Gold stocks are rallying. The Market Vectors Gold Miners Fund (GDX) is up around 12% in the last two weeks.
But there’s one gold stock outperforming the rest. It’s up more than 18% in the same time frame. More important, it has soared around 60% over the last year, while GDX is up just 6%.
The secret to this company’s success is simple… it’s a gold miner that doesn’t actually mine gold.
[ad#Google Adsense 336×280-IA]Let me explain…
Franco-Nevada (FNV) is a royalty company.
Longtime Growth Stock Wire readers know royalty companies don’t actually operate mines.
Instead, they finance lots of early-stage mining projects, then earn royalties on mine production if things work out.
This is a safer, more diversified way to invest in the gold-mining business, rather than owning a company focused on one big strike.
And Franco-Nevada is one of the best royalty companies in the world.
As you can see in the table below, Franco has soared over the past year while other big gold producers have struggled because of the low gold price.
And there’s more upside ahead.
You see, Franco focuses on the long term. Franco’s CEO David Harquail believes you make money by sitting tight. The company purchased its first royalty in 1985. It paid $2 million for a portion of the production from Barrick Gold’s Goldstrike mine in Nevada. Since then, Franco has received several hundred times its original investment in Goldstrike and mines like it. And many of these mines are still producing… and still creating revenue for Franco.
Plus, even though the company already has a portfolio of more than 500 resource assets, it’s still buying. As precious-metals prices and miners have struggled, Franco has been able to “buy low”… paying less for future royalties from mines.
But one of the biggest reasons Franco will continue to rocket higher is its diversified portfolio. You see, Franco collects royalties from several resources, not just gold. And it has big exposure to energy… 18% of the company’s first-quarter revenue was from oil and gas royalties. Last year’s falling precious-metals prices caused Franco’s metal royalties to drop. But oil and gas royalties increased 64%. That’s why Franco’s share price rallied higher over the last year – despite low precious-metals prices.
To be clear, Franco is still a gold-focused royalty company. It will benefit from the gold-stock rally. But the array of resources it owns ensures the company is profitable even if one its resources underperforms. And that makes it one of the best gold stocks to own today.
Good investing,
Brian Weepie
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Source: The Growth Stock Wire