Joseph Wickwire, a co-manager of the best-performing U.S. precious-metals mutual fund, increased returns for his investors by purchasing...
Joseph Wickwire, a co-manager of the best-performing U.S. precious-metals mutual fund, increased returns for his investors by purchasing gold-mining stocks this year as the price of bullion fell.
He and co-manager Gilman Gunn had 92 percent of their Evergreen Precious Metals Fund in shares of gold-mining companies, including Goldcorp and Meridian Gold, at the end of June, up from 83 percent in April.
The $389 million Evergreen fund rose 27 percent from June 1, when the price of gold touched a low for the year, to Oct. 12, when the metal reached a 17-year high of $483.10 an ounce.
“We put ourselves in a position to catch the rebound,” said Wickwire, 40, in an interview from his Boston office at Evergreen Investments, a unit of Wachovia, the fourth-largest U.S. bank.
The Evergreen fund has climbed at an average annual rate of 33 percent in the past five years, the best among 16 U.S.-based gold funds tracked by Bloomberg. The fund was up 12 percent this year, as of Oct. 14, trailing four funds led by the 27 percent gain of the Vanguard Precious Metals and Mining Fund.
Gold rose 7.8 percent in September, the biggest monthly gain since March 2004, as investors sought to hedge themselves against inflation.
Investing in gold after the run-up in prices is a risk, said Karen Wallace, an analyst at Morningstar in Chicago.
“Going forward, gold probably wouldn’t be able to keep pace with what it’s done in the past,” Wallace said.
Investors who buy gold-related stocks are paying almost 38 times earnings, data compiled by Bloomberg show. That’s about twice the average of companies on the Standard & Poor’s 500 Index.
Wickwire’s performance is beating the 13-member Philadelphia Stock Exchange Gold and Silver Index, which is up 7.7 percent this year. The S&P 500 has declined 2.6 percent.
Wickwire and Gunn focus on mining companies that produce gold at low cost.
“I like companies that stack the deck in their favor,” Wickwire said.
One of the fund’s top performers is Toronto-based Goldcorp, which has risen 22 percent this year. Canada’s fourth-largest gold producer aims to double annual bullion output to 2 million ounces by 2008 through acquisitions. The company bought Wheaton River Minerals this year for $1.91 billion.
In the past year, Wickwire and Gunn increased their holdings of Meridian, a Reno, Nev.-based gold producer with mines in Chile. The company produced gold for $47 an ounce in the second quarter.
“They probably have one of the best growth profiles, and the growth they’re adding is low-cost,” Wickwire said. “They happen to do a lot of exploration on their existing property. It doesn’t get any cheaper than that.”
He added: “Gold does well in times of financial-asset uncertainty,” and the odds of a rally in stocks, bonds and the dollar are slim. …
“You don’t wish for bad things to happen, but my job is to provide our shareholders with diversification should bad things happen,” he added.