Long on ValueAs a follow up on my last post, I felt a deeper analysis was necessary to ascertain true risk and reward associated with GDX.
Here is GDX and it's top holdings. However, there is very little lines on a chart can't tell you, and it is definitely no substitute for indepth research.
No one can predict the future by dividing chart patterns except for seeing patterns that might or might not be there. If you are influenced by such superstitious notions, you will have better luck going to a fortune teller, you would have better odds picking winners and losers that way.
My thesis is simple and is based on research anyone can do. Gold will continue to rise and Gold miners along with them for the duration of this pandemic and GDX is well positioned to take advantage of this trend (simple right, because it isn't complicated).
The case for gold
if you are interested in gold it's because there is uncertainty in the markets. So if the markets are in stormy seas and covid is the storm of the century, you need an anchor to ascertain the true value of things and an anchor recognized the world over is Gold.
The case for miners
Right now Gold miners are the worlds printing presses. The process of mining gold is a capital intensive and like any capital intensive activity, mining gold requires the careful measuring of risk over much longer periods of time. So increasing production is no simple task. So unless you are King Midas, you can't just order the printing press to print more gold. So as the value of gold increases miners will be he only new source of gold into the market.
The case for GDX
Returns compared to their peers has been good
1 year is 60.03 %
3 years is 53.03 %
5 years is 80.43 %
Lipper Leader ratings score are out of 5 and they score well in almost all categories
Total Return 4 out of 5
Consistent Return 5 out of 5
Preservation 1 ( to be expected with gold since it does not move with inflation)
Tax Efficiency 5 out 5
Expenses are 5 out 5
They hold shares in mines all over the world, and their largest holdings are in Canada and US but are well distributed all over the world.
Holdings by Region %:
55.1% are in Canada and United States. 0.73% south America. 6.76% in South Africa, 1.29% in Europe, 0.97% in the United Kingdom, Asian pacific 14.3% and 1.31% in emerging markets.
So GDX ranks high in reliably and it is well distributed to mitigate risk. It is the Costco of Gold miners, profitable, affordable, predictable and more importantly boring.
but i would like to extend this thesis to include, that gold will continue to rise to levels higher than the previous recession and will remain there for the foreseeable future even after the dust has settled from covid19. The Price of Gold was already rising before covid and there is evidence indicating this trend will continue, so if confidence in the dollar continues to diminish it wouldn't be a bad idea holding on to GDX for the foreseeable future, but that's speculation and you will need to do your own research and arrive at your own conclusions, but until then GDX is a solid buy and hold.
So if you got into GDX you are in a solid position but hold on tight. Speculators who are late to the game are going to want to rock the boat and shake you off, but as long term investors pile on those swings will become less violent and the cost of shorting becomes more prohibitive.
