Q: I hold two small positions, which combine to about 2.5%, in New Gold Mining and Triple Flag Precious Metals. I am considering a switch to Lilly Pharmaceuticals. At the moment, my exposure to the materials and health care sectors are about 5% each: this would change my weighting to 2.5% materials and 7.5% health care.
My questions are which of LLY or (TFPM + NGD) have a more favourable outlook on a three-year horizon, and would this potential impact on my portfolio diversification outweigh any potential gains?
My questions are which of LLY or (TFPM + NGD) have a more favourable outlook on a three-year horizon, and would this potential impact on my portfolio diversification outweigh any potential gains?
5i Research Answer:
It is pretty hard (impossible really) to predict the relative performance of smaller gold stocks vs a $722B healthcare company. So we would first look at sector allocations. 2.5% in any sector is of course low. But we would have no issue against 7.5% in US healthcare. Risks need to be considered as well. Golds might have lots of upside but lots of risk comes with that. We would consider LLY the better overall choice rather than the combo and safer. But the combo could absolutely outperform under the right conditions. Still, we would be fine with such a proposal if it matched our objectives.