Gold isn't all that glitters for Thomas Winmill, head manager of the $171 million Midas Fund. His fund is cashing in on a strategy that plays on growth stocks as much as gold and mergers as much as metals.
"The stocks we invest in do well regardless of the price of gold," Winmill says.
That's a good thing, because gold has lost some of its luster as of late. Although futures for June delivery closed Friday up $4.80 at $662 an ounce on the Nymex, they have lost more than $10 for the week.
The Midas fund has been a solid performer in all kinds of gold markets. According to Morningstar, it has had an 8.6% total return so far this year, and returned 44% in 2006. The fund has outperformed its peers for each of the past three years.
Midas' top holdings as of March 31 included gold miners such as Golden Cycle Gold (GCGC), Cumberland Resources (CLG)
and Eldorado (EGO), companies Winmill says give him a lot of ways to win.
"We get operating leverage," Winmill told TheStreet.com TV on Friday. (Click here to see the video.) "So as soon as a company makes its operating costs, the percentage increase in its earnings with a one dollar increase in gold is higher than you will get in the percentage increase in the gold price itself."
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Investment in physical commodities only appreciate when demand pushes prices higher. But mining stocks can appreciate in value when companies cut costs, expanding their business or improve profit margins. "Metal does not grow," Winmill points out.
One of the ways miners have been getting bigger as of late is through mergers and acquisitions -- and the next takeover play Winmill sees on the horizon involves Miramar Mining (MNG)
.
The company recently announced it had found some new high-grade ore in northern Canada. Winmill says Newmont Mining (NEM)
already holds a 15% stake in the company and "might want to gobble up the whole thing before it gets too big in size."
Although gold is his specialty, Winmill sees some attractive opportunities in another metal right now. "Uranium has been a fabulous story, going from the mid-teens to $120 a pound now," he says.
Winmill sees demand rising as China builds more nuclear power plants. One of his favorite plays is Denison (DNN),
which just made an "extremely high-grade" discovery in Canada.
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Prospectus
