Investing is complicated, and during periods of economic and geopolitical uncertainty, it gets even more difficult. For many investors, it makes sense to include an investment that is considered a store of wealth as a hedge against adversity. Historically, that role was played by gold, but now some look to Bitcoin (BTC 3.89%) and other cryptocurrencies to fill it. A better choice might be Franco-Nevada (FNV 2.71%). Here’s why.
What is the point of owning a store of wealth?
While some market watchers suggest the stock market is efficient, anyone who invests in it knows it can be wildly unpredictable over short periods. In the end, investor emotions are a big driver of near-term market performance, which is why it can make sense to own an investment that has value beyond the stock market.
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Traditionally, gold has been a key store of wealth. In fact, during turbulent times, investors often buy gold in an attempt to protect themselves from potential stock declines. More recently, Bitcoin and other cryptocurrencies have been used to fill this role, since they aren’t controlled by a government entity. The problem is that the value of Bitcoin is largely dictated by investor emotions, just like stocks.
Moreover, the safe-haven value of crypto hasn’t really been tested by a deep and prolonged bear market. In fact, as geopolitical turmoil has increased, Bitcoin’s price has been plunging. The price of gold, by contrast, has been hovering near all-time highs.
Franco-Nevada is a gold alternative
The big problem with gold is that an ounce of the precious metal will only ever be an ounce of gold. There’s no growth opportunity; the price has to increase for you to make any money. Franco-Nevada is a gold streaming and royalty company. It provides gold miners cash up front for the right to buy precious metals at reduced rates in the future, which effectively locks in a profit on the sale of those metals.
Today’s Change
(-2.71%) $-7.11
Current Price
$254.86
Key Data Points
Market Cap
$49B
Day’s Range
$247.57 – $257.37
52wk Range
$140.03 – $285.67
Volume
52K
Avg Vol
809K
Gross Margin
71.99%
Dividend Yield
0.60%
Franco-Nevada is one of the largest companies that does this. And it is always on the lookout for new investment opportunities, which allows it to grow its business over time. And since it doesn’t actually operate any mines and has a large collection of streaming deals, it is a lower-risk choice than buying a gold miner. Meanwhile, the fact that it basically buys gold at advantageous prices means it is more closely tied to gold prices than a miner, which has to pay for and operate mines.
If you are looking at Bitcoin as a safe-haven investment, you might want to broaden your search to include gold. And in the gold space, streamer Franco-Nevada could end up being the investment you really want to own.