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How to Spot the Next Big Investing Wave, According to Frank Holmes

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The following content is sponsored by U.S. Global Investors

How to Spot the Next Big Investing Wave, According to Frank Holmes

How to Spot the Next Big Investing Wave, According to Frank Holmes

The world is constantly being shaped by powerful waves that ripple throughout the global economy.

When analyzed effectively, these macro trends can serve as a key investment tool.

Today’s infographic comes from U.S. Global Investors, and it highlights how its team uses macro trends to identify investment opportunities.

Preparing for the Next Wave

Frank Holmes, CEO and Chief Investment Officer of U.S. Global Investors, is responsible for developing and overseeing investment strategies. One fund under his team’s management is the Holmes Macro Trends Fund (MEGAX), which follows a combination of two approaches.

  1. Analyze macro trends in an effort to find the fastest-growing sectors.
    Macro trends are defined as long-lasting, pervasive shifts that affect a large population. They generally fall into one of the following categories:

    • Demographics
    • Economics
    • Environment
    • Government
    • Society
    • Technology

    A key benefit of macro trends is that they are unbiased, and cut through the endless headlines created by today’s 24/7 news cycle. They also help investors gauge market expectations, which in turn help drive long-term price trends.

    Here are a couple examples of current macro trends, and the investment opportunities or threats they present:

    • Aging populations
      Africa has the world’s youngest population and is least likely to be affected, while China is particularly vulnerable given the one-child policy.
    • Rising interest rates in North America
      Financial companies may be able to improve their interest rate spread, while the real estate and automotive sectors may be negatively impacted by higher financing costs.

    Once Holmes’ team has identified the regions and sectors with the best opportunities, it moves onto the next step.

  2. Analyze companies within those sectors in an effort to find the ones growing the fastest, at a reasonable price.
    Traditionally, investors subscribe to either the growth strategy or the value strategy. Holmes’ team uses the Growth at a Reasonable Price (GARP) strategy, which combines elements of both.

    • Growth – Buying stocks of companies that have been growing fast and may increase in price over time.
    • Value – Buying stocks that appear to be undervalued by the marketplace.
    • GARP – Buying stocks with a track record of consistent earnings growth and reasonable valuations.

    Some other key metrics are also used to evaluate companies, including quarter over quarter sales, growth in earnings, and return on equity.

Professional Management

Macro trends are the waves that shape the future – but to ride them, investors need to pick the best companies in these sectors. The MEGAX fund, under the leadership of Holmes, follows this strategy.

Why invest in MEGAX?

  • Experience: Fund managers have a total of 60+ years’ experience
  • Strategy: Pragmatic investing that cuts through the 24-hour news cycle
  • Composition: Diversified portfolio to decrease risk

Investors don’t need to discover the next big wave themselves. Instead, they can invest in MEGAX to take advantage of U.S. Global Investors’ experienced management.

Please consider carefully a fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Foreside Fund Services, LLC, Distributor. U.S. Global Investors is the investment adviser.

Stock markets can be volatile and share prices can fluctuate in response to sector-related and other risks as described in the fund prospectus.

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Zinc: The Essential, Sustainable, and Versatile Metal

Zinc’s widespread uses in the modern economy make it essential for urbanization and economic development. Learn more about the uses of zinc in this infographic.

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Uses of zinc in the modern economy

What would the world be like without zinc?

Long-running TV show The Simpsons showed us one depiction what this could look like—but in order to truly gauge the impact of the metal on our lives, we need a better understanding of the uses of zinc and its role in modern life.

Zinc’s Role in Modern Life

Zinc is a naturally occurring mineral that is present all around us: from our bodies, foods, and medicines to the buildings we live and work in. Despite this, very few people actually know how it gets there.

This infographic comes to us from Trilogy Metals and looks at the widespread uses of zinc in the modern economy, from construction and infrastructure to health, farming, and green energy.

The Zinc Supply Chain

Zinc is the fourth most used metal in the world behind iron, aluminum, and copper.

Before zinc makes it into its various applications, miners have to extract the metal from the ground. So which countries are the top producers of zinc?

CountryMined Zinc Production (2019, metric tons)Share of World Production (2019)
China4,300,00033%
Peru1,400,00011%
Australia1,300,00010%
Total7,000,00054%

China, Peru, and Australia account for 7 million tons or 54% of the world’s zinc production. Although the U.S. is among the world’s top five zinc producers, it only produced 780,000 metric tons of the silvery metal in 2019—roughly one-fifth of China’s zinc production.

We don’t always use zinc in its raw, metallic form; it is often refined and processed first.

