4/28/2014 1:00 PM ET|
Fund manager's bold bet on gold
Contrarian investor David Iben found success unlocking value in stocks others hate. Today that means shares of gold miners, uranium producers and emerging markets.
Despite a recent rally, shares of gold miners remain well below their highs. During the past three years, Market Vectors Gold Miners ETF (GDX) lost 25 percent annually, according to Morningstar. As the price of gold fell, some stocks dropped 90 percent.
That has attracted David Iben, portfolio manager of Kopernik Global All-Cap (KGGAX), a mutual fund. "The miners look cheap, even if the price of gold never rises again," says Iben.
A die-hard contrarian, Iben roams around the world looking for stocks others hate. Besides gold, he now has a big stake in uranium producers, which sank after Japan shuttered its nuclear power plants. Iben also likes Russian energy companies that plunged as the Ukraine crisis unfolded.
The positions may seem like long shots, and the Kopernik fund is new. But Iben should not be dismissed lightly. For three decades, he has practiced a bold strategy -- and most often it has succeeded. The most notable stretch came when Iben managed Nuveen Tradewinds Global All-Cap (NWGAX) from 2006 to 2012. During that period, the fund returned 8.8 percent annually, topping world stock peers by almost 7 percentage points annually.
The contrarian method does not work well when markets rally strongly and investors flock to highfliers. Iben lagged during the Internet bubble of 1999, and he also fell behind last year as biotechnology and social network shares soared. But in this year's uneven markets, the fund has returned 3.9 percent, compared to 1.2 percent for the average peer.
Under his system, Iben can put up to 25 percent of the portfolio in one sector. In 2002, he held the maximum position in depressed technology, a move that produced big rewards as the sector recovered. After gold miners collapsed in late 2008, he grabbed shares and rode the subsequent rebound. In recent years, he made a successful move into Europe, betting on French stocks as the European crisis intensified.
Iben now has about 25 percent of assets in gold miners. At a time when an ounce of gold costs about $1,300, stock investors pay only $200 to own an ounce of reserves, he says. Even if it costs $1,000 to produce the gold, investors stand to profit. One holding is Barrick Gold (ABX), a big Canadian miner. "Barrick has many years' worth of reserves," says Iben.
One of the Kopernik fund's biggest holdings is Cameco (CCJ), a uranium producer. After the Fukushima nuclear disaster in Japan, uranium prices plummeted, falling from a high of $136 an ounce in 2007 to $34 now. Investors figured that Germany and other countries would abandon nuclear power. Stocks of uranium producers sank.
"The conventional wisdom is that this is a dead industry," says Iben. "But this is actually a growing industry."
Iben says that China alone will open 60 new nuclear plants by the end of the decade. Other countries are also building plants, insuring that demand for uranium will increase. While demand will grow, supplies should shrink. Because of the low uranium prices of recent years, companies have stopped opening new mines.
"Three years from now we will likely have shortages of uranium," Iben says.
As recently as three years ago, Iben had a big stake in the U.S. But as the S&P 500 ($INX) climbed, he trimmed the position. Now he favors emerging markets, such as Brazil and Russia. "Three years ago, people loved China and Russia, and now they hate them," he says.
One holding is China Mobile (CHL), a growing provider that serves 710 million customers. The stock sells for a price-to-earnings (P/E) ratio of 9.5, compared to 18.6 for the S&P 500. Iben also likes Gazprom (OGZPY), a Russian gas giant, with a P/E of 2.3.
"This is very cheap for a profitable company that has 50 years of natural gas supplies sitting on the edge of Europe," he says.
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This we will see by 2016;
It a cost of $700.00 to produce an ounce of gold..
With the current standings of a 1/3 equation
Gold should be at $2100.00 an ounce..
Well, if you are a moron you say " Well. .... ah it is all Bush's fault". No analysis, no facts. In fact they ignore the fact that it was Democrats (Barney Frank, and Waters, etal) who said "We see no problem with Freddie and Fannie no money down loans", and pushed insane levels of home ownership among people who obviously could not afford them, and it was Republicans who were raising eyebrows. But no matter. DID DEMOCRATS "HIRE" OBAMA to FIX "Bush's mess" or not! One would think.
but instead what do we have near zero growth, more people unemployed, the lowest job participation rate in decades, high healthcare costs, massive deficits (five times greater than Bush) 20 trillion in national debt. But oh ... it is Bush's fault.
Well, whatever, but obviously Obama and the Democrats are incapable of comprehending econiomics and incapable of fixing it.
Then we have the most inept foreign policy in the history of the nation ....
Hey Ex Deo,
I know where AOL is right now. In the trash heap where it belongs. It doesn't take much for the public to start disliking a company, any company. Facebook, I can already see starting to go downhill. Amazon, will be here for the medium-term, unless the money-grubbing greedy states that tax sales start taxing internet sales. The ones that already are, are seeing internet sales dropping by double digit percentages. Twitter, I don't think will last long, either. It's just a silly time-wasting thing. I mean, who gives a crap about what some idiotic celebrity who can't walk and chew gum at the same time, and certainly can't spell, is doing?
Of course it's Bush's fault if you're a Nazi, progressive socialist. And if you're right-wing statist, who still thinks Ronnie Regan was God, you just know that it's Obama's fault.
So it depends on your beliefs and politics on whose fault it really is.
I tend to believe it's the fault of BOTH parties, and if you look REALLY close, you won't see much difference between the two of them. They're BOTH socialist parties; the ONLY difference between them is who wants the government to do what to whom.
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