Sprott Gold Miners ETF (NYSE: SGDM) is the first factor-based gold miners ETF. Learn more about its innovative Index.
Sprott Gold Miners ETF tracks the Sprott Zacks Gold Miners Index, an innovative index that is the first of its kind to use qualitative company factors to select and weight gold stocks. It is designed to incorporate three factors that have historically been strong predictors of gold stock performance over the long term.
From the investible universe of U.S. exchange- listed large-to-mid cap gold stocks, the Index selects 25 stocks whose stock prices have historically shown high sensitivity to the price of gold. It then uses two company factors – revenue growth and long-term debt to equity - to determine the weights of each stock in the Index.
Revenue growth has been a strong indicator of production growth and the long-term success of a gold producer. Companies with the highest revenue growth scores are rewarded with a higher weighting in the Index.
Lower debt to equity ratio indicates a stronger balance sheet and a greater ability to weather downturns. This is especially important for gold miners since exploring for large gold deposits and developing mines can often cost billions of dollars and 10 or more years to reach production. Companies with the low debt relative to their market value are rewarded with a higher weighting in the Index.
Very importantly, the Index rebalances its holdings on a quarterly basis to incorporate the latest company results into its screening process. This ensures that companies with the highest factor scores are represented in the Index on a quarterly basis.
The Sprott Gold Miners ETF seeks to provide investors with:
- An innovative indexing methodology that focuses on quality vs. quantity
- The potential to outperform a purely passive representation of the gold and silver mining industry
- An emphasis on gold companies with the strongest relative revenue growth and balance sheets as measured by their long-term debt to equity ratio