Since the peak for bullion in August 2011, the metal has been under intense pressure and many gold s...
Who's Who of Gold Miners
08/01/2014 9:00 am EST
Gold is underrepresented in our portfolio; we think it’s a good time to add a gold play, advises Briton Ryle, editor of The Wealth Advisory.
For an investment, we don’t want to simply make the same percentage gains as the move for gold; we want an investment that will make more money as the price of gold rises.
That’s gold miners. They make exponentially more as gold prices rise. And right now, even after a bit of a rally, gold miners are among the cheapest stocks on the markets. And, because we are an income service, we want a dividend.
The question is: which gold miner to select? Well, how about all of them? And we can get a 9.7% dividend to boot. GAMCO Global Gold, Natural Resources & Income Trust (GGN) is a closed-end gold fund run by Mario Gabelli’s Gabelli Funds company.
It’s a leveraged fund, which means it trades derivatives to generate income, which it then distributes as a very nice dividend. Its holdings are a “Who’s Who” of gold miners. Most of the holdings are North American miners, which lowers the geopolitical risk.
This fund trades at a slight premium to its Net Asset Value (NAV). That’s a bit unusual for closed-end funds. They tend to trade at a discount to NAV. But in this case, we don’t mind, mainly because the gold miners are very cheap right now.
Fees run a little higher than we’d like to see at 1.35%. However, this fund traded above $18 when gold was at its highs. If gold can just trade back to the $1,500 level, we’d likely be looking at a 35%-40% profit, and we don’t mind paying 1.35% for that.
You’ll notice this fund has made a strong move from $10 over the last couple of months. We certainly can’t rule out the potential for the stock to retrace some of that move. The nearest recent support level is $10.50.
You may want to consider averaging into this fund, just in case the price moves a bit lower. We rate the GAMCO Global Gold, Natural Resources & Income Trust GGN a strong buy under $11.50 a share.
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