Student and entrepreneur
Altius Minerals Corp., Eurasian Minerals Inc., Ligand Pharmaceuticals Inc., Alaris Royalties Corp., Freehold Royalties Ltd. and Franco-Nevada Corp.
Martin Hoff is a student and fledgling entrepreneur preparing to open a craft-beer store. A few years ago, he began investing in junior-mining companies. The result was "substantial losses."
Now he invests in royalty companies. They provide funding to mining and other companies in exchange for a percentage of their revenues. One main advantage is that they avoid the operational risks that sometimes befall producing companies – for example, cost overruns.
How he invests
Mr. Hoff looks for royalty companies with quality assets, stable cash flows and diversified holdings. He also checks management's operational experience and sensitivity to social/environmental issues. Then he buys at a "significant discount to net asset value or to peers' valuations."
Mr. Hoff believes Altius Minerals Corp. stock is undervalued for reasons originally outlined in his seekingalpha.com article. A key point: He feels the market is not fully aware that Altius coal royalties are tied to volumes shipped (not affected by low coal prices).
He recently added to his position in Eurasian Minerals Inc. Its royalty on Reservoir Minerals Inc.'s proceeds from the Timok Magmatic properties in Serbia looks particularly interesting given the appreciation in Reservoir Minerals' stock.
He sold his shares in SkyePharma PLC for a quadruple gain this summer. He took a position the previous summer after realizing the company owned "substantial royalty rights to third-party medications" in addition to its product for treating chronic obstructive pulmonary disease.
"Being long several minerals development and exploration companies during the bear market the past few years. I called the bottom too early several times."
Given royalty companies have interests in many companies, Mr. Hoff recommends them as an alternative to mutual funds and exchange-traded funds.
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