The 25 Junior Gold Miners Elite Investors Are Buying

| About: VanEck Vectors (GDXJ)
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Summary

The GDXJ is in such hot demand its imploding.

I've suggested to switch to the alternative SGDJ.

An alternative is to pick up a basket of Guru stocks.

25 junior gold miners > $3 billion market cap owned by 1-6 famous investors.

Because of the The Van Eck Vectors Junior Gold Miners ETF (GDXJ) ETF becoming problematicly large, as described by Ian Bezek here, I suggested switching to the SGDJ Sprott Junior Gold Miners ETF (SGDJ). Readers were not terribly excited to jump from one leaking boat to one that wasn’t leaking just yet. Instead a recurring proposal was to just buy shares of junior gold miners outright.

That’s a brilliant solution.

The reason I didn’t suggest it is that investors who are buying products like these junior gold miners ETF don’t have the time or inclination to spend time differentiating between the juniors. They just need a basket of gold juniors without buying into a number of frauds or very iffy businesses.

If you are a gold mining specialist or expert of course you aren’t buying the ETF. Still, this got me thinking. How can we find a basket of attractive junior gold mining stocks without a lot of due diligence?

Well, by freeriding on the work done by famous value investors and their analyst teams. I went to Gurufocus to sort through the holdings of their Guru’s. They track about 84 at Gurufocus and they use these criteria:

To qualify for our Guru Hall of Fame, an investor needs to meet at least three criteria:

  1. Long-term outstanding performance;

  2. More than $1 billion under management;

  3. Low portfolio turnover

Given they manage portfolios of at least one billion this included quite a few larger gold miners. I filtered out every one of these over $3 billion. After all, we're trying to put together a basket of juniors.

Jim Simmons is the most indiscriminate buyer, not coincidentally he's the quant among these guru's, and his firm is probably generating the highest returns on capital. I'm just not sure if and how much leverage they use to do it.

I own Comstock Mining (LODE), which has a real estate component to it, and International Tower Hill Mines. Both are interesting nano-cap names with high insider ownership.

Purely judging by the line-up of star investors I'd say NovaGold (NG) must be pretty appealing as well. Coincidentally a name that was mentioned in the comment thread on my previous article on GDXJ. Finally, I love the royalty model of which Osisko Gold Royalties Ltd (OR) is an excellent example but I happen to prefer its larger brethren like Royal Gold (RGLD) and Silver Wheaton (SLW) at this time.

We happen to own many royalty companies in The Black Swan Portfolios.

Symbol

Company

Market Cap(Mil)

Guru Shares

Number of Guru Holders

Guru's owning the company:

LODE

Comstock Mining Inc

$38.42

22,542,509

2

Ken Fisher, Arnold van den Berg

PGLC

Pershing Gold Corp

$81.75

7,466,400

2

Donald Smith, Jim Simons

THM

International Tower Hill Mines Ltd

$92.45

55,487,842

1

Paulson

PPP

Primero Mining Corp

$113.16

39,377,181

2

Donald Smith, Jim Simons

OTCPK:ARCTF

AuRico Metals Inc

$119.25

12,690,709

1

Donald Smith

GORO

Gold Resource Corp

$229.63

2,124,636

2

Simons, Brandes

AKG

Asanko Gold Inc

$518.70

2,384,590

3

Donald Smith, Jim Simons, Mario Gabelli

SA

Seabridge Gold Inc

$618.13

1,698,031

2

Jim Simons, Arnold van den Berg

OR

Osisko Gold Royalties Ltd

$1,226.89

3,991,137

1

First Eagle, Jim Simons

NG

Novagold Resources Inc

$1,431.39

35,746,963

4

Paulson, Seth Klarman, Murray Stahl, First Eagle, Steven Cohen

NGD

New Gold Inc

$1,881.44

15,691,231

3

First Eagle, Jim Simons, Ray Dalio, Paul Tudor Jones

IAG

Iamgold Corp

$2,081.48

116,747,276

4

Donald Smith, Jeremy Grantham, Paulson, Jim Simons

AGI

Alamos Gold Inc

$2,383.00

3,643,095

4

Donald Smith, Jim Simons, Mario Gabelli, First Eagle

EGO

Eldorado Gold Corp

$2,665.70

8,394,200

4

Ray Dalio, Jim Simons, Mario Gabelli, First Eagle, Joel Greenblatt, Caxton Associates

BTG

B2Gold Corp

$2,721.00

17,927,297

3

Ray Dalio, Jim Simons, Mario Gabelli, First Eagle,

AUY

Yamana Gold Inc

$2,986.32

123,081,214

4

John Buckingham, David Dreman, Donald Smith, Jim Simons, Joel Greenblatt, Ray Dalio

Source: Gurufocus

This could function perfectly well as an alternative buying list instead of a junior gold mining ETF. Sure there could be other problems. For example some of these stocks may not be as liquid. ETFs tend to eliminate stocks that aren’t very liquid because these cause problems. ETFs also tend to eliminate stocks with little free float. The basket could certainly be more volatile compared to the ETF.

The above basket could have a very good chance of outperforming either the GDXJ or the SGDJ. These stocks have been selected by some of the finest minds in investing and their teams. They are selected based on risk/return criteria or alternatively as solid tail-risk insurance. The stocks in the ETFs are picked for their liquidity, fitting with the theme and size as the more AUM the stocks can absorb, the more fees the ETF sponsor can charge.

Disclosure: I am/we are long LODE, THM, SLW, RGLD.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.