Health Care Sector Spurred by Population Growth and M&As
By Frank Holmes
CEO and Chief Investment Officer
U.S. Global Investors
Recently I spoke with John Derrick, director of research here at U.S. Global, to pick his brain about what he thought was the most interesting sector right now. You might expect him to have said energy, perhaps because of the intensifying violence in Kurdistan Iraq, a major oil producer. But instead, he said that he had his eyes on health care.
This might raise some eyebrows since health care has slightly underperformed in the last three months compared to some of the other sectors such as energy and utilities. But health care does appear to be due for a major rotation, fueled by a number of reasons: dramatically changing global demographics, the recent rise in biotech and pharmaceutical mergers and acquisitions (M&As) and companies’ relocations to more tax-friendly countries.
As you can see in the bar graph below, health care, while still reliable, has much room to grow.
A rapidly growing and aging world population.
By 2030, a mere decade and a half from now, the world population is expected to grow 16 percent to 8.3 billion. And because we’re living longer, a greater number of people will fall into the 60-and-above age bracket, when chronic diseases such as stroke, cancer, diabetes and heart disease become more pronounced. Life expectancy is expected to rise to 73.7 by 2017. Two billion of us—that’s the equivalent of more than six times the U.S.’s population—will be over the age of 60 by 2050, a whopping 233 percent increase from 2000.
Meeting the demands of such a staggering number of people, many of them at advanced ages, will require unprecedented innovation in key areas such as energy, food production, housing and especially health care. We’re already seeing practical applications of advanced biotechnology that blur the line separating sci-fi and reality—3D printing, bionic eyes and limbs, face transplants—but better and more efficient treatments are needed to confront the unique challenges that accompany an overcrowded planet.
Average global spending on health care as a percentage of gross domestic product (GDP) is currently above 10 percent. The U.S. alone spends over $8,000 annually per person on health care, more than any other country. Even so, these figures are expected to rise over the coming months and years as our population matures and, unfortunately, we become more accustomed to unhealthy diets and sedentary lifestyles
In emerging countries, health care infrastructure is in desperate need of improvement. Many parts of the fastest growing regions, such as the Middle East and Africa, sorely lack caregivers, surgeons, hospital beds and easy access to health care in general. These are areas where global health care providers, drugmakers and biotech firms can realize huge growth potential by entering historically underserved markets.
M&As and relocations.
As we’ve seen in other industries lately, heath care companies are undertaking a series of high-profile M&As that enable them to increase their innovative bandwidth and expand their global reach.
Following are a couple that John says are worth checking out.
Biogen Idec, the top holding in both our Holmes Macro Trends Fund (MEGAX) and All American Equity Fund (GBTFX), was founded in 1978 in Geneva, Switzerland, and specializes in developing leading treatments for neurological and autoimmune disorders such as multiple sclerosis (MS). Since its 2003 merger with IDEC, it has gone on to acquire two other companies.
Now headquartered in Weston, Massachusetts, Biogen Idec controls business and research operations facilities all over the world and generates close to $7 billion in annual revenues.
Although sales of its popular Avonex have slowed lately, Biogen Idec still has strong growth potential. Its oral MS drug Tecfidera, launched in April of last year, has become a certifiable blockbuster hit, generating $1.38 billion in the first quarter of this year alone.
As you can see below, Biogen Idec has been rising steadily over the last three years, consistently outperforming the S&P 500.
Another company that has benefited from acquisitions is Grifols, a leading producer of blood-plasma products. It’s made several of them in the past decade and continues to seek additional opportunities, especially within diagnostic and hospital services.
Because of these actions, Grifols is now the world’s third-largest manufacturer of plasma protein therapies, with donor and treatment centers dotted across the globe, from Argentina to Canada, Germany to China, Thailand to Australia. Although headquartered in Spain, it conducts more than 90 percent of its sales outside of its native country.
Grifols is in the early stages of building a new logistics facility in Ireland, to be completed by February 2015, to take advantage of the country’s inviting 12.5 percent corporate tax rate.
