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Note: This article is courtesy of Iris.xyz
By Frank Holmes
As we all know, exchange-traded funds (ETFs) have increasingly become the hot menu item, attracting a lot of money away from actively-managed funds such as mutual funds. But don’t discount active management just yet! There’s still plenty of room in your portfolio for this type of investment.
Consider the following:
1. First-Mover Advantage
Active management gives us the ability to act swiftly and strategically, with the surgical skill of a highly-trained team of Special Forces. It allows us to push out of the starting blocks much faster.
As active managers, we closely monitor key indicators and macroeconomic themes such as PMI (the Purchasing Manager’s Index), which we’ve written about many times, and negative real interest rates. These indicators, among other factors, often serve as the signals we’re looking for.
2. Explicit and Tacit Knowledge
Some people have book smarts (explicit knowledge), while others have street smarts (tacit knowledge). Active management requires that you have both.
Not only are we experts in geology and mineral resources, we’re also world travelers with “boots on the ground” experience visiting mines, spending time with mining crews and meeting with management teams.
[related_stories]3. Technical Models
We are practitioners of quantitative analysis on a per-share basis. We use a matrix of top-down macro models and bottom-up micro stock selection models to determine weightings in individual securities. When looking at mining stocks, for instance, we screen for the following factors.