Venture: Portfolio Update

Issue 57

In my latest Atlas Pulse on gold, I discussed gold’s super bull market, something of a step above a mere bull market. I called it a super bull because gold normally follows the bond market, and this time, it is riding high while bonds have been under pressure. The last time this happened was in the 1970s, the other super bull.

Yet investors couldn’t be less interested in gold. It has beaten the S&P 500 since the turn of the century and trades at an all-time high in most currencies, while in US dollars, it is down a mere 3% since October. Gold is booming, and investors ignore it. I can illustrate this with Seabridge Gold (SEA Canada), one of the most exciting gold exploration companies in the world. In their words, Seabridge has “A 20+ year track record of growing ounces of gold in the ground faster than shares outstanding”.

The value of their assets (blue) keeps on rising, while their market cap (red) has fallen back. The price-to-book (purple) is at the lower end of the range, and the book value per share has grown 79% over ten years.

Seabridge Gold Price-to-Book

Source: Bloomberg

If you would like book value explained, I wrote “Value Investing: Introducing Book Value”.

$100 invested in gold in 2015 is today worth $224, yet that $100 would have turned into $159 in SEA. An investor might reasonably expect SEA to be well ahead of the gold price, yet it has fallen behind. That was the case until 2022 when Western investors cooled on gold despite the price continuing to appreciate.

Seabridge Gold Compared to Gold Price

Source: Bloomberg

This is a market anomaly, and SEA, and many other gold miners, offer compelling value in the face of the gold super bull. This is one of those opportunities that comes around once every super bull cycle. As I said, the last one was in the 1970s.

Alliance Pharma

Alliance Pharma (APH) was added to Venture last June. There was a takeover approach last week, and the shares returned 61% over 199 days, equivalent to a 139% IRR.

The bid was very near the average analyst price forecast, a useful shorthand for private market valuations that has proven correct again.

Alliance Pharma Plc

Source: Bloomberg