Midas MarketScope

ROCHESTER, NY – June 26, 2023

Federal Reserve Chairman Jerome Powell recently reiterated his expectation that more interest rate increases are required to combat inflation. Although inflation as measured by the Consumer Price Index (CPI) decreased to 4% in May 2023, it is still double the Federal Reserves’ target inflation rate of 2%. After four decades of investing in a declining rate environment, investors now face the challenge of investing with higher rates. When investing with higher rates, future free cash flow generated by a business is discounted at a higher rate, thus decreasing the current value of those cash flows. The result can be lower price-to-earnings ratios, among other valuation metrics. In addition, investors may choose to invest in credit instruments which, with higher rates, yield a more attractive return than in low interest rate periods. As a result, investors may choose to allocate a higher percentage of their portfolio towards securities with higher current earnings yields. Therefore, the investing environment over the next few years may be different than what investors have experienced in the past decade and investors should be aware of this shift.

Midas Fund The Fund’s holding of Centerra Gold Inc., a Canadian gold mining company, performed well in the past month. Shares of Perseus Mining Ltd., an African gold mining company, underperformed in the past month.

The Fund seeks primarily capital appreciation and protection against inflation and, secondarily, current income.

Under normal circumstances, in pursuit of its investment objectives, the Fund’s investment strategy is to invest principally in (I) securities (e.g., common and preferred stocks, bonds, convertible securities, etc.) of companies primarily involved, directly or indirectly, in the business of mining, processing, fabricating, distributing or otherwise dealing in gold, silver, platinum, other precious metals, or other natural resources (“Natural Resources Companies”); and (ii) gold, silver, and platinum bullion and coins; provided, however, that the Fund’s investment adviser, Midas Management Corporation (the “Investment Manager”), may invest in any type of equity security (e.g., common and preferred stocks) and in companies of any size, industry or sector, including both domestic and foreign companies, that the Investment Manager believes may achieve the Fund’s investment objectives. Up to 35% of the Fund’s total assets may be invested in fixed income securities of any issuer, including U.S. government securities, of any credit quality or maturity, although the Fund has no current intention of investing more than 5% of its total assets in fixed income securities rated less than investment grade (also known as “junk bonds”). The Fund concentrates its investments by investing at least 25% of its total assets in Natural Resource Companies.

Midas Magic The Fund’s position in Atkore Inc., an American manufacturing company, performed well in the past month. The Fund’s holding of U-Haul Holding Co., an American moving truck rental and self storage company, hindered the Fund’s performance in the past month. Each of Mastercard Inc. Class A and Alphabet Inc. Class A currently comprise more than 10% of the Fund’s net assets.

The Fund seeks capital appreciation. Under normal circumstances, in pursuit of its investment objective, the Fund may invest in any security type (e.g., common and preferred stocks, bonds, convertible securities, etc.) and in companies of any size, industry, sector, including both domestic and foreign companies.  Relative to the S&P 500, the Fund’s portfolio currently is more weighted in economically sensitive sectors, such as communications, and cyclical sectors, financial services, and is underweight in defensive industries, such as utilities.  

How to Invest in Gold?

Three alternatives investors often consider when seeking the advantages of gold are gold bullion, stocks of gold mining companies, and funds that invest in gold and gold-related securities, such as Midas Fund. Using a disciplined approach, Midas Fund seeks to emphasize gold and other natural resource companies offering financial strength, expanding production profiles, strong free cash flow, and promising exploration potential. The Fund’s portfolio is focused on what we believe to be some of the best companies in the sector and so we view Midas Fund as currently well positioned to seek capital appreciation and protection against inflation.