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This Massive Hedge Fund Company Is Investing in Gold

The latest 13F season is commencing, when many money managers issue required reports on their holdings. It can be worthwhile to pay attention, as you might get an investment idea or two by seeing what some major investors have been buying and selling.

For example, consider Bridgewater Associates, one of the world's largest hedge-fund companies. According to its recently released 13F statement, the company has initiated positions in Yamana Gold (NYSE: AUY  ) , Goldcorp (NYSE: GG  ) , and Kinross Gold Corporation (NYSE: KGC  ) . This demonstrates some confidence in the future of gold after a rather disastrous 2013 for the metal. Gold sank in value by more than 25% last year after doubling between 2008 and 2012.

Why would Bridgewater be bullish on bullion? Well, there are always gold fans and gold detractors. At The Motley Fool, we've long pointed out that gold's long-term record isn't so hot. Even Warren Buffett has advised against investing in gold.

Gold bears may see more trouble ahead in 2014 if they expect interest rates to rise, as that will make gold a less attractive investment than, say, bonds. The Federal Reserve is indeed tapering its quantitative easing -- though remarks from new chair Janet Yellen suggest that steeper rates are not around the corner, and that has sent gold higher. A strengthening U.S. economy could also make stocks more appealing than gold, sending its price down.

Gold bulls are hopeful about growing demand from China and perhaps India if the government there reduces import taxes on gold, which sank demand last year. (It might do so as the taxes have led to a rise in smuggling.) They also see some power in gold producers, as cutbacks in production from companies have helped bolster prices.

Reasons to be hopeful
Goldcorp has been boosting its production and plans to keep doing so in the next few years. It's also aiming to buy smaller miner Osisko Mining Corp. (NASDAQOTH: OSKFF)Rising gold prices could boost Goldcorp's fortune considerably. In its last quarter, it posted record production but disappointing earnings. Goldcorp's dividend yield is 2.2%.

Kinross Gold also posted disappointing earnings (despite record full-year production) in its last quarter, and also lowered its reserves. Its net losses were far narrower than in the year-ago period, though, and its costs lower than expected. Management pointed to a "quality over quantity" strategy that has been in place recently, which did reduce its reserves, but also increased their value. Kinross stock yields 3.1%.

Yamana Gold is also upping its production and also focusing on quality, having initiated "cost containment and margin reclamation initiatives." Some worry, though, that cost-cutting will lead to lower production. Still, patient believers can enjoy a 2.5% dividend yield.

Keep in mind
If you're interested in valuable metals, remember there are other opportunities, as well. Freeport McMoRan Copper & Gold (NYSE: FCX  ) offers substantial diversification beyond gold, as it's the world's second largest copper producer. In fact, it even acquired several big oil and gas exploration and drilling companies, which helped offset challenges from low copper prices. Bulls like Freeport's new contract with its CEO, who is giving up salary in exchange for stock. That keeps his interests aligned with shareholders'. Freeport stock yields 3.7%.

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  • Report this Comment On February 18, 2014, at 12:23 PM, DoctorLewis4 wrote:

    Interesting news but what a large hedge fund is doing these days is almost irrelevant to the individual investor. They are playing a different game and last year that game didn't do as well as the overall market. Not even close actually. As to gold, it may well go up this year. So what. If you are a long term investor gold is really fool's gold, guaranteed to be worth only what the next person will pay for it and sure to burn whoever is left holding the bag.

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Selena Maranjian

Selena Maranjian has been writing for the Fool since 1996 and covers basic investing and personal finance topics. She also prepares the Fool's syndicated newspaper column and has written or co-written a number of Fool books. For more financial and non-financial fare (as well as silly things), follow her on Twitter...

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Related Tickers

9/1/2015 12:10 PM
AUY $1.85 Down -0.03 -1.60%
Yamana Gold, Inc.… CAPS Rating: ***
FCX $9.84 Down -0.80 -7.48%
Freeport-McMoRan C… CAPS Rating: ****
GG $13.90 Up +0.04 +0.29%
Goldcorp, Inc. (US… CAPS Rating: ***
KGC $1.76 Down -0.04 -1.96%
Kinross Gold Corp… CAPS Rating: ***