ETF Trends
ETF Trends

Following up on the success of the Sprott Gold Miners ETF (NYSEArca: SGDM), Sprott Asset Management introduced SGDM’s junior miners equivalent today with the launch of the Sprott Junior Gold Miners ETF (NYSEArca: SGDJ).

The new ETF tracks the Sprott Zacks Junior Gold Miners Index (NYSE:ZAXSGDJ) and is the first factor-based junior miners ETFs. Investors have an appetite for junior gold miners via the ETF wrapper as highlighted by the $1.6 billion in assets held by the Market Vectors Junior Gold Miners ETF (NYSEArca: GDXJ), making that fund the second-largest gold miners ETF.

SGDJ provides investors with a more thoughtful strategy by focusing on more advanced stage companies where the historical success rates have been higher. The Index also weights companies differently by using two factors – revenue growth and price momentum – to emphasize companies with stronger growth potential. These factors have historically been strong predictors of long-term stock performance in the junior gold mining sector,” said John Ciampaglia, head of ETFs at Sprott, in a statement.

SGDJ, which holds both 36 U.S- and Canada-listed companies, weighs its components based on revenue growth and price momentum. The new ETF’s underlying index can also invest in junior silver miners that meet the aforementioned criteria. [A Different Spin on Gold Miners ETFs]

Investors have shown they like the idea of introducing fundamental weighting to a genre of the ETF market that has been dominated by cap-weighted products as it took SGDM less than five months of trading to accumulate $100 million in assets. The ETF now has close to $200 million in assets under management.

SGDJ’s index excludes companies with market values below $250 million in an effort to keep out very early stage exploration firms with low rates of success. The weighted average market value of the new ETF’s holdings is $745 million, according to Sprott data.

Some of SGDJ’s largest U.S-listed holdings include First Majestic Silver (NYSE: AG), Hecla Mining (NYSE: HL), Pan American Silver (NasdaqGS: PAAS) and IAMGOLD (NYSE: IAG). Those stocks combine for 21.5% of the new ETF’s weight.

SGDJ debuts at a time of extreme bearish sentiment toward junior miners, but the ETF could be a way to play a reversal in that sentiment.

“Sentiment is extremely negative – the junior gold stock sector is down over 80% since its market high in late 2010. High-quality junior miners are potential acquisition targets for senior miners,” according to Sprott. [Waiting for a Junior Miners ETF Rebound]

The new ETF charges 0.57% per year.

Chart Courtesy: Sprott

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.