Other companies seem to have the same idea. Minneapolis-based Medtronic, manufacturer of medical devices such as pacemakers, is planning a corporate inversion by merging with Dublin-based Covidien, producer of pharmaceuticals and surgical supplies, and moving operations to Ireland. Giant New York City-based drugmaker Pfizer, whose attempts to purchase London-based AstraZeneca fell through in May, is also speculating on whether to become a foreign company, according to Investor’s Business Daily.
Reaching the masses.
The recent trend in health care M&As has many benefits, not least of which is the ability to reach a wider range of people who depend on the drugs and treatments the industry delivers. Biogen Idec and Grifols, among others, exemplify the idea that biotech firms and drugmakers can join forces and broaden their global reach in an ever-increasing population—while also serving the needs of their shareholders.
These are the opportunities that John and the other portfolio managers here at U.S. Global seek out to ensure that our investors’ money is working optimally.
- Major market indices finished mixed this week. The Dow Jones Industrial Average fell 0.56 percent. The S&P 500 Stock Index declined 0.10 percent, while the Nasdaq Composite gained 0.68 percent. The Russell 2000 Small Cap Index advanced 0.09 percent this week.
- The Hang Seng Composite Index rose 0.21 percent. Taiwan gained 0.36 percent and the KOSPI advanced 1.04 percent.
- The 10-year Treasury bond yield fell 7 basis points to 2.54 percent.
Domestic Equity Market
The S&P 500 Index was basically flat for the week, realizing a very modest loss. Consumer discretionary stocks led the way on the upside, followed by utilities and technology. Industrials and consumer staples were the biggest drags on the index, falling by more than one percent.
- The consumer discretionary sector rose by more than 1 percent as an eclectic bunch led the sector higher. Best Buy, PetSmart and TripAdvisor all rose by more than 6 percent. Best Buy announced they are considering a partnership sale of their Chinese business.
- The utility sector was also a strong performer this week as yields headed lower and mergers and acquisitions (M&A) activity sparked additional interest. Wisconsin Energy offered $5.7 billion to buy Integrys Energy Group, which was a 17 percent premium to the previous closing price.
- Vertex Pharmaceuticals was the best performer in the S&P 500 Index, rising 44.35 percent this week. The company announced positive late-stage trial results for its cystic-fibrosis regimen, likely paving the way for an FDA filing in the fourth quarter.
- The industrials sector experienced broad based weakness with many well-known heavyweights leading the way down. Flowserve, Precision Castparts, Rockwell Collins, Boeing and Norfolk Southern were among the worst performers.
- The S&P 500 Index refining and marketing group fell nearly 8 percent this week. The U.S. Commerce Department opened the door to oil exports from the U.S. by allowing condensate (ultra-light oil) to be exported. This has the potential to negatively impact the refiners who are benefitting from relatively cheap domestic oil prices. Marathon Petroleum and Valero Energy were the worst performers in the S&P 500 Index this week.
- Other poor performing areas in the S&P 500 Index this week included tobacco, home furnishing retailers and health care facilities.
- A strong unemployment report next Thursday could be a catalyst for the market with estimates for nonfarm payroll growth of 215,000 jobs.
- The market is closed next Friday and half of Thursday in observance of the Fourth of July. Holidays often get the market in a positive mode and a modest rally ahead of a holiday wouldn’t be a surprise.
- The market appears comfortable with the current Fed positioning and it appears the path of least resistance is higher.
- The second quarter is closing fast and we haven’t had the seasonal correction that we experienced the past few years.
- At almost 18 times trailing earnings, the S&P 500 Index is not cheap. Valuation may be a headwind for future market gains.
- Focus will shift to upcoming earnings. We are in the preannouncement season when negative news will likely be divulged.
Treasury yields moved lower this week, capping off the best week in over a month for the treasury market. Economic data remains mixed, and after having a week to consider Federal Reserve Chair Janet Yellen’s comments from last week, the market believes the Fed is unlikely to alter its current easy monetary policy. Revised first-quarter GDP data was released this week, indicating GDP contracted by 2.9 percent, which was the worst decline in five years. The market basically ignored this data as it was widely expected to be revised lower due to weather and a late Easter impact. The key data point out this week that investors should focus on is the Markit Manufacturing PMI, shown in the chart below. As can easily be seen, this index hit a new high and was very strong, which indicates whatever weakness was seen in the first quarter is being reversed in the second quarter. Barring exogenous external shocks, this bodes well for the economy for the next three to six months.
