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1 ETF That Tackles Warren Buffett's Biggest Complaints With Gold
Legendary investor Warren Buffett has an innate aversion to gold (GCZ24) as an investment vehicle, despite his preference for value plays overall. Trying to describe the depth of his dislike for gold, Buffett once said, “It doesn't do anything but sit there and look at you," and he used his 2011 shareholder letter to call out the yellow metal for being “neither of much use nor procreative.”
On the other hand, the Berkshire Hathaway (BRK.B) boss is a little more flexible when it comes to silver (SIU24), given that the metal has various industrial applications. Silver's excellent conductivity and resistance to corrosion make it ideal for wiring, connectors, computers, cellphones, and cameras. In the medical field, silver is used in bandages, catheters, and as a treatment for burns and other health issues. Additionally, it has historical use in coinage and remains popular in jewelry.
Buffett's History With Gold and Silver
Buffett previously invested in silver amid demonetization concerns in the 1990s, and Berkshire briefly held a stake in Barrick Gold(GOLD) during the COVID-19 era. However, the widely followed investor has largely avoided the precious metals space altogether.
Given the long-term outperformance of equities as an asset class, it's hard to argue with Buffett's broader thesis. But with forecasts calling for higher precious metals prices to continue into next year, there's one exchange-traded fund (ETF) that can offer investors some strategic exposure to gold - and with enough silver in the mix to make even Warren look twice.
About the US Global GO Gold and Precious Metal Miners ETF
The US Global GO Gold and Precious Metal Miners ETF (GOAU) was launched in 2006 by US Global Investors, a San Antonio-based investment management firm.
The ETF seeks to provide investors with exposure to companies involved in the production of precious metals through mining or owning royalties and production streams. GOAU is actively managed, differentiating it from other commodity-based ETFs that typically follow an index.
Its assets under management (AUM) currently stand at $92.7 million, and shares of the ETF are up 10.6% on a YTD basis. Offering a dividend yield of 0.88%, the ETF charges a management fee of 0.6%.
The fund uses a unique smart factor model to screen its investments. The rules-based model selects precious minerals companies that earn over 50% of their aggregate revenue from precious minerals through active (mining or production) or passive (royalties or streams) means. The index uses fundamental screens to identify companies with favorable valuation, profitability, quality and operating efficiency, reflecting the robustness of its investment process.
Net assets at the end of 2023 stood at $91.2 million, up from $82.4 million at the end of 2022. Further, after two years of negative return, the total return came in at 10.67% for 2023.
Top Holdings for GOAU
GOAU's top three holdings are Royal Gold (RGLD), at 10.7%; Wheaton Precious Metals (WPM), at 10.4%; and Franco Nevada (FNV), at 10.1%. Smaller gold stocks, like B2Gold (BTG) and Sandstorm Gold (SAND), are also well-represented in the top 10.
The fund's holdings are spread across a variety of countries rich in mineral resources such as Australia, Canada, the United States, and South Africa.
The prominent inclusion of royalty companies in GOAU's portfolio is also an advantage for investors. Because they’re not directly responsible for building and maintaining mines and other costly infrastructure, these companies can avoid many of the risks and expenses associated with labor and operations.
Is GOAU a Good Buy?
Against a backdrop of geopolitical and economic uncertainties, precious metals have always provided shelter to investors. With analysts at Bank of America and Goldman Sachs still firmly bullish about continued upside for silver and gold, the GOAU looks like an ETF worth considering at current levels - even for investors who typically share Buffett's aversion to investing in bullion.
On the date of publication, Pathikrit Bose did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
