Capturing Growth Potential in the Precious Metals Sector

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.

The Market Vectors Junior Gold Miners ETF (GDXJ) seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the Market Vectors Junior Gold Miners Index. The Index provides exposure to a global universe of publicly traded small- and medium-capitalization companies that generate at least 50% of their revenues from gold and/or silver mining, hold real property that has the potential to produce at least 50% of the company’s revenue from gold or silver mining, or primarily invest in gold or silver.

GDXJ’s focus on small- to mid-cap companies allows it to capture the upside capital appreciation potential that those stocks offer in a rally like the current one.

The Fund will normally invest at least 80% of its total assets in companies that are involved in the gold mining industry. As such, the Fund is subject to, among other risks, that of investing in international equities and small- and mid-cap mining companies. Many companies may not have begun to generate material revenues and operate at a loss, contributing to greater volatility, lower trading volume and less liquidity than larger companies.

GDXJ’s share price has traded up quite steeply over the past three months, with shares up more than 110% from the fund’s low in mid-January. Year to date, GDXJ has risen over 80% on the strength of precious metals and related sectors. The ETF pays out a modest annual distribution in December, amounting to an approximately 0.5% yield, which about covers its expense ratio of 0.55%. The fund has $2.38 billion in assets and trades at just over a 1% premium to assets.

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View the current price, volume, performance and top 10 holdings of GDXJ at ETFU.com.

Among GDXJ’s top holdings are Northern Star Resources (NST) at 6.3% of assets; OceanaGold Corp. (OGC) at 5.7%; Evolution Mining (EVN) at 5.35%; Centamin PLC (CEY) at 4.62%; and Osisko Gold Royalties (OR) at 4.28%.

Gold and precious metals have made a strong start to the year. If you want to consider an investment in precious metals, then the Market Vectors Junior Gold Miners ETF (GDXJ) might be a good place to start.

If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my Successful ETF Investing newsletter.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an e-mail. You just may see your question answered in a future ETF Talk.

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