- The Markit Manufacturing PMI rose to a very strong 57.5, indicating that the economy is strengthening and should give confidence to policymakers and business leaders.
- Both new and existing home sales in May were better than expected. Existing home sales rose 4.9 percent while new home sales rose 18.6 percent.
- June consumer confidence indicators were also better than expected this week. Both the Conference Board Consumer Confidence Index and the University of Michigan Sentiment Index showed good improvement over last month.
- First-quarter GDP contracted 2.9 percent. Although this is bad on the surface, it is backward looking and overstated due to weather and a late Easter.
- Personal income and spending data for May revealed that spending rose a modest and less-than-expected 0.2 percent.
- Durable goods orders fell 1 percent in May. Month to month changes in durable goods orders tend to be choppy, so don’t read too much into this drop at this point.
- While next week is a holiday shortened week, we still have big economic data points being released. The employment report will be released on Thursday and expectations are for nonfarm payroll growth of 215,000 jobs, which is consistent with recent results. If payrolls are around the 200,000 level, the market will likely embrace the results as that would imply status quo from the Fed.
- The ISM Manufacturing Index will be out on Tuesday and is another top tier report on the health of the economy. We potentially received a good preview this week with the Markit data mentioned above.
- With key global central banks back into easy policy mode and inflation trending lower in many parts of the world, the path of least resistance for bond yields is likely down.
- A strong payroll report would be a sign the economy is accelerating and could alter views of potential Fed policy action.
- Japanese Consumer Price Index (CPI) inflation hit the highest level in 32 years at 3.7 percent (year over year). This is potentially the canary in the coal mine on developed world inflation trends.
- St. Louis Fed President James Bullard stated the economy is “closer to normal” than many realize and that the Fed could raise interest rates as soon as the first quarter of 2015.
For the week, spot gold closed at $1,315.66, up $0.81 per ounce, or 0.06 percent. Gold stocks, as measured by the NYSE Arca Gold Miners Index, rose 0.53 percent. The trade-weighted U.S. dollar index fell 0.42 percent for the week.
|June 22||China June HSBC Manufacturing PMI Preliminary||49.7||50.8||49.4|
|June 25||U.S. May Durable Goods Orders||-0.2%||-1.0%||0.6%|
|June 25||U.S. GDP First Quarter Third Reading||-1.8%||-2.9%||-1.0%|
|June 26||China May Gold Imports from Hong Kong (tonnes)||–||67.2||80.8|
|July 1||U.S. June ISM Manufacturing||55.5||–||55.4|
|July 2||Fed Chair Yellen to speak at IMF||–||–||–|
|July 3||ECB Main Refinancing Rate Decision||0.15%||–||0.15%|
|July 3||U.S. June Change in Nonfarm Payrolls||210K||–||217K|
- China’s manufacturing Purchasing Managers Index (PMI) expanded in June for the first time in six months, posting its highest reading since November 2013, as policymakers to continue to implement targeted accommodative policies. The reading is significant because gold has become increasingly important to both high net worth and middle class individuals in China. As a matter of fact, the China Gold Association forecasts the global flow of gold from west to east will probably last for up to two decades as rising incomes spur demand. Such is the demand, the CME (Chicago Metals Exchange) is considering offering products to trade gold during Asian trading hours and competing with the Singapore’s government plan to promote the city-state as the regional precious metals trading hub.
- Peruvian prosecutors have jailed the governor of the Cajamarca province who supported protests against Newmont Mining’s Minas Conga gold project amid a probe of allegations officials in his government took bribes. The decision may unlock investment in the province as investors anticipate the election of a more business friendly governor. In related news, Solitario Exploration and Royalty presented its resource estimate for the Bongara high grade zinc deposit in northern Peru, developed in conjunction with Brazilian conglomerate Votorantim. The resource contains 2.8 million tonnes of 15.5 percent zinc equivalent in the measured and indicated category, making it one of the few promising zinc development projects globally.
