I wanted to quickly have some exposure to precious metals a few months ago. I never liked buying GLD or SLV. Buying ETFs just doesn't appeal to me. And the alternative of buying physical? Who's got the time to go buy it, store it, clean it...
So I ran a quick screen for "quality" miners. And I mean quick. My simple rules where these:
Then I did some back-of-the-envelope research, and quickly decided on Barrick Gold (B) and Pan American Silver (PAAS). So far it's working out great! Far outpacing direct exposure to the metals.
What do you think? Miners or metals? What would you use to screen for "quality miners" ?
NOTE: when I ran the screen PAAS shares were decreasing Looking at it again the shares picture for PAAS is muddy. I'll probably take profits and buy more B.
Silver specifically can really spike and then tank.
If the metal goes up by X the miners will go up by more…and vice versa.
If the stock market crashes, the miners historically crashed also, but the ETFs don’t because they are the metal price. See GFC for example.
Miners have execution and capital allocation risk which the metal doesn’t. This applies more to the smaller ones than the bigger ones. e.g. a miner might make a LOT of cash, but rather than pay down debt or do divis (which the market can easily price), they may decide to buy a mine somewhere or buy another miner which may benefit management but not shareholders.
So I think it depends what you are looking for and also what system you follow as to what can be backtested.
You have a third path @marco ...precious metal royalty bussines like Triple Flag Precious Metals Corp. They are usually expensive cause they have no burden of miner assets
I've heard that the miners eps estimates are generally based on much lower metal prices. So if the prices hold for the metals, the stocks should do very well. Also, some miners hedge production and as those hedges roll off, their earnings will surge even more. I have 2/3 in miners and 1/3 metals.
I asked Gemini 3: "What are the top 10 metrics to predict the future returns of precious metals mining stocks? I am only interested in companies with producing mines - not explorers with $0 sales. I do not have access to mining industry specific data like AISC, production or reserve data. I will be using Portfolio123 to create a ranking system using these metrics."
I created a ranking system based on the reply and a Screen using it’s recommendations. Screen Ranking system
10 year Screen backtest results are below. It only holds 5 stocks since it is such a small universe, but it did ok with 10 stocks also. Not bad for something thrown together quickly. The liquidity rule is low also - typically fine for me, but not for groups for big investors.
Gold and silver stocks have been moving in sync lately, but silver has far outperformed gold as shown in the Fundamental chart below. I have a basket of silver producers in hopes that silver stocks catch up to the metal.
For anybody interested in creating the Fundamental chart above in their account, here are the rules used above:
Close(0,GetSeries("GLD:USA"))
Close(0,GetSeries("SLV:USA"))
Close(0,GetSeries("PPLT:USA"))
Close(0,GetSeries("SIL:USA"))
Close(0,GetSeries("GDX:USA"))
Set Axis = %
(10*Close(0,GetSeries("GLD:USA"))) / Close(0,GetSeries("SLV:USA"))
x10 because GLD is 1/10 oz of gold
Interesting, my screens and process have me loaded up with gold miners to the point that I have been looking for screens that don’t select them. Current holdings are:
I've been investing heavily in mining companies for well over a year now. They've all done really well. My biggest holdings right now in the mining space are in Mineros, TRX Gold, Serabi Gold, Thor Explorations, and Monument Mining. Realized gains have been amazing: 174% for Thor Explorations, 122% for Titan Mining, 90% for Mineros, 51% for Endeavour Mining, 51% for OceanaGold. Currently 27% of my portfolio is devoted to mining companies, but it used to be signficantly higher. (All this pertains to my hedge fund, not my personal portfolio.)
On the other hand, I don't own any actual metals or metals funds.
As to whether miners are better, one can say they are in a way a levered way to play the metals so it can work for or against you.
