An investment in precious metals has always exerted a certain fascination, all the more so in uncertain times. There are various ways of investing money in gold. These include the physical purchase of gold coins, for instance. Financial institutions also offer what are known as gold custody accounts, which do not give possession of the metal itself but allow part ownership of physical gold even from very small sums. Investing in gold ETFs are another popular way of profiting from rising prices. The current launch of the Leonteq Junior Gold Miners Quality & Momentum NTR Index now gives investors a unique and very special opportunity to take a position in the precious metals market. The newly created barometer comprises 20 stocks of small and medium-sized gold miners. Of late, many of them have actually been performing better than gold itself. This year the Canadian Alamos Gold, for instance, has posted growth of two thirds, outperforming the price of the precious metal by around 38%.
Alamos Gold currently tips the scales at a market capitalisation of just USDbn 5.9, not even one tenth of the value of big player Barrick Gold. Yet it is precisely in this gap that a huge opportunity exists. That is because small companies frequently show much greater dynamism in price movements. Not only does Leonteq put the focus of the Junior Gold Miners Quality & Momentum on second and third-tier stocks, but importance is also attached to the above small cap effect within the index itself. All 20 stocks are thus weighted equally regardless of size, allowing the index to profit from the potential growth of smaller companies.
To give the index the best possible structure, a promising investment process was developed. In July each year, experts select the 20 Junior Gold Miner shares based on momentum and quality criteria. The stocks need to go through a sort of pre-selection stage even before these two filters are applied, though. According to the index rules, only those which are listed on the stock markets in Toronto, Australia, New York or Hong Kong make it into the selection universe. In addition, the average daily turnover in the last 6 months must be not less than USDmn 5. Any that meet these requirements are then subjected to the quality and momentum analysis. This process takes a detailed look at the ratio of debt to market capitalisation and the relationship between debt and the value of the company. The growth in gross profits and the normalised and trailing profit margin, i.e. that of the last four quarters, also flow into the valuation. For the momentum yardstick, the committee screens the price movement over one, two and three years. The first 20 stocks from the ranking subsequently created through the two filters make it into the index. This complex process is performed once a year. Many studies show that stocks with strong Quality metrics and strong recent price Momentum will outperform the overall benchmark in the medium to long term. Moreover, Quality stocks tend to exhibit lower drawdowns and volatility than the overall benchmark.
The new open-ended tracker (ISIN CH0542381006, SIX symbol JXAUTQ) offers investors simple and low-cost access to 20 promising gold mining stocks. This product allows a full participation in the barometer. The certificate contains a raft of advantages: alongside the broad diversification and active management, the transparency, liquidity and low costs of the product are also attractive. Issued in CHF, the tracker comes with an annual management fee of just 0.65% p.a. despite the sophisticated investment process.
We look forward to answering all of your questions about our products and how they are traded. Please don't hesitate to get in touch! Phone: 058 800 11 11, email info@leonteq.com or contact us here.