- Coeur Mining announced its intention to complete development of its Guadalupe underground mine in Mexico after successfully renegotiating its streaming arrangement with Franco Nevada. The project will assist the company in its strategic plan to transition to a higher margin, longer-life, underground-only operation. In related news, Canyon Resources rose 70 percent after announcing first assay results for part of the company’s drilling program at the Brisok Bauxite Project in Cameroon. The drill results are highly encouraging and suggest potential for the Brisok Project to host a large, high grade bauxite resource, according to the company.
- Indian jewelers are threatening to shut down their stores if their demands for the government to revisit the gold import-export rules are not met. In light of rising global oil prices, the Indian government has shown little sign of revisiting its import restrictions on gold. Surinder Kumar Jindal, managing director of Jindal Dyechem Industries, one of the largest precious metals traders in India, has openly criticized the government’s inaction, arguing that import restrictions encourage smuggling, affect registered legal industry, and affect consumers as physical delivery premiums rise. Jewelers are hoping for the government to reconsider its position ahead of next month’s federal budget discussions.
- After a surge in mistrust during Europe’s debt crisis, the German government has decided not to proceed with the proposed repatriation of $141 billion in gold holdings currently stored in the U.S. and U.K. Analysts have speculated the repatriation request had the potential to irritate U.S.-German relations. Others have ventured to speculate that gold simply is not available for delivery to the rightful German owners, to which a German government official responded: “The Bundesbank never doubted the integrity of the foreign gold-storage sites.”
- China’s gold imports from Hong Kong fell 20 percent in May from a month earlier with net imports reaching 52.3 metric tons, compared with 65.4 tons in April. Commodities analysts speculate lower bullion demand from China—which surpassed India as the biggest gold consumer last year—may weigh on prices. However, import data from Hong Kong has become less reliable as the Chinese government continues to open gold import channels, likely diverting a portion of the import volume from Hong Kong to Beijing.
- It is time to nibble on gold stocks according to Barrons technical analyst Michael Kahn. Numerous signs suggest a decent rally is in the cards for gold, says Kahn, who argues the extreme bearishness of this cycle will leave no sellers left, while incremental buying will pull bullion up. Similarly, Swiss-based Incrementum published its latest “In Gold We Trust” report predicting a gold rally to $1,500 over 12 months. Incrementum argues that current monetary experiments will have unintended consequences difficult to gauge today, and gold should be your hedge for worst case scenarios.
- The supply deficit for platinum is estimated at 818,823 ounces this year, according to New York-based commodities research CPM Group. The estimated supply shortfall will be the largest ever platinum deficit, which is vulnerable to operational disruptions in South Africa, which accounts for 73 percent of global supply. Although the South African five-month long platinum strike was declared officially over, analysts expect that it will take months before mines can ramp up to full capacity, further exacerbating the supply shortfall expected for this year.
- The diamond market is expected to be in significant deficit for the foreseeable future, with Rio Tinto forecasting demand to double current mined supply. According to JP Morgan analysts, it is not clear how miners plan to meet increasing demand, but it implies material upside to existing producers. Lucara Diamond has appreciated nearly 50 percent this year by continuing to recover rare 100-carat plus diamonds. In Angola, another junior, Lucapa Diamond, is planning to start development at its Lulo deposit, a promising kimberlite deposit.
- A Bloomberg report states China’s chief auditor discovered $15.2 billion loans backed by falsified gold transactions, thus adding to the signs that the yellow metal may be used with other commodities in fraudulent financing deals. The revelation may spur a wave of gold sales as lenders seek to unwind gold-backed transactions to ensure their counterparties are not fraudulent.
- The gold surge can’t sustain itself according to Donald Selkin, chief market strategist at National Securities Corp. in New York. According to Selkin, the spike was caused by the Iraqi conflict and Yellen’s comments which will fade as investors seek excitement in other areas of the market. Barclays analysts agree with Selkin’s observation, adding physical demand has been “unspectacular” as of late.
- A Bloomberg report suggests gold will weaken after investors piled up into the trade too quickly. The report shows gold futures’ 14-day relative strength index exceeded the level 70 for a number of days since June 19, leading technical analysts to conclude prices are likely to decline.