The United States is lagging in the production of refined zinc, with a net import reliance of 87%. As the demand for zinc rises, local sources of mined and refined zinc will be valuable for import-reliant countries like the U.S.

But where does the demand for zinc come from, and what makes it so valuable?

Zinc Strengthens: Infrastructure and Alloys

Zinc is also referred to as the “galvanizing metal” for its role in protecting steel. In fact, galvanizing accounts for around 50% of total annual zinc usage.

Galvanizing with zinc improves steel in various ways:

  • Strength
    Adding zinc as a protective layer provides steel with higher impact strength
  • Longevity
    The zinc coating on galvanized steel lasts around 50 years, allowing structures made from steel to last longer
  • Corrosion-resistance
    Zinc acts as a sacrificial coating for the underlying steel, protecting it from corrosion and rust

From steel-frame buildings and bridges to furniture and automotive body parts, galvanized steel plays a critical role in building sustainable infrastructure.

According to a study by the National Association of Corrosion Engineers, corrosion costs the world $2.5 trillion annually. Given that only 6% of all steel produced annually is galvanized, increasing the use of zinc-coated steel could potentially reduce this economic impact.

Zinc in Alloys

Besides galvanizing, alloying is one of the most common uses of zinc. Zinc’s ability to provide other metals with strength and corrosion-resistance makes it an effective alloying material.

Around 25% of all zinc is used in alloys to create metals such as brass, which are commonly found in household fixtures, plumbing fittings, electronic devices, and musical instruments. Additionally, zinc alloys have a range of engineering applications, thanks to their rigidity, strength, and conductivity.

Zinc Improves: Health and Productivity

Zinc is not only a natural part of our body but also a critical nutrient for our immune systems.

The UN has labeled zinc a “life-saving commodity”—increased access to zinc could prevent 200,000 childhood deaths annually. Zinc is an essential nutrient for various reasons:

  • Helps fight infections
  • Vital for taste and smell
  • Enhances memory and thinking

Furthermore, zinc oxide, a compound produced by oxidizing metallic zinc, is a key ingredient in various health and medicinal products including cosmetics, food additives, and anti-fungal creams.

Zinc in Crops

Besides its critical role in the human body, zinc is also an essential micronutrient for plants.

When farmers add zinc to soils in the form of zinc oxide, it helps their crops resist tough conditions such as drought, salinity, and heat. A stable supply of zinc can also help crops reach higher productivity and yield levels.

As the global population grows, crop productivity will be important in addressing the higher demand for food. Zinc has an essential role to play in making crops resilient and more productive.

Zinc Supports: The Clean Energy Transition

The transition to a low-carbon, clean energy future will be mineral intensive—and zinc is playing a key role in boosting this transition.

Zinc-air batteries are quickly emerging as an efficient clean energy-storage solution that can provide renewable electricity in remote regions. Three factors make zinc-air batteries an integral part of the clean energy transition:

  • Efficient for storing non-constant renewable energy
  • Affordable because of their use of zinc
  • High energy density

In fact, NantEnergy’s zinc-air energy storage systems have already made a significant impact on sustainability.

  • Avoided 50,000 tons of CO2 emissions
  • Reduced 4 million liters of diesel fuel use
  • Provided 200,000 people with access to power

Additionally, zinc protects the steel used to build renewable energy infrastructure. Offshore wind masts are made from zinc thermal sprayed steel to prevent corrosion, and solar PV panels use support structures made of galvanized steel.

Zinc in the Circular Economy

Zinc is part of a circular economy that restores, recovers, and reuses.

For starters, zinc is fully recyclable—it can be recycled from scrap without losing any of its properties. As a matter of fact, 60% of all produced zinc is still in use. Moreover, zinc’s 45% end-of-life recycling rate means that almost half of all the zinc produced is recycled after final-usage.

Zinc’s contribution to the circular economy will help minimize waste and improve resource sustainability as our material needs grow.

Zinc: Strengthening the Path to a Sustainable Future

The uses of zinc today are widespread and make an enormous impact on almost every aspect of our modern lives. Just as our present world could not function without zinc, so will our future.

As we transition to a cleaner world, zinc will continue strengthening, improving, and supporting the modern economy.

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How Precious Metals Royalty and Streaming Companies Create Value

Discover how royalty and streaming companies offer a unique way to invest in precious metals and the mining industry.

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Royalty and Streaming Companies outperform gold and GDX

Gold and Silver Royalty and Streaming Companies

Investing in precious metals often seems like it boils down to either buying the physical gold or silver or investing in shares of specific mining companies, both with their own very distinct advantages and risks.

Rather than having to settle for the simplicity of bullion or extensive research in individual mining companies, precious metals royalty and streaming companies provide investors with exposure to a diversified portfolio of miners’ revenues and produced metals.

