Gold's Just Getting Started - Barron's Interview

by: SA Eli Hoffmann

Joseph McNay of Essex Investment Management is one of the all-time greats of growth investing. In this week's Barron's interview, McNay shares his thoughts and picks for the current economic slowdown.

  • Gold: M3, a broad measure of U.S. money supply (see graphic), is growing at almost 15%/year (vs. a typical 5%), driving the dollar down. While some cite gold's already-high prices, McNay notes that at its peaks, gold has traded at the same price as the DJIA; right now it sells for 1/14 of the Dow. He recommends gold ETFs streetTRACKS Gold Trust ETF (NYSEARCA:GLD) and Market Vectors Gold Miners ETF (NYSEARCA:GDX). He also suggests owning Chinese yuan rather than U.S. dollars. As the yuan revalues upwards, it will offer protection against purchasing-power erosion.
  • Biotech: Genentech (Private:DNA), Gilead Sciences (NASDAQ:GILD) and Celgene (NASDAQ:CELG) have good products, great growth and 'no risk' from economic slowdown or a falling dollar. BioMarin Pharmaceutical (NASDAQ:BMRN) has some nice products, and Intuitive Surgical (NASDAQ:ISRG) is the leader in robotic surgery.
  • Emerging companies: Aladdin Knowledge Systems (ALDN) is an overlooked company that develops security software for application access. Earnings are growing at 20%-plus. Perrigo (NASDAQ:PRGO) gives off-patent drugs private labels for drug stores. VASCO Data Security (NASDAQ:VDSI) makes information-access security software. Quarterly sales have been growing at 60%.
  • Agriculture: DuPont (NYSE:DD) has a new seed business that will compete with Monsanto Company (NYSE:MON), yet it sells for 13x earnings.