- On the heels of the long-anticipated Schlumberger Ltd. analyst meeting this week, oil service and equipment stocks outperformed the broader market and the benchmark. Shares of Schlumberger gained 8 percent in the period.
- Clean energy stocks continued to strengthen as the price of crude oil remained above $105 a barrel. Sunedison Inc. gained 2 percent this week, reaching a new 52-week high.
- The Supreme Court in Iraq rejected a request from the Baghdad government to prevent the KRG from independently exporting oil. This effectively opens the door for a potential ramp up in production and exports out of Kurdistan, a potential breakthrough for current exporters DNO ASA (up 6 percent on Friday) and GENEL Energy Plc.
- Despite a slight pick-up in the price of iron ore, dry bulk shipping rates remain weak heading into the seasonally strong third quarter. The dry bulk shipping freight rate is down over 49 percent from its high set in March. Knightsbridge Tankers Ltd. declined 4 percent this week.
- Base metals equities lagged the natural resources sub-sector this week due in part to loosening within the physical market for nickel. Sherritt International Corp. fell by 2.5 percent in the period.
- For a second week in a row, food stocks were mixed on light volume but generally underperformed the broader market. Amira Nature Foods Ltd. fell 7 percent this week.
- Global chemical companies plan to invest as much as $72 billion in U.S. plants as evidence grows that natural gas will remain cheap and abundant. Foreign companies account for 62 percent of announced capital investments in the U.S. chemical industry, the largest ever inflow from other nations.
- One of the largest natural gas transportation companies in the country, won approval for a liquefied natural gas (LNG) export facility along the Louisiana coast. The Federal Energy Regulatory Commission voted unanimously for the Cameron LNG project, estimated to cost around $9 to $10 billion to construct.
- The Wall Street Journal reported that the Commerce Department approved an application for Pioneer Natural Resources to export condensate, as it was deemed to be a refined product given the initial processing through a distillation tower. This development could be positive for Eagle Ford producers such as Sanchez Energy Corp. due to growing condensate production and proximity to water and export terminals.
- Development projects in Iraq for oil production through 2030 may suffer delays in response to the latest escalation in violence across Iraq. This could help explain why long-dated Brent contracts have risen faster than the front-month contract in the past week.
- BHP Billiton Ltd. and Rio Tinto Group., two of the world’s largest mining companies, may need to cut back on their share repurchase programs following this year’s 30-percent decline in the price of iron ore.
- The Philippines was the best performing country in Asia this week, as the Philippine Stock Exchange Index entered a technical bull market on Thursday after rallying 20 percent from late August 2013. The government maintained its GDP growth target of 6.5 to 7.5 percent for this year despite a first-quarter slowdown.
- Consumer discretion was the best performing sector within emerging markets this week, led by automakers as dealer restocking activity picked up in China in the first half of June due to below normal inventory levels. Talk of government policy reforms allowing automakers to use asset-backed securities to provide financing to car buyers boosted investor sentiment as well.
- China Gas Holdings Ltd, a leading natural gas distributor, advanced 14.5 percent this week, the best performer in the MSCI Emerging Markets Index. Management announced plans to triple sales by 2020 to 30 billion cubic meters thanks to the $400 billion gas supply deal signed between China and Russia in May along with government measures to encourage use of less polluting fuels.
- Dubai was the worst-performing emerging market for the week as property developers continue their slump. Arabtec Holdings, the largest property developer in the Emirate, sunk on unconfirmed reports it was laying off hundreds of employees including top executives. The losses quickly spread to the wider market after stop losses and margin calls were triggered, partly due to the large number of highly leveraged retail investors.
- Energy was the worst-performing sector this week. The news that the U.S. Commerce Department has given the go-ahead to several companies to export crude oil, a big policy change essentially ending a ban in place for the last four decades, weighed on international energy producers. The rapid growth in U.S. energy production due to shale fracking has resulted in increasing volumes of light crude that can garner higher prices in the international market rather than domestically, while displacing existing production from international producers.
- Greek banks underperformed for the week as Standard & Poor’s said that despite the recent stabilization and recapitalization, it does not expect Greek banks to be able to successfully unwind these imbalances in the medium term. The weakness was compounded by a Markit purchasing managers’ index (PMI) report showing June economic activity slowed to its weakest rate in six months in the eurozone, of which Greece is one of the weakest links.