These companies are not operators of mines. Instead, they seek to find undiscovered value by financing and working directly with miners to forge agreements that provide their shareholders with steady exposure to precious metals production.

This infographic from Empress Royalty outlines exactly how gold and silver royalty and streaming companies operate, and how they mitigate risk and create value for their shareholders.

What Do Precious Metals Royalty and Streaming Companies Do?

Royalty and streaming companies are an important part of the mining industry’s financial ecosystem, as they provide capital to mine operators and explorers in exchange for a percentage of revenue or metals produced from the mine.

Mining companies receiving this investment are able to further develop or expand projects, providing greater returns for both their shareholders and the companies with royalties and stream agreements on the projects.

These agreements typically last for the life of a mine, providing steady cash flow to royalty and stream holders while cutting out various risks associated with mining companies and operations.

“What it takes in the royalty business is patience and cash.”
– Pierre Lassonde, co-founder of the first royalty and streaming company, Franco-Nevada

The Difference Between Royalty Agreements and Streams

Royalty agreements and streams have similarities in their structure, but ultimately have some key differences.

  • Royalty agreements, also called net smelter return (NSRs), provide the royalty holder a percentage of the mine’s revenue from production, typically around 1-3%. There are also other kinds of royalty agreements like net profits interests (NPIs), where the royalty holder receives a percentage of the profits rather than the revenue.
  • Streams provide the right to purchase a certain percent (typically 5-20%) of metal production directly from the mine. Typically, streams will have an already decided purchasing price for the metal, which is usually either a fixed dollar amount or a fixed percentage of the spot price.

Royalties are more common than streams as they provide cash directly to the royalty company rather than the option to buy the physical metal which then needs to be sold.

While royalty and streams differ in what is delivered, both kinds of agreements avoid operational costs as they receive cuts from the top line.

The Growing and Diverse Landscape of Royalty and Streaming

The niche sector of gold and silver royalties has changed greatly since the founding of the original royalty business, Franco-Nevada in 1980.

While still fairly small today, the subsector has grown to have more than 10 companies with a market cap of $100M USD each, with five surpassing the $1B mark.

Here are the top 10 royalty and streaming companies by market cap:

CompanyMarket Capitalization (USD)Forward Dividend Yield
Franco-Nevada$21.6B0.91%
Wheaton Precious Metals$17.8B1.20%
Royal Gold$7.1B1.12%
Osisko Gold Royalties$1.9B1.39%
Sandstorm Gold$1.3B0.00%
Maverix Metals$738.0M0.75%
Nomad Royalty$488.6M1.82%
Metalla Royalty and Streaming$368.3M0.37%
EMX Royalty Corporation$308.0B0.00%
Abitibi Royalties$237.9M0.78%

Source: Yahoo Finance

While the three big names of Franco-Nevada, Wheaton Precious Metals, and Royal Gold tend to focus on larger and more secure ounce-producing agreements, the newer precious metals royalty companies start out by establishing a few cash-flowing agreements in their portfolio.

After this, they can begin targeting more speculative agreements with developing or exploration projects which are typically worth smaller dollar amounts and are slightly riskier or further from production, but have the potential of undiscovered upside.

Some royalty companies don’t even deal with mining companies at all, and focus exclusively on buying royalty and stream agreements held by third party companies or prospectors.

How These Companies Reduce Risk and Capture Upside

By avoiding many of the operational costs, royalty and streaming companies cut out a large amount of risk that is typically associated with mining investments.

In precious metal bull markets, it’s typical to see mining company revenues rise alongside the prices of gold and silver.

While mining companies’ operational costs will also rise, royalty and stream holders simply reap the benefits of high margins as they sell their physical metals at higher prices, despite having acquired them at lower fixed prices according to their agreement.

Another key advantage royalty and streaming companies have is their ability to diversify their portfolios and be selective with their agreements. This allows them to escape concentrated jurisdictional or asset risk and make agreements with mines which are already producing or close to production.

Since royalties and streams tend to last as long as the associated mine is operational, the holders of these agreements also benefit from any increased production or lifespan.

Royalty and Streaming Companies: Stable Exposure to Metals

As precious metals royalty and streaming companies are able to carefully choose their agreements and are overall less exposed to price downturns, they provide investors with a more stable investment in gold and silver.

Royalty and streaming companies typically have dividend policies which ensure shareholders are consistently rewarded with rising dividends, while many gold and silver mining companies cut dividends aggressively during precious metal market downturns.

As they help finance new projects and expansions, royalty and streaming companies take advantage of high margins in a unique form of financial arbitrage while providing their shareholders with stable exposure to precious metals and mining operations.

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