As an exchange-traded fund tied to the global agriculture industry, the VanEck Vectors Agribusiness ...
A GROWing Fund Family
06/30/2008 12:00 am EST
Mark Skousen, editor of Turnaround Trader and Forecasts & Strategies, recommends shares of a strongly performing fund family-and a couple of its funds, too.
US Global Investors (Nasdaq: GROW) is Frank Holmes's five-star fund family based in San Antonio, Texas. During the first five years of the commodity boom, US Global's stock doubled and then doubled again. It has the hottest mutual funds out there, focusing on precious metals and emerging markets.
US Global's funds, such as its US Global Investors Global Resources Fund (PSPFX) and Global Accolade Eastern Europe Fund (EUROX), have been top performers. I recommend both in my monthly newsletter, Forecasts & Strategies, and my subscribers have profited handsomely.
Our favorite commodity fund, Global Resources invests in oil and gas, precious metals, and other commodity companies around the world. It rose another 0.85% this past month, and is up 15% year to date. Global Resources is a five-star fund, according to Morningstar, and one of the world's best-managed natural resource funds. I see higher prices ahead.
Five-star rated fund Accolade Eastern Europe split three for one last month. EUROX invests in Russia, Poland, the Czech Republic, Hungary, and Turkey. Eastern Europe is booming because most of that part of the world has adopted a flat income tax (Russia's is 13%), and continues to deregulate and privatize government-controlled industries. Russia reported that its economy grew at an 8.5% annualized rate in the most recent quarter, and Goldman Sachs concluded that Russian stocks are "exceptionally undervalued."
But as far as the parent company is concerned, in the past year, GROW's revenues and earnings stalled, and the stock fell in half [even as] the funds continue to perform well and the money keeps coming in.
Now I think it's on the mend. With gross margins at 76% and a return on equity of 44%, US Global can't help but grow over the next few years.
Profit margins exceed 22%, and earnings could advance. For the first quarter ended March 31, US Global recorded $2.12 million in net income, or 14 cents per diluted share, on revenue of $12.26 million. That was down slightly from the same quarter a year ago. However, average assets under management rose 14% to $5.5 billion! Right now, GROW is selling for 20x trailing earnings, which is half the P/E ratio on Janus Capital Group (NYSE: JNS), just for comparison.
Not surprisingly, US Global is showing signs of recovery, and the stock has [held up relatively well] this year. (The stock closed Friday below $18-Editor.)
Let's add it today to our Turnaround Trader portfolio, and set a protective stop of $15 a share. For those more adventuresome, consider buying the December $22.50 calls, symbol QGW-LX.
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