Retired investor Samuel Maxwell is hoping his investments in gold will see him through the current market turmoil. With both physical gold and gold-related stocks and shares in his portfolio, his investments have held up relatively well in the volatility of recent weeks.
He says: “I try to find the assets with the best prospects and work from there. My exposure to gold is doing very well under the pandemic lockdown and bodes well for the future too, given that the response from governments has been to print ‘limitless’ paper money to help struggling economies.”
Samuel, who lives in Blackburn, expects this strategy to see currencies such as sterling weaken, and the value of physical assets such as gold pushed up.
Why I'm Investing in Gold
For many retirees, securing a reliable stream of income is an investment priority but Samuel is trying to maximise his returns: “Fees and dividends come after finding good value.” He avoids funds, because he finds their fees difficult to understand and performance hard to monitor.
However, there are exceptions within his portfolio, such as the BlackRock Gold & General fund. But while the fund has provided much-needed diversification for his portfolio, Samuel points out that it has not performed better than physical gold. The Bronze-rated fund is run by Evy Hambro and invests in shares of companies related to gold mining, commodities and precious metals.
Over the past three years it has delivered annualised returns of 5.83% according to Morningstar data, and annualised returns of 12.14% over five years. Morningstar analysts point out that, due to the nature of the underlying assets, returns can be volatile though. This is certainly borne out by its longer-term performance: over 10 years it has delivered an annualised loss of 0.31% to investors.
Despite this Morningstar analysts say: “We continue to see positives at BlackRock Gold and General in the form of an experienced manager, stable team, and structured approach.” Despite that, the fund’s rating has been downgraded from Silver to Bronze in recent year: “Significant changes to the investable universe and benchmark present problems for a UCITS-compliant portfolio, however, lowering our level of conviction in the strategy's ability to consistently outperform.”
The fund has performed “respectably” against its benchmark, the FTSE Gold Mines Index. There are difficulties for fund managers is tracking against this benchmark, however; it is very concentrated and some of its constituents account for more than 10% of the index but because of regulations funds can’t have more than 10% of their assets in any single stock. That means funds such as BlackRock Gold & General may underperform the index if one of these larger positions does particularly well.
This situation has been further exacerbated by the merger of Randgold Resources and Barrick Gold at the end of 2018 and of Newmont and GoldCorp in April 2019. The top three names in the index accounted for 18%, 21%, and 11% of assets respectively at the end of April 2019 – a fund can not match these exposures.
Hunting for Value
Value is a key consideration for Samuel and he is wary of investing in over-priced assets. He says: “The average UK property is now about nine times the average salary, so I would consider this over-priced.” Instead he has been looking to smaller companies for growth and invests in US micro-cap company
SurgLine International (SGLN), a provider of medical and surgical products at discount prices. The business mainly offers spine products, trauma products, endoscope products, and medical disposables. With the latter in particular demand amid the Covid-19 crisis, it is little surprise the company’s share price has soared more than 20% year to date.
Another individual shareholding in his portfolio is specialist retailer Pets at Home (PETS), which also operates small animal veterinary business by combined number of surgeries both in its stores and at standalone sites. Its share price has grown significantly since mid 2018 — although shares are marginally below the peak seen back in 2015.
Samuel adds: “Initially I was just looking to make sufficient return to survive, but I have been fortunate in my investment and am financially secure now, so am looking to make as much money as possible.”
View the latest pricing and investment return data on gold stocks available in the market.