- Mergers and acquisitions (M&A) of European companies by U.S. counterparts have exceeded $100 billion year-to-date, surpassing the full year 2013 numbers. According to JP Morgan analysts, the wave of transactions is driven by four key points: 1) accelerating economic growth in Europe; 2) unprecedented levels of U.S. corporate cash trapped overseas; 3) lower corporate tax rates, inviting companies to relocate; 4) cheap European valuations. Case in point, Alcoa, the largest U.S. aluminum producer, agreed to buy U.K. aerospace-components maker Firth Rixson for about $2.85 billion seeking to profit from Rixson’s growth opportunities over the next three years.
- HSBC has a positive view on earnings upside surprises for emerging market stocks, after what the bank’s analysts conclude has been an “extended period of disappointment.” According to the report, emerging market margins are stabilizing and set to gradually recover, aided by cooler labor markets, lower input and commodity cost pressures, greater pricing power due to weaker currencies, as well as some top-line recovery. Among the bank’s biggest forecast-margin recoveries are Greece, Taiwan, Korea and Chile.
- Exponential growth of quick response (QR) code scans in China offers another sign of rapid expansion of mobile Internet. Smartphone scans of QR codes surpassed 1.1 billion in the country in 12 months ending in March of this year. That is equal to 35 scans per second, surging 17 times year-over-year to 160 million in March alone, according to Morgan Stanley. Electronic collection of massive consumer behavior data should help mobile commerce providers identify further monetization opportunities.
- Poland’s prime minister won a parliamentary vote of confidence following a crisis involving taped conversations of top officials. The release of the recordings comes as the Polish government is taking a principled stand against Russian aggression in Ukraine and asking for NATO intervention. The political chaos triggered a response from Prime Minister Tusk who assured the tapes had “ill intent” and had been deliberate actions by foreign masterminds aimed at destabilizing the country.
- Brazil’s 2014 economic growth expectations are a race to the bottom. According to HSBC Economics, which recently cut Brazil’s 2014 growth expectations to 1.1 percent, a weaker investment climate will weigh on the country’s growth prospects. Currently, growth expectations stand at merely one-third the level expected a year ago despite the government’s efforts to kick start growth ahead of the October presidential elections. The implications are negative for the local market where earnings’ growth trail government bond yields.
- Renewed weakness in Chinese property developers recently validated investors’ caution on the most significant risk to the Chinese economy. Fragile and deteriorating sentiment toward Chinese residential property oversupply in lower-tier cities only adds to the volatility of property-developer stocks in the near term.
The tables show the weekly, monthly and quarterly performance statistics of major equity and commodity market benchmarks of our family of funds.
|S&P Basic Materials||312.03||-1.69||-0.54%|
|Hang Seng Composite Index||3,176.49||+6.74||+0.21%|
|Korean KOSPI Index||1,988.51||+20.44||+1.04%|
|S&P/TSX Canadian Gold Index||192.98||-0.87||-0.45%|
|Natural Gas Futures||4.44||-0.09||-2.10%|
|10-Yr Treasury Bond||2.54||-0.07||-2.72%|
|S&P Basic Materials||312.03||+6.12||+2.00%|
|Hang Seng Composite Index||3,176.49||-332.01||-14.83%|
|Korean KOSPI Index||1,988.51||-28.55||-1.42%|
|S&P/TSX Canadian Gold Index||192.98||+26.23||+15.73%|
|Natural Gas Futures||4.44||-0.18||-3.96%|
|10-Yr Treasury Bond||2.54||+0.09||+3.72%|
|S&P Basic Materials||312.03||+16.81||+5.69%|
|Hang Seng Composite Index||3,176.49||+110.36||+3.60%|
|Korean KOSPI Index||1,988.51||+7.51||+0.38%|
|S&P/TSX Canadian Gold Index||192.98||+7.33||+3.95%|
|Natural Gas Futures||4.44||-0.05||-1.09%|
|10-Yr Treasury Bond||2.54||-0.19||-6.87%|
Please consider carefully a fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.
All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.
Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. By investing in a specific geographic region, a regional fund’s returns and share price may be more volatile than those of a less concentrated portfolio.
The Emerging Europe Fund invests more than 25 percent of its investments in companies principally engaged in the oil & gas or banking industries. The risk of concentrating investments in this group of industries will make the fund more susceptible to risk in these industries than funds which do not concentrate their investments in an industry and may make the fund’s performance more volatile.
Because the Global Resources Fund concentrates its investments in a specific industry, the fund may be subject to greater risks and fluctuations than a portfolio representing a broader range of industries.
Gold, precious metals, and precious minerals funds may be susceptible to adverse economic, political or regulatory developments due to concentrating in a single theme. The prices of gold, precious metals, and precious minerals are subject to substantial price fluctuations over short periods of time and may be affected by unpredicted international monetary and political policies. We suggest investing no more than 5 percent to 10 percent of your portfolio in these sectors.
Bond funds are subject to interest-rate risk; their value declines as interest rates rise. Tax-exempt income is federal income tax free. A portion of this income may be subject to state and local income taxes, and if applicable, may subject certain investors to the Alternative Minimum Tax as well. The Near-Term Tax Free Fund may invest up to 20% of its assets in securities that pay taxable interest. Income or fund distributions attributable to capital gains are usually subject to both state and federal income taxes. The Near-Term Tax Free Fund may be exposed to risks related to a concentration of investments in a particular state or geographic area. These investments present risks resulting from changes in economic conditions of the region or issuer.
Investing in real estate securities involves risks including the potential loss of principal resulting from changes in property value, interest rates, taxes and changes in regulatory requirements.
Past performance does not guarantee future results.
Some link(s) above may be directed to a third-party website(s). U.S. Global Investors does not endorse all information supplied by this/these website(s) and is not responsible for its/their content.
These market comments were compiled using Bloomberg and Reuters financial news.
Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. Holdings as a percentage of net assets as of 3/31/2014:
China Gas Holdings Ltd.: 0.0%
Arabtec Holdings Co.: 0.0%
Biogen Idec Inc.: All American Equity Fund, 3.27%; Holmes Macro Trends Fund, 3.13%
Grifols SA: 0.0%
Medtronic Inc.: 0.0%
Covidien PLC: 0.0%
Pfizer Inc.: All American Equity Fund, 0.89%
AstraZenica PLC: 0.0%
Newmont Mining Corp.: Gold and Precious Metals Fund, 0.12%; World Precious Minerals Fund, 0.11%
Solitario Exploration & Royalty Corp.: World Precious Minerals Fund, 0.84%
Coeur Mining Inc.: 0.0%
Franco-Nevada Corp.: All American Equity Fund, 0.69%; Global Resources Fund, 1.00%; Gold and Precious Metals Fund, 1.62%; Holmes Macro Trends Fund, 0.68%; World Precious Minerals Fund, 0.72%
Canyon Resources Ltd.: World Precious Minerals Fund, 0.13%
Rio Tinto PLC: Global Resources Fund, 0.29%
Lucara Diamond Corp.: Gold and Precious Metals Fund, 0.25%; World Precious Minerals Fund, 1.34%
Best Buy Company Inc.: 0.0%
PetSmart Inc.: 0.0%
TripAdvisor Inc.: 0.0%
Wisconsin Energy Corp.: All American Equity Fund, 1.04%
Integrys Energy Group Inc.: 0.0%
Vertex Pharmaceuticals Inc.: 0.0%
Flowserve Corp.: 0.0%
Precision Castparts Corp.: Holmes Macro Trends Fund, 1.17%
Rockwell Collins Inc.: 0.0%
Boeing Co.: 0.0%
Norfolk Southern Corp.: 0.0%
Marathon Petroleum Corp.: All American Equity Fund, 1.27%; Global Resources Fund, 0.22%
Valero Energy Corp.: Global Resources Fund, 0.29%
Schlumberger Ltd.: Global Resources Fund, 3.46%
SunEdison Inc.: Global Resources Fund, 0.98%
DNO ASA: 0.0%
Knightsbridge Tankers Ltd.: Global Resources Fund, 0.65%
Sherritt International Corp.: Global Resources Fund, 1.24%
Amira Nature Foods Ltd.: Global Resources Fund, 0.63%
Sanchez Energy Corp.: Global Resources Fund, 1.18%; Holmes Macro Trends Fund, 1.10%
BHP Billiton: 0.0%
Lucapa Diamond Company Ltd.: 0.0%
GENEL Energy Plc: Emerging Europe Fund, 2.99%
*The above-mentioned indices are not total returns. These returns reflect simple appreciation only and do not reflect dividend reinvestment.
