The Sprott Gold Miners ETF (SGDM) debuted today, becoming the latest entrant in the gold miners ETF field.
The new ETF from Sprott, the Canadian asset manager that offers an array of precious metals, including the Sprott Physical Gold Trust (PHYS) and the Sprott Physical Silver Trust (PSLV), tracks the Sprott Zacks Gold Miners Index. [New Gold Miners ETF Comes to Town]
The rules-based index, which is rebalanced quarterly, “seeks to emphasize gold stocks with the highest quarterly revenue growth measured on a year-over-year basis and stronger relative balance sheets as measured by long-term debt to equity,” according to Sprott.
“The Index aims to track the performance of large to mid-capitalization publically traded gold companies that are listed on major U.S. exchanges. The Index uses a transparent, rules-based methodology that is designed to identify 25 gold stocks with the highest historical beta to the spot price of gold, with each stock’s weighting in the Index adjusted based on its quarterly revenue growth on a year-over-year basis and the quality of its balance sheet, as measured by long-term debt to equity,” according to a statement issued by Sprott.
Nearly 89.4% of SGDM’s weight is allocated to gold miners with the remainder going to silver miners. Canadian stocks account for almost 76% of the new ETF’s weight. By comparison, the Market Vectors Gold Miners ETF (GDX) , the largest gold miners ETF, allocates 64.9% of its weight to Canadian miners.
SGDM is top-heavy with three stocks – Franco-Nevada (FNV), Randgold Resources (GOLD) and Goldcorp (GG) – combining for about 46% of the new ETF’s weight. Other top-10 holdings include Silver Wheaton (SLW), Agnico Eagle (AEM) and Barrick Gold (ABX).
While SGDM will not be lacking for established competition, particularly in the form of GDX and the Market Vectors Junior Gold Miners ETF (GDXJ) , the new ETF’s timing appears to be decent. As Sprott notes, miners are trading at multi-year lows based on a number of valuation metrics and the stocks have notoriously lagged spot gold for the better part of three years.
That trend is reversing this year as some investors believe last year’s spate of cost-cutting in the industry and the group’s low valuations mean miners have more upside in store. That could be a sign SGDM could be one of the more compelling new sector ETFs to launch this year. [Gold Miners ETFs: Ready to Rally]
Year-to-date, the SPDR Gold Shares (GLD) is up 6.5%, but GDX and GDXJ are up 20.7% and 32.5%, respectively.
Sprott Gold Miners ETF Holdings
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of GLD.
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