Quick example on one way the leverage manifests as operating leverage: Imagine a gold mining company with costs of around $1,000 to produce each ounce of gold. If gold’s selling at $1,200 an ounce, they’re making a $200 profit per ounce. Now, if gold jumps 20% to $1,400, their profit doubles to $400 per ounce—that’s a 100% gain. So, their overall earnings (like EBITDA) can increase much more than the gold price itself.
Yuval — does the hedge fund run in a fully automated, rules-based way similar to your P123 models, or are the rankings used more as decision support for discretionary allocation choices? Thank you.
It's run in an automated, rules-based way. I wouldn't say it's similar to my P123 models because it combines 7 different ranking systems rather than relying on one, the trading is done throughout the week rather than all at once, and it uses some hedging; moreover, formula weighting plays a significant role in the hedge fund while most of my P123 models are equal weight.
Just curious, what is the latest size of your hedge fund and the capacity that it can manage? Is the something similar to the P123 subscriber hedge fund manager?
I can’t seem to find any information on Fieldsong Investment from the hedge fund database and it covers more than 99.9% of existing hedge funds.
Yes I think it’s correct that miner valuations are based on a discounted metal price vs spot. Investors seem to assume prices drop in future vs spot.
Would be worth doing this for miners in general not just precious metals, because if USD declines then commodities in general tend to go the other way.
One other difference between miners and other equities is that they tend to go nowhere for years then suddenly rocket, then suddenly crash. I think it must be to do with supply:demand tension affecting pricing. As prices go up, it attracts new mines, then you get oversupply and price crashes. Then the cycle repeats.
We're managing around $20M at the moment. I'm going to close the door to new investors if we ever reach $80M.
I didn't know about hedge fund databases until recently, so we haven't submitted our information to them yet. We'll be doing so shortly. Right now all our investors are either personal contacts or have heard of me through Seeking Alpha, Portfolio123, dub app, or LinkedIn. We have no institutional clients at the moment.
I checked the Bloomberg and Barclayhedge database.
It helps to have your info in them as it can attract institutional investors. I am sure the 56% ytd performance will attract the attention from some allocators.
Regards
James
EDIT : I was just told by someone still working in New York that it is smart to keep the cap at USD 80 mio to avoid the USD 100 mio reporting requirement by SEC on positions held. Apparently, there is a notable difference in reporting/operating/legal & compliance cost above the USD 100 mio threshold. Even though every hedge fund wants a higher AUM (especially those with AUM above USD 1 billion - except the likes of Citadel, DE Shaw, Millennium…etc which has reached USD 50 billion above and constanly returning cash to investors to maintain it size vs performance).
I like to be exposed to both gold and gold miners but the gold miners are obviously the high beta plays here if gold finally makes a big move. For me, it helps to have a quant model that has exposure to miners to assess how much I should be invested in them. I assume many multi-factor rankings that include a value metric and have access to microcaps and small caps had them a the top of the ranking this year? During the first half of the year there were still multiple small miners with EBITDA and FCF yields that are incredibly cheap and they are still cheap. I covered them on my Substack. It looks like there is overlap with Yuval’s list. I also have other Canadian’s such as Golconda Gold and Andean Precious Metals. The latter is up +500% since I did a deep-dive on that one in March because it was very depressed, probably due to some minor operational issues.
FYI, my Substack ‘The Alpha Engineer’ is about a quant method. I try to teach the Substack investor community the benefits of using multi-factor rankings and a mechanical, hands-off approach (which is unfortunately sometimes like talking to a brick wall). I promote Portfolio123 too so I hope some become contributing members here.
Benchmark is the S&P 500. It underperformed SPY 2021 to 2024, but it did extremely well in 2025. So my point is it may be too late to to join the party.
Gold reminds me a lot of 2011 in the post GFC QE boost. Now we have a new boost post covid QE and stimulus. Would not surprise me if it crashes similarly. It is a game of hot potato at this point. I shorted gold and did very well in 2011 since it had a false premise but have not shorted this spike as it is not quite as aggresive/long-yet
