Tocqueville: Top Pick for Miners

02/23/2017 8:00 am EST

Focus: ETFs

Sector funds with a narrow focus that still offers investors a diversified way to gain stakes in particular market segments. Our gold fund Tocqueville Gold (TGLDX) is a good example, explains Alyssa Lappen, contributing editor to The Complete Investor.

Gold and mining companies can be extremely volatile. Typically miners as a group gain far more sharply than the underlying metal during bull surges.

Investors wary about buying individual mining companies may find Tocqueville a comfortable way to participate in the outsized gains miners will likely experience if, as we expect, gold enters into a big bull market in coming years.

Rated four stars by Morningstar, and a recommendation of ours since 2003, Tocqueville over time has kept its returns high and risks low relative to its peers, in part through divergence from the average gold fund’s allocations and an unusual 12 percent tilt towards value.

The latter can limit gains on the upside but also protect on the downside. In the 12 months through January 17, Tocqueville gained 63.5 percent vs. an average 74.9 percent for its peers.

However, Tocqueville ranks in the top 14 percent of its category for the last 10 years. And managers John Hathaway (since 1998), Douglass Groh (since 2012), and Ryan McIntyre (who joined in January) carefully diversify its $1.2 billion in assets across some 80 positions. Also Tocqueville, unlike some other gold funds, has no load.

Its managers invest 12 percent in physical gold and more than 80 percent in global mining stocks, with roughly a third in large caps (vs. the 27 percent average among peers), 48 percent in mid-caps (vs. the 45 percent average), 9 percent in small caps (vs. the 26 percent average) and 7 percent in microcaps (vs. the average of less than 1 percent).

Tocqueville’s top five stocks as of Nov. 30, 2016 were Agnico Eagle Mines Ltd. (5.24 percent); Pan American Silver (5.07 percent); Detour Gold (5 percent); Franco Nevada (4.9 percent), and Torex Gold Resources (4.3 percent).

With such positions, it had already gained 12.1 percent year-to-date through Jan.17, nearly 2 percent better than peers. Tocqueville Gold remains our recommended fund for investing in gold miners.

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