Michael Goldberg of the Collins St Value Fund has established a reputation for strategic foresight in the investment world. Three years ago, his bold call on gold, at a time when few were paying attention, has been proven prescient. Now, with gold prices soaring, Goldberg remains optimistic yet cautious about the future potential of this precious metal.
Goldberg explained,
“I’m not sure that gold is properly represented in most people’s portfolios. I think there’s a lot of excitement now and people are tinkering with it, but you don’t see gold forming a material part of people’s portfolio. I think there’s probably upside. How much upside? I don’t know.”
This blend of conviction and humility characterizes the investment approach of Goldberg and the Collins St team.
Gold: A Strategic Asset in Uncertain Times
The Collins St Value Fund’s journey with gold began when the spot price hovered around US$1,600–1,800. Few anticipated the record highs that would follow. The team identified several powerful tailwinds: significant central bank purchases, inflationary pressures weakening the US dollar, and a dearth of new mining projects due to financial and environmental constraints.
Instead of speculating on bullion, Collins St focused on undervalued gold equities. Goldberg noted,
“What we tried to find and what we uncovered was a host of companies… where not only were the companies’ costs cheap based on prevailing gold prices, but they were predicting much lower gold prices, and we thought that that was unreasonable.”
Despite current gold prices around US$4,000, Goldberg believes the market still undervalues many producers, with broker models often assuming long-term prices well below spot.
Managing Concentration and Expanding Horizons
Collins St’s conviction in gold grew so strong that their flagship fund at times held nearly 35% in the theme. Recognizing the need for diversification, they launched a dedicated gold fund, which has seen significant returns. Recently, they returned capital to investors, reflecting both the fund’s success and strategic adjustments.
Goldberg remains constructive on gold’s supply-demand dynamics but is wary of market euphoria.
“When the market gets excited about a commodity, it makes me a bit nervous.”
The flagship fund has since reduced its gold exposure from 30% to about 25%, maintaining a high-conviction position.
Exploring Rare Earths and AI as Strategic Investments
Collins St has long been interested in rare earths and mineral sands, well before geopolitical tensions brought them to the forefront. Their investment in Astron (ASX: ATR) highlights this focus, with the Donald Project in Victoria becoming increasingly significant as Western nations seek to reduce reliance on Chinese supplies.
Goldberg argues that AI should be viewed as a tool rather than an investment thesis.
“It is just the first time in history that we’ve had a tool that was capable of digesting mountains of data and then recognising patterns.”
Collins St looks for companies using AI pragmatically, such as Seven West Media and SkyCity, which leverage AI for targeted advertising and regulatory compliance, respectively.
Top Stock Picks: Strategic Investments for the Future
Based on Collins St’s latest quarterly report, here are ten stocks they currently favor:
- Astron (ASX: ATR): Backed for its Donald mineral sands and rare earths project, with significant strategic value.
- Boom Logistics (ASX: BOL): A crane business with potential for consolidation and asset sales.
- Carnarvon Energy (ASX: CVN): Priced for its cash, with potential upside from its Bedout Basin interests.
- Gold equities basket, including Black Cat Syndicate (ASX: BC8): Significant valuation upside as equities align with gold prices.
- Humm Group (ASX: HUM): A turnaround financial business with a promising business lending arm.
- Litigation Capital Management (LON: LIT): Despite negative sentiment, Collins St sees underappreciated value.
- Retail Food Group (ASX: RFG): A franchising group back in growth mode, with potential takeover interest.
- Select Harvests (ASX: SHV): Positioned for margin expansion with rising almond prices.
- SkyCity Entertainment (ASX: SKC): A discounted casino operator with monopoly assets.
- Seven West Media (ASX: SWM): An undervalued media group with strong ratings and valuable sports rights.
Investment Philosophy: Slow is Smooth, Smooth is Fast
Collins St adheres to the mantra “slow is smooth, smooth is fast” in a market dominated by AI hype and mega-caps. Historically, they held stocks for under two years, but value recognition now takes longer. Goldberg emphasizes the importance of buying a dollar’s worth of earnings for 50 cents, resisting the urge to chase trends.
On the macroeconomic front, Goldberg acknowledges the disjointed global landscape. Traditional economic relationships appear less reliable, but he cautions against assuming historical patterns have broken. Instead, he believes in the long-term benefits of technological progress, urging investors to avoid permanent errors and maintain a consistent process through uncertainty.
