An Investment Rarity

AN INVESTMENT RARITY

This is “survivor’s week” in Market Notes.

For the next four days, we’ll feature a stock that survived the greatest “stress test” thrown our way in decades: the 2008 credit crisis. Classic investment wisdom says if a stock can hold steady or make new highs during a horrible market environment, it’s incredibly strong. It’s near impossible to find companies that held steady during the one of the greatest asset declines in history.

We’ll kick off survivor’s week with the past three years in Royal Gold (RGLD). Royal Gold is an unusual kind of gold company. It follows the “royalty model” Dan Ferris wrote so bullishly of last year. You see, Royal Gold doesn’t mine any gold of its own. Instead, it finances lots of early-stage mining projects, then earns a royalty on a mine’s production if things work out. This is a safer, more diversified way to invest in the gold-mining business, rather than a company focused on one big strike.

As you can see from today’s chart, Royal suffered a sharp decline in October 2008. But this decline lasted for just the blink of an eye… and was much less than those suffered by conventional gold miners. The stock then marched to a new all-time high a few months later… and continued on the uptrend you see below. As the infomercial pitchmen like to say, this is “an investment rarity.”

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