I recently posted a thread on RMS looking at this Van Eck trade, few more charts there for those interested. BDR is another one i have looked at and it's extremely interesting.
The Van Eck sell rebalance will be announced on the 9th of June, i had previously heard the 17th but either way they are lining up to have their GDXJ index finalised around mid-June. Post this, depending on flows into/out of the ETF will impact their market movements.
Personally, i think this is one of the highest conviction trades i've seen as a value investor. Many of these gold juniors are selling well below their true value, purely due to the largest shareholder being a non-company specific ETF. One way to put it, if the company was to sell all its assets tomorrow, they would likely get a price far higher than their current market cap leaving the buyer to take advantage of exploration and future production and any increases in the gold price.
As this chart shows, there is a serious divergence between BDR and the gold price of late...starting right when the Van Eck rebalance began.
If you look at the stocks Van Eck has been buying, compared to selling it's pretty obvious the impact it has had on the share prices of the companies. Green are a few they are buying, Red are the ones they are selling (lists i posted on the thread for RMS).
And prior to the announced index changes how the same stocks were trading.
And a little closer to home, the ASX listed gold stocks winners/losers.
Take from it what you will, but it isn't often you get the opportunity to purchase great assets at big discounts. A reversion back to normality will see the savvy investor (someone who doesn't invest in an ETF!!) reap great profits when the forced sell down ends in the near future.
Any further research posts on this topic are appreciated.
BDR Price at posting:
21.5¢ Sentiment: Buy Disclosure: Held
