By Patrick Watson
Investment success often lies in timing. Van Eck Global may have hit the nail on the head with today’s introduction of Market Vectors Junior Gold Miners ETF (GDXJ). With gold bullion breaking above $1,100 earlier this week, gold stocks are flying.
GDXJ follows the also very successful Market Vectors Gold Miners (GDX), launched back in 2006. The difference lies in that word “Junior.” GDX includes large-cap global mining companies; GDXJ is focused on much smaller gold miners and prospectors. The weighted average market capitalization of GDX constituents was $15.2 billion as of 9/30/09. In the index tracked by GDXJ, it was only $850 million.
These dynamic companies are notoriously volatile but can climb at an astonishing rate under the right conditions. Now may be just such a time. The dollar is in a downtrend in terms of gold, the greenback, and just about every other currency. Capital is pouring into the sector. More than a few investors want to get aboard the smaller companies that are developing new discoveries.
The top holdings in GDXJ at its launch are:
- Coeur d’Alene Mines (CDE), 6.6%
- New Gold (NGD), 5.6%
- Silver Standard Resources (SSRI), 5.4%
- Hecla Mining (HL), 5.2%
- Gammon Gold (GRS), 4.7%
- Alamos Gold (AGIGF.PK), 4.3%
- Semafo (SEMFF.PK), 3.8%
- Silvercorp Metals (SVM), 3.7%
- European Goldfields (EGFDF.PK), 3.4%
- Golden Star Resources (GSS), 3.34%
These top ten holdings collectively represent about 46% of GDXJ, leaving the balance to be split among 27 smaller positions. Geographically, the portfolio is heavily tilted toward Canadian-based companies at 62.6% with the U.S. and Australia far behind. In mining, a company’s domicile is probably less relevant than the location of its properties, which is often far from headquarters. The minimum market capitalization to be included in GDXJ is $150 million, so the most speculative penny stocks are not represented.
GDXJ has a net expense ration of 0.60%. Trading volume was good on opening day and I expect this ETF to stay off of Deathwatch, thanks to Van Eck’s excellent timing and the fact it covers a niche without a lot of competition. More information can be found at the sponsor’s GDXJ page.
Disclosure compliant with FTC 16 CFR Part 255 covering writer, editor, and publisher: Long GSS. No positions in any of the ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.