the 20-year average:
- 3-year CAGR: 34.94%
- 5-year CAGR: 20.05%
- 10-year CAGR: 15.35%
- 15-year CAGR: 7.12%
- 20-year CAGR: 12.83% (20-year total return: 1,020%)
These firms are also widely diversified. Even the smallest royalty firms have a dozen or more different royalties at any given time. The biggest have hundreds.
These royalty deals are usually spread across the world so there’s no single geopolitical risk as there is with most miners. They’re also in various degrees of development.
Some royalties are prospect stage, some are in development, some are in first production or expansion, some are mature mining operations.
And unlike a gold major with multiple projects in its portfolio, a gold royalty has no ongoing costs attached to its ownership.
The royalties in my GP service also tend to focus on building fortress balance sheets, with low or zero debt, and lots of liquidity.
Buy a Dollar of Gold for .36 Cents
Here’s a number that shouldn’t exist: Right now, you can buy a dollar of gold for about 36 cents. The best small gold miners are sitting on record value from proven gold in the ground, yet their shares still trade as if gold sells for $1,800 an ounce. That gap between what they’re worth and what they cost is the whole game of gold investing – and it only shows up early in a gold bull… which means it won’t be around much longer.
Click here to see the four miners trading at a 64% discount to their gold.
I can feel people clicking away from this article. Value stocks tend to be boring. And for a variety of reasons, even people who think of themselves as value investors rarely allow their search for investments to stray into the gold sector.
For the gold investor, the problem is you will NEVER see a big headline about a new exciting gold royalty story. People are naturally drawn to the shiny, big headlines.
There aren’t any for gold royalties.
The whole point is that gold royalties provide years (decades even) of reliable, growing revenues, dividends and internal compounding reinvestment.
You don’t get a headline out of 15-30% annual growth. You only see the amazing compounding effects after years.
Right now you can buy some of the world’s best gold royalties for a massive discount.
It won’t last.
And normally, the best way to get started is to take a membership to my Golden Portfolio service.
But it’s a $3,500 product.
The 2nd best way is to take a look at my GPIV service, which currently has four different royalty firms in the portfolio.
It’s my lowest cost, entry level service.
Get on board and you can own these deeply discounted royalty firms for decades of incredible returns.
Best,
Garrett Goggin, CFA, CMT
Lead Analyst and Founder, Golden Portfolio
P.S. If you’d like to receive (free) issues of Golden Opportunity in your inbox: click here to sign up.
