U.S. Global Investors, Inc. (NASDAQ: GROW) (the “Company”), a
boutique registered investment advisory firm with longstanding
experience in global markets and specialized sectors, today
reported net income of $647,000, or $0.04 per share, for the fiscal
year ended June 30, 2018. In comparison, for the previous fiscal
year, the Company recorded a net loss of $513,000 ($0.03 per
share), representing an increase in net income of approximately
$1.2 million. The increase is primarily due to income from equity
method investments of $1.6 million. Assets under management (AUM)
for fiscal year 2018 fell in comparison to the same period in 2017,
leading to a decrease in operating revenue.
Cash and cash equivalents at fiscal year-end
increased by $2.4 million from the prior fiscal year-end. A large
component of the increase in cash during fiscal 2018 was due to net
proceeds from investing activities, somewhat offset by dividends
paid and repurchases of common stock.
Average AUM was $729 million versus $843 million
in fiscal year 2017, a decrease of 13.5 percent. The decrease was
primarily due to market depreciation and shareholder
redemptions.
2018 Has Been Challenging for Metals, but that Could
Change with Faster Inflation
“The price of gold was off more than 4 percent
in the first six months of the year on a stronger U.S. dollar and
massive short positions in precious metals by hedge funds,”
explains Frank Holmes, Company CEO and chief investment officer.
“Gold has had a very strong negative correlation to the dollar this
year, meaning it’s moved in nearly the exact opposite direction as
the strengthening greenback. However, taking into account the trade
war’s potential harm on the U.S. and global economies, I believe
the dollar could be near a peak, with the potential for even higher
gold prices. The yellow metal was down two standard deviations over
the past 60 trading days as of the end of the first half of 2018,
so the math is in our favor for gold to revert to the mean.
“At this stage in the business cycle, investors
should start considering the risk of inflation, which I believe is
accelerating a lot faster than the Labor Department’s official
annual rate,” Holmes continues. “Historically, gold has performed
very well when consumer prices were rising faster than 3 percent.
In many cases, we’re already seeing this rate or higher because of
trade tariffs, wage inflation and higher fuel prices.
“What’s more, we’re seeing a slowdown in the
Global Manufacturing Purchasing Manager’s Index (PMI), which could
portend a global recession by as early as next year. The price of
copper, traditionally seen as a barometer of economic health,
tumbled nearly 5 percent in June as President Donald Trump and
economic advisor Larry Kudlow imposed heavy tariffs on China, the
world’s second largest economy, and ramped up the rhetoric against
international trade deals.
“Having said that, I’m very pleased with the
performance of our Gold and Precious Metals Fund (USERX), which
beat its benchmark, the FTSE Gold Mines Index, for the one-year,
three-year, five-year and 10-year periods as of June 30, 2018. It
also held an incredible five-star rating overall from Morningstar
as of June 30 in the Equity Precious Metals category, based on
risk-adjusted returns.
“Finally, I think it’s important that investors
be aware that Vanguard, one of the largest fund companies in the
world, will be changing the investment strategy of its flagship
precious metals fund. Starting in September, its metals and mining
position will be trimmed substantially, from 80 percent to only 25
percent, leaving many investors underexposed at a time when
inflationary pressures are intensifying. We believe USERX, as well
as our U.S. Global GO GOLD and Precious Metal Miners ETF (GOAU),
are attractive ways to participate, should precious metals begin to
rally. Our funds might charge more, but I believe it’s all about
performance, and for the one, three, five and 10-year periods,
USERX beat Vanguard’s fund.
“GOAU has also done very well in its first
year,” Holmes continues. “It outperformed its gold equity peers, as
its model suggested it would.”
Total AUM in GOAU was $12.1 million as of June
30, 2018, an increase of more than 400 percent from the same time
in 2017, when total AUM was $2.4 million. The ETF was launched in
June 2017.
Higher Fuel Costs Impacted
JETS
The U.S. Global Jets ETF (JETS), launched in
April 2015, held $92.5 million in total AUM as of June 30, down
from $114.9 million a year ago, as Brent crude oil, the global
benchmark, rose nearly 19 percent in the first six months of 2018.
