I’ve owned shares of Sandstorm Gold (SAND) for several years, and it was one of my larger holdings for a while, so readers ask about it with some frequency — particularly during times like these, when it is wildly volatile. So is Sandstorm Gold a buy today?
Well, I haven’t sold any shares recently. But that’s largely because SAND represents an allocation to gold equities in my portfolio — the fact that gold is falling shouldn’t have me cutting my allocation to gold equities unless I think that gold will be a less important asset class in the decades to come. I think the opposite is more likely to be true, and that now is probably actually a reasonable time to be “rebalancing” to add more to gold because it is substantially lower than it has been in recent years.
But I could be wildly wrong about that, and especially wrong about the timing, so that’s why gold is a small part of my portfolio. I hold some physical gold and silver (about 10% of my savings — these are “store of value” allocations to preserve purchasing power, not speculations in growth), and some gold equities (less than 5% of my investment portfolio, these are speculations that gold will rise in value over time versus the dollar). Sandstorm has been a big part of the equity part of that allocation, so should that position continue?
Well, conceptually I think the core of a precious metals equity investment should be royalties — I think it’s just too silly to spend a lot of time assessing the merits of individual mining projects, and betting on the vagaries of those projects, unless you really like reading about mining and want this to be your hobby. Mining companies are, on balance, such lousy businesses that you can easily get sucked into loving one that looks slightly less lousy. Royalties and streaming companies, while they are also exposed to risks (particularly the risk that a mine won’t get built, or will be shut down, or that a mine won’t produce at capacity or the miner will go bankrupt), are not completely reliant on a single mining project like most small mining companies are.
Now, for better diversification it’s absolutely safer — and probably better if you’re worried about volatility — to go with the big guys: Royal Gold (RGLD), ...