The Dow Jones Industrial Average is a price-weighted average of 30 blue chip stocks that are generally leaders in their industry.
The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies.
The Nasdaq Composite Index is a capitalization-weighted index of all Nasdaq National Market and SmallCap stocks.
The Russell 2000 Index® is a U.S. equity index measuring the performance of the 2,000 smallest companies in the Russell 3000®, a widely recognized small-cap index.
The Hang Seng Composite Index is a market capitalization-weighted index that comprises the top 200 companies listed on Stock Exchange of Hong Kong, based on average market cap for the 12 months.
The Taiwan Stock Exchange Index is a capitalization-weighted index of all listed common shares traded on the Taiwan Stock Exchange.
The Korea Stock Price Index is a capitalization-weighted index of all common shares and preferred shares on the Korean Stock Exchanges.
The Philadelphia Stock Exchange Gold and Silver Index (XAU) is a capitalization-weighted index that includes the leading companies involved in the mining of gold and silver.
The U.S. Trade Weighted Dollar Index provides a general indication of the international value of the U.S. dollar.
The S&P/TSX Canadian Gold Capped Sector Index is a modified capitalization-weighted index, whose equity weights are capped 25 percent and index constituents are derived from a subset stock pool of S&P/TSX Composite Index stocks.
The S&P 500 Energy Index is a capitalization-weighted index that tracks the companies in the energy sector as a subset of the S&P 500.
The S&P 500 Materials Index is a capitalization-weighted index that tracks the companies in the material sector as a subset of the S&P 500.
The S&P 500 Financials Index is a capitalization-weighted index. The index was developed with a base level of 10 for the 1941-43 base period.
The S&P 500 Industrials Index is a Materials Index is a capitalization-weighted index that tracks the companies in the industrial sector as a subset of the S&P 500.
The S&P 500 Consumer Discretionary Index is a capitalization-weighted index that tracks the companies in the consumer discretionary sector as a subset of the S&P 500.
The S&P 500 Information Technology Index is a capitalization-weighted index that tracks the companies in the information technology sector as a subset of the S&P 500.
The S&P 500 Consumer Staples Index is a Materials Index is a capitalization-weighted index that tracks the companies in the consumer staples sector as a subset of the S&P 500.
The S&P 500 Utilities Index is a capitalization-weighted index that tracks the companies in the utilities sector as a subset of the S&P 500.
The S&P 500 Healthcare Index is a capitalization-weighted index that tracks the companies in the healthcare sector as a subset of the S&P 500.
The S&P 500 Telecom Index is a Materials Index is a capitalization-weighted index that tracks the companies in the telecom sector as a subset of the S&P 500.
The NYSE Arca Gold Miners Index is a modified market capitalization weighted index comprised of publicly traded companies involved primarily in the mining for gold and silver.
The Consumer Price Index (CPI) is one of the most widely recognized price measures for tracking the price of a market basket of goods and services purchased by individuals. The weights of components are based on consumer spending patterns.
The Philippine Stock Exchange PSEi Index is composed of stocks representative of the industrial, properties, services, holding firms, financial and mining & oil sectors of the Philippines Stock Exchange.
The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets.
The China Purchasing Managers’ Index, a gauge of nationwide manufacturing activity, is issued by the China Federation of Logistics & Purchasing and co-compiled by the National Bureau of Statistics.
The Conference Board index of leading economic indicators is an index published monthly by the Conference Board used to predict the direction of the economy’s movements in the months to come. The index is made up of 10 economic components, whose changes tend to precede changes in the overall economy.
The ISM manufacturing composite index is a diffusion index calculated from five of the eight sub-components of a monthly survey of purchasing managers at roughly 300 manufacturing firms from 21 industries in all 50 states.