Fuel, airlines’ largest expense, is expected to account for 22.5
percent of global airlines’ operating costs in 2018, up from 19.8
percent last year, according to a June report by the International
Air Transport Association (IATA).
JETS’ stock price began to lift in July,
however, as oil prices sank below $75 per barrel on increased U.S.
output. American producers pumped more than 11 million barrels per
day (bpd) for the first time ever in July, and the Energy
Information Administration (EIA) expects them to produce as much as
12 million bpd by late 2019. The additional output is anticipated
to offset continued supply disruptions in OPEC member nation
Venezuela, as well as in Iran, on which the U.S. re-imposed
sanctions in early August.
Share Repurchase Program
U.S. Global Investors has continued purchasing
its outstanding stock. For the quarter ended June 30, 2018, the
Company purchased a total of 1,000 class A shares using cash of
approximately $2,000. The share repurchase plan may be suspended or
discontinued at any time.
Continued Strong Balance
Sheet
As of June 30, 2018, the Company had net
working capital of approximately $15.3 million. With approximately
$6.4 million in cash and cash equivalents and $15.3 million in
securities recorded at fair value, which together comprise
approximately 75 percent of total assets, the Company has adequate
liquidity to meet its current obligations. In addition, the Company
has had no long-term debt since 2004 and owns its headquarters
building.
U.S. Global Continues GROW
Dividends
The Company has continued to pay monthly
dividends for more than 10 years. The Company paid $0.0025 per
share per month in fiscal 2018 and fiscal 2017. A monthly dividend
of $0.0025 has been authorized through September 2018, and will be
reviewed by the Board quarterly.
Earnings Webcast
Information
The Company has scheduled a webcast for 7:30
a.m. Central time on Friday, September 7, 2018, to discuss the
Company’s key financial results for the year. Frank Holmes will be
accompanied on the webcast by Lisa Callicotte, chief financial
officer, and Holly Schoenfeldt, marketing and public relations
manager. Click here to register for the earnings webcast or visit
www.usfunds.com for more information.
|
Selected Financial Data (unaudited): (dollars in
thousands, except per share data) |
|
|
|
2018 |
|
|
2017 |
|
Operating Revenues |
$ |
6,261 |
|
$ |
6,763 |
|
Operating Expenses |
|
8,549 |
|
|
7,636 |
|
Operating Loss |
|
(2,288 |
) |
|
(873 |
) |
|
|
|
Total Other Income |
|
3,174 |
|
|
346 |
|
Income (Loss) Before
Income Taxes |
|
886 |
|
|
(527 |
) |
|
|
|
Income Tax Expense |
|
197 |
|
|
17 |
|
Net Income (Loss) |
|
689 |
|
|
(544 |
) |
Less: Net Income (Loss)
Attributable to Non-Controlling Interest |
|
42 |
|
|
(31 |
) |
Net Income (Loss)
Attributable to U.S. Global Investors, Inc. |
$ |
647 |
|
$ |
(513 |
) |
|
|
|
Earnings (Loss) per
share (basic and diluted) |
$ |
0.04 |
|
$ |
(0.03 |
) |
|
|
|
Avg. common shares
outstanding (basic) |
|
15,158,067 |
|
|
15,212,008 |
|
Avg. common shares
outstanding (diluted) |
|
15,158,067 |
|
|
15,212,008 |
|
|
|
|
Avg. assets under
management (millions) |
$ |
729 |
|
$ |
843 |
|
|
|
|
About U.S. Global Investors, Inc.
The story of U.S. Global Investors goes back
more than 50 years when it began as an investment club. Today, U.S.
Global Investors, Inc. (www.usfunds.com) is a registered investment
adviser that focuses on niche markets around the world.
Headquartered in San Antonio, Texas, the Company provides money
management and other services to U.S. Global Investors Funds, U.S.
Global ETFs and other international clients.
Forward-Looking Statements and
Disclosure
This news release and other statements by U.S.
