GROW - Earnings call transcript Q1 2025 | U.S. Global Investors, Inc.

Thank you, Holly.

We have over 30 years of experience, unique global footprint, particularly that grew out of gold in the world of gold and looking for gold mining assets. And the big growth in the past 30 years has been in Africa and Latin America and in certain little regions of North America, in particular, Canada, for two states. It was Nevada, and we saw success in pockets from Quebec and Ontario and British Columbia, but the big growth in the gold mining industry was in emerging countries. And with the rise of GDP per capita, with China embracing capitalism and having a cultural affinity for gold, it led to a new world, especially this century, the year 2000, and we look after the great tech bubble, commodities, in particular, gold started to get this, I call, the love trade. And that led us to open up a China region fund, which we had incredible success with. And then there's sort of an anti-China concerns and rightly so.

So we've shut that down. There's just no interest. And it led us into other emerging countries. And with that, in that journey, we have created three ETFs because that's a new technology in the Mutual Fund 1940 Act industry. And they've been related to our global travels. But it's always, as Holly said, smart beta 2.0, which means that you have a very quantitative regressional work that's a minimum 10,000 hours of studies going back over a decade to look at what is the ideal portfolio construction for up and down cycles in the economy and what are the industry-specific factors that you are best for stock picking and you try to create a portfolio that recalibrates every quarter.

And so we've been very successful in creating sustainable products. And with that, we have 100,000 readers in 80 countries, and we've won many award-winning financial bloggers as we've grown the sort of footprint of sharing our global knowledge and trade with our weekly investor alert.

Next, please.

So we want to thank those shareholders, in particular, The Vanguard Group that we show up in their Index. They own 5.32% Franklin Investments which is interesting, bought 5.21%. And Perritt Capital has been a loyal investor in the microcap and small cap sector.

And so I'd like to thank them all for continuing to be strategic investors with us.

Next, please.

So this is a nice visual because I want to go from a macro point view for shareholders to recognize that microcap struggled to keep pace with large caps. And this is a classic example of looking since 2020, just before -- or I guess, COVID onset, you can see is the S&P has far outperformed iShares microcap stocks.

Next, please. And then when you go and look at the big cap stocks, something else is really quite interesting is the difference between market cap weighted S&P 500 versus equally weighted S&P 500. And you can see here that the market cap only of the S&P 500 is up almost 12% more than the equally weighted.

So then it lends itself what stocks are leading that charge. And you can see that Tesla and Google and Microsoft and Apple and Facebook and Tesla, there have been big 7 stocks that have skewed the overall -- in particular, the technology of the S&P 500.

And so it's not just the microcaps, it's also the big caps. And there, you have 7 stocks being dominating the overall performance.

Next, please. And then we want to go back and look at how we've done over 5 years and this -- The Russell Microcap Index.

So we have outperformed it. And there are times in this journey where we far outperformed it.

You can see that huge spike that happened going into COVID. And that was a combination of the Jets ETF going from $40 million to $4 billion in assets. And since then, that sort of decline has been people taking their profits off of JETS. And even though JETS as a stock price has not returned to its pre-COVID, even though more people are flying today than pre-COVID, and I'll explain that more in detail.

So try to understand that we've had this big run. And that big run, as you can see here, was a combination of Bitcoin and our investment in HIVE exploding during this period along with assets coming into the complex.

So a real important part is relative to having a great product that is sustainable and is thematic enough that it attracts a lot of investors.

Next, please.

So often, when you're my age, you get this question and sort of good corporate governance is succession planning. And I always like to say that Warren Buffett is my hero for many reasons. But that 95 -- 94-year-old Warren Buffett is now sitting on more than $325 billion in cash and he is still blowing and going.

And so I often like to run in the morning 5 kilometers, which is about 3 miles.

So staying healthy is important, and I want to keep my brain and my body as robust as possible.

So there's no immediate succession that's necessary or planned for me today.

So next, please.

Another sort of Sage Advice out of Warren Buffett is that stock buybacks, they benefit all shareholders, not just the biggest shareholders. Increasing dividends benefits the biggest shareholders on that income distribution, whereas the thought process is when you're buying shares and you're shrinking the market cap that all shareholders benefit. And it's a combination, which I'll explain in a few seconds, but I think that we're going to demonstrate to you that we've been very strong in buying the stock back because we've lived through these cycles before. We've lived where you have a hot product or you get a theme so correct, such as creating the first Eastern European fund that went from $4 million to $1.4 billion. And that fund has had such difficulty with Putin first invading Crimea and then going back and then coming back again and invading Ukraine. American appetite for anything Eastern Europe or in that region as close to Putin is really not happening. And they would rather speculate in technology stocks like NVIDIA and keep that risk domestic.

So that is something that I've witnessed on and I think there's a wonderful book by John Surowiecki on The Wisdom of Crowds, it's important to be able to capture that. But I would say -- share with you that the other unique ETF products we've created are Sea to Sky. It really captures emerging markets and global trade.

As global trade picks up, the global GDP picks up, shipping explodes because 80% of everything is shipping.

So we've consolidated our exposure to Asia and to Eastern Europe by having a unique smart beta 2.0 for cargo, for cargo airplanes and predominantly for shipping higher-end products across oceans. And the other part is to recognize that we are -- with all our cash makes us undervalued.

So -- we are just going to be in our sort of consistent basis, no extreme big moves except for working and analyzing our products and looking to come up with new exciting products.

Next, please.

So often you're asked like why do you buy back your stock besides Warren Buffett, Sage Advice? Well, we believe that U.S. Global is deeply undervalued. We believe that by buying stock back, it's going to enhance shareholder value. And we believe that during this sort of lull that's taken place, in particular, coming into this very challenged election cycle with so much negativity, thank God is behind us, that we offer to the shareholders a very strong shareholder yield of 9.34%. And that is a combination of stock buyback and dividends.

Next, please.

So the number of shares repurchased over the past three period, as you can see that as GROW has gone down in overall stock price, it's made it for -- as a long-term vision, just prudent to increase our stock buybacks because we believe it is deeply undervalued. But we're not going to go do something that is to pay out all the cash and as some shareholders are trying to take our cash from us and pay some big onetime price or a big dividend, which would really only enrich me, not enrich the company and be able to deal with these sort of negative cycles that you can have when you have cyclical thematic products.

So we believe we're undervalued, and we have shown that conviction by a very pragmatic and thoughtful way of buying back more stock.

Next, please.

So dividends, it's interesting. The dividend is quite often in the Quant world that there's a model that looks at the 5-year government treasuries. And what is that yield that's a safe yield for 5 years against what the dividend yield is today or can that your dividend grow faster than what the 5-year yield is? So stocks, and this is my first time in [ 1978 ] when I got hired and went into this business and graduated from university was to have a very simple -- today would be locked at, but it was a Quant model using old technology, but it was looking at 5-year government yields and stocks that were -- that had this capacity to grow and had a yield that was higher, and they outperformed.

So that's why I bring this to your attention that the negativity and the fund flows of negativity towards the airline industry, which is predominantly sentiment has impacted the valuation of the stock.

So the yield today is higher than the 5-year treasury yield. And that makes it a very attractive proposition and another rational reason for us buying back our stock.

Next, please.

So we're going to take a look at the first quarter of 2025.

Some of the strengths is that we have a strong balance sheet, including cash and other investments, shareholder value. The company continues to buy back stock, as I just mentioned, and pay its monthly dividend. And gold's record performance, gold reaching all-time highs and the company's gold focus has -- funds have grown modestly year-over-year on total assets. We're not seeing the big flows that you would normally see in gold and gold stocks. But I believe that when we look at global debt structures and the continuance of printing money and many of the countries in the G20 still believe in modern monetary theory as a way to stimulate the economy, I think gold and other alternative asset classes will continue to be an important part of a diversified portfolio.

So that's why we think that we're rightfully positioned for the world of gold.

Next, please.

So Go Gold theme, we write about it every week. It's always been the sort of idea of having 10% allocated towards gold and nice beautiful gold jewelry as gifts for love and the other 5% in our gold funds to be able to capture this run. But you can see the total assets have modestly grown.

Next, please. To put that in context, in 2007, those assets were $2 billion.

So that's the potential leverage is almost a tenfold bagger going back to 2007 levels for gold stock.

So if gold continues with this march, it was up [indiscernible] deviations over 60 trading days. And yes, they have corrected. And I think it's just a wonderful buying opportunity as the dollar surged with the election results. It's just normal for the short-term mean reversion. But gold as an asset class, I believe, will continue as it has this century outperformed the S&P 500. And gold royalty companies, which I've always loved like Franco-Nevada have outperformed Berkshire Hathaway since it went public in 2008. And other funds -- stocks that we own in our funds like Triple Flag, it's also outperformed. And it went public like just after 2019 in that timeframe area, and it's one of the newer royalty companies by -- that was the [indiscernible] was Elliott Management as a hedge fund, and they want to create their own royalty company because it's unique model. And you can see that it too has been very successful outperforming majority of gold stocks as it has gone public. Rule of Three strategy and tactics create sustainable thematic products using a smart beta 2.0 strategy back testing up to 10,000 hours and then continuously testing every quarter, manage to preserve cash for