WHAT WE'RE LOOKING FOR
This is the final instalment of our week-long look at what's inside some popular exchange-traded funds listed on the Toronto Stock Exchange. Our point of comparison is something called EVA, or economic value added, which is a stringent measure of a company's profitability. Here, we examine the stocks that make up the iShares CDN Gold Sector Index ETF (XGD).
Montreal-based Stockpointer, a specialist in EVA analysis, has alphabetically listed the stocks that account for the assets in XGD. You'll also find data on each stock's intrinsic value, which is what a stock should be trading at according to the wealth it creates for shareholders.
Price over intrinsic value puts a stock's actual trading price in perspective. Higher numbers suggest an overvalued stock, while a score under 1.0 suggests bargain pricing.
Finally, Stockpointer has provided an economic performance index score for each stock. The EPI offers a way of comparing wealth-generating power for companies across different sectors. A company needs an index score of at least 1.0 to be considered a wealth creator.
WHAT WE FOUND
Bundle the stocks in XGD together and you've got a big zero from an EVA point of view. Stockpointer explains this as being a result of the trouble gold producers have had in converting high prices for gold bullion into strong profits. XGD was up about 26 per cent in the past 12 months, so let's not get too carried away in dissing the S&P/TSX global gold index tracked by this fund.
But if you're interested in owning gold companies that are good wealth creators, you might want to investigate Eldorado Gold, Newmont Mining and Red Back Mining. None of the three, it has to be said, is a bargain if you compare their recent share price with their intrinsic value as calculated by Stockpointer.
|iShares CDN Gold Sector Index Fund (XGD)|
|Company||Symbol||% Weight in Portfolio||$ Price Jan. 6||Intrinsic $ Value||Price \ IV||Economic Performance Index|
|Agnico Eagle Mines Ltd||AEM-T||4.3||60.16||5||11.85||0.3|
|Anglogold Ashanti Ltd - ADR||AU-N||7.3||44.18||-28||-1.6||-1.9|
|Barrick Gold Corp||ABX-T||19.2||43.18||-26||-1.66||-2.3|
|Eldorado Gold Corp||ELD-T||3.8||15.35||7||2.3||1.9|
|Gold Fields Ltd - ADR||GFI||4.9||13.87||6||2.29||0.7|
|Harmony Gold Mining Ltd - ADR||HMY-N||2.1||11.03||7||1.64||0.7|
|Kinross Gold Corp||K-T||6.3||20.73||2||8.61||0|
|Lihir Gold Ltd - ADR||LIHR-Q||3.5||31.63||7||4.83||0.5|
|Newmont Mining Corp||NEM-N||11.4||49.61||39||1.27||1.5|
|Osisko Mining Corp||OSK-T||1.0||8.65||-1||-13.65||-0.5|
|Randgold Resources Ltd - ADR||GOLD-Q||3.6||84.32||8||10.02||0.9|
|Red Back Mining Inc||RBI-T||1.7||17.54||5||3.37||1.3|
|Royal Gold Inc||RGLD-Q||0.9||48.75||11||4.3||0.5|
|Yamana Gold Inc||YRI-T||4.2||12.68||4||3.15||0.4|
|Weighted Average for the ETF:||100.0||43.37||11||2.25||0|
|Note: ADR means American Depositary Receipt, which is a way for global stocks to list on a U.S. exchange.|
|Ticker key: T=TSX; N=NYSE, Q=Nasdaq|
© 2007 The Globe and Mail. All rights reserved.
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