Global Investors may include certain “forward-looking statements,”
including statements relating to revenues, expenses and
expectations regarding market conditions. You can identify these
forward-looking statements by the use of words such as “outlook,”
“believes,” “expects,” “potential,” “opportunity,” “seeks,”
“anticipates” or other comparable words. Such statements involve
certain risks and uncertainties and should be read with corporate
filings and other important information on the Company’s website,
www.usfunds.com, or the Securities and Exchange Commission’s
website at www.sec.gov.
These filings, such as the Company’s annual
report and Form 10-Q, should be read in conjunction with the other
cautionary statements that are included in this release. Future
events could differ materially from those anticipated in such
statements and there can be no assurance that such statements will
prove accurate and actual results may vary. The Company undertakes
no obligation to publicly update or review any forward-looking
statements, whether as a result of new information, future
developments or otherwise.
Please consider carefully a fund’s investment
objectives, risks, charges and expenses. For this and other
important information regarding the U.S. Global Jets ETF (JETS) and
U.S. Global GO GOLD and Precious Metal Miners ETF (GOAU), obtain a
statutory and summary prospectus by visiting www.usglobaletfs.com.
Read it carefully before investing.
Total Annualized Returns as of 6/30/2018:
|
|
|
|
|
|
Fund |
One-Year |
Three-Year |
Five-Year |
Ten-Year |
Gross Expense Ratio |
Gold and Precious Metals Fund |
5.82 |
% |
12.18 |
% |
3.17 |
% |
-4.55 |
% |
1.86 |
% |
Vanguard Precious Metals and Mining Fund |
-3.85 |
% |
5.03 |
% |
-0.42 |
% |
-9.14 |
% |
0.36 |
% |
FTSE Gold Mines Index |
-0.22 |
% |
10.21 |
% |
0.89 |
% |
-6.57 |
% |
n/a |
|
|
|
|
|
|
|
|
|
|
|
|
Expense ratios as stated in the most recent
prospectus. Performance data quoted above is historical. Past
performance is no guarantee of future results. Results reflect the
reinvestment of dividends and other earnings. For a portion of
periods, the fund had expense limitations, without which returns
would have been lower. Current performance may be higher or lower
than the performance data quoted. The principal value and
investment return of an investment will fluctuate so that your
shares, when redeemed, may be worth more or less than their
original cost. Performance does not include the effect of any
direct fees described in the fund’s prospectus which, if
applicable, would lower your total returns. Performance quoted for
periods of one year or less is cumulative and not annualized.
Obtain performance data current to the most recent month-end at
www.usfunds.com or 1-800-US-FUNDS.
Morningstar
***** |
Overall/67 |
***** |
3-Year/67 |
***** |
5-Year/64 |
**** |
10-Year/44 |
Morningstar ratings based on risk-adjusted return and number of
fundsCategory: Equity Precious MetalsThrough: 6/30/2018
Morningstar Ratings are based on risk-adjusted
return. The Morningstar Rating for a fund is derived from a
weighted-average of the performance figures associated with its
three-, five- and ten-year Morningstar Rating metrics. Past
performance does not guarantee future results. For each fund with
at least a three-year history, Morningstar calculates a Morningstar
Rating based on a Morningstar Risk-Adjusted Return measure that
accounts for variation in a fund’s monthly performance (including
the effects of sales charges, loads, and redemption fees), placing
more emphasis on downward variations and rewarding consistent
performance. The top 10% of funds in each category receive 5 stars,
the next 22.5% receive 4 stars, the next 35% receive 3 stars, the
next 22.5% receive 2 stars and the bottom 10% receive 1 star. (Each
share class is counted as a fraction of one fund within this scale
and rated separately, which may cause slight variations in the
distribution percentages.)
For information regarding the investment
objectives, strategies, liquidity, risks, expenses and fees of the
Vanguard Precious Metals and Mining Fund, please refer to the
prospectus for that fund.
Investment Objectives: The Gold
Precious Metals Fund seeks capital appreciation while protecting
against inflation and monetary instability. The fund also pursues
current income as a secondary objective. The Vanguard Precious
Metals and Mining Fund seeks to provide long-term capital
appreciation.
Liquidity: The Gold and
Precious Metals Fund and Vanguard Precious Metals and Mining Fund
can be purchased or sold at a net asset value (NAV) determined at
the end of each trading day.
Safety/Fluctuations of
principal/return: Loss of money is a risk of investing in
the Gold and Precious Metals Fund and Vanguard Precious Metals and
Mining Fund. Shares of these securities are subject to sudden
fluctuations in value. Gold, precious metals and precious minerals
funds may be susceptible to adverse economic, political or
regulatory developments due to concentrating in a single theme. The
prices of gold, precious metals, and precious minerals are subject
to substantial price fluctuations over short periods of time and
may be affected by unpredicted international monetary and political
policies. The chance that world events—such as political upheaval,
financial troubles, or natural disasters—will adversely affect the
value of securities issued by companies in foreign countries or
regions. Because the fund may invest a large portion of its assets
in securities of companies located in any one country or region,
its performance may be hurt disproportionately by the poor
performance of its investments in that area. Country/regional risk
is especially high in emerging markets. The chance that the value
of a foreign investment, measured in U.S. dollars, will decrease
because of unfavorable changes in currency exchange rates.
Tax features: The Gold and
Precious Metals Fund and Vanguard Precious Metals and Mining Fund
may make distributions that may be taxed as ordinary income or
capital gains. Mutual funds are pass-through entities, so the
shareholder is responsible for taxes due on distributions.
Information provided here is neither tax nor legal advice and is
general in nature. Federal and state laws and regulations are
subject to change.
The FTSE Gold Mines Index encompasses all gold
mining companies that have a sustainable and attributable gold
production of at least 300,000 ounces a year, and that derive 75%
or more of their revenue from mined gold.
The Purchasing
Managers' Index (PMI) is an indicator of
economic health for manufacturing and service sectors. The
purpose of the PMI is to provide information about
current business conditions to company decision makers, analysts
and purchasing managers.
Fund portfolios are actively managed, and
holdings may change daily. Holdings are reported as of the most
recent quarter-end. Holdings by region in the Gold and Precious
Metals Fund as a percentage of net assets as of 6/30/2018: Vanguard
Precious Metals and Mining Fund (0.00%).
Investing involves risk, including the possible
loss of principal. Shares of any ETF are bought and sold at market
price (not NAV), may trade at a discount or premium to NAV and are
not individually redeemed from the fund. Brokerage commissions will
reduce returns. Because GOAU concentrate its investments in
specific industries, it may be subject to greater risks and
fluctuations than a portfolio representing a broader range of
industries. GOAU is non-diversified, meaning it may concentrate
more of its assets in a smaller number of issuers than a
diversified fund. The fund invests in foreign securities which
involve greater volatility and political, economic and currency
risks and differences in accounting methods. These risks are
greater for investments in emerging markets. The fund may invest in
the securities of smaller-capitalization companies, which may be
more volatile than funds that invest in larger, more established
companies. The performance of the fund may diverge from that of the
index. Because GOAU may employ a representative sampling strategy
and may also invest in securities that are not included in the
index, it may experience tracking error to a greater extent than
funds that seek to replicate an index. The fund is not actively
managed and may be affected by a general decline in market segments
related to their indexes. Airline Companies may be adversely
affected by a downturn in economic conditions that can result in
decreased demand for air travel and may also be significantly
affected by changes in fuel prices, labor relations and insurance
costs.
GOAU and JETS are distributed by Quasar
Distributors, LLC. U.S. Global Investors is the investment adviser
to GOAU and JETS.
Under the equity method, the investment is
initially recorded at cost, then the Company’s proportional share
of the fund’s net income or loss, which primarily consists of
realized and unrealized gains and losses on investments offset by
fund expenses, is recognized in the Company’s earnings with a
corresponding increase or decrease to the carrying value of the
investment. Distributions received from the investee reduce the
Company’s carrying value of the investment.
Contact:Holly SchoenfeldtMarketing & Public
Relations Manager210.308.1268hschoenfeldt@usfunds.com
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