Golden Strategy

Market Outlook

 Due to continually rising systemic risk, I continue to advice that investors hedge their portfolios’ with precious metals.

As I write this, gold holds firm ground at levels inconceivable by most analyst one year ago. Gold is finally in vogue, and while most investors are finally beginning to consider the sector, we at Canaccord have been implementing this strategy for some time. With the help of Canaccord, this is how I’m allocating clients funds into the sector to mitigate the associated risks; 

1.       Solid foundation of producers and royalty companies, the principle mandate of the Special Opportunities Portfolio I manage. First, low cost producers, with good management, long reserve mine life, in geopolitically safe areas of the world. Secondly, royalty companies with growing cash flow, production, and project flow. This strategy is delivering solid returns in great companies financially levered to the PMs, with many again raising their dividends this quarter. Furthermore, Canaccord’s Research Team is doing Yeoman’s work in uncovering gems in a sea of many.

2.       Some allocation into developing producers, companies currently building their mines and getting ready to start up. This is a good way to acquire companies at a good discount, due to execution risk of starting up a new mine, something always goes wrong but it’s where good experienced teams make a big difference. Again, research is key.

 3.       Gold as money for cash management. Holding physical gold and silver is no different than holding US$ or Cad$, a cash component. The Equity Income Portfolio is currently sitting on an equal allocation of physical and cash as I wait for higher cash flows from my Dividend Equities, once I spend the cash I will convert Physical to FIAT and reduce the position accordingly.

4.       Explorers, the speculative plays. While these are fun, and usually investors’ first choice when entering the sector, these should be the last consideration of your strategy. Furthermore, these are not components of my two portfolios, as their exploratory nature disqualifies them as Investments, and I view them as speculations. However, putting aside the disclaimers, these should also be a component because having a small participation in 5 to 7 of these could yield some very rewarding results. In this department Canaccord is by far the best firm I have had the pleasure to work under, having led more 40 deals over the last year. Happy to report that a large percentage of these are currently in the top quartile for exploration success around the world, delivering clients some very handsome returns. However, I must again emphasize the importance of diversifying this risk among at least five, and that only play money be allocated.

Following this strategy has allowed clients to benefit from the proper hedge offered by the sector, while avoiding the pitfalls of mining. Furthermore, working with a firm with a dedicated team in this area will also make the process less risky. The Special Opportunity and the Equity Income Portfolio’s* returns since 2018 have clearly benefited, proving that also in this volatile sector Canaccord is Driven for Success. 

Here's a link to the entire interview: FULL INTERVIEW.

My practice manages three segregated portfolios designed to help our clients with their cash management needs, capital growth, and dividend income generation. Portfolios are tailored to meet each client’s risk return profile based on their individual investment needs and are not suitable for everyone. The Special Opportunities Portfolio is designed as a stand-alone solution for those looking to get participation in the precious metals market, a sector long forgotten by most Investment Advisors. The Equity Income Portfolio is designed for growth and income through a “top down” industry specific approach. The Cash Management Portfolio is designed for short-term money management needs. All portfolios require a minimum investment account size of CAD$300,000.  

This newsletter is solely the work of the author for the private information of clients. Although the author is a registered investment advisor at Canaccord Genuity Corp. (“CG”), this is not an official publication of CG and the author is not a CG analyst. The views (including any recommendations) expressed in this newsletter are those of the author alone and are not necessarily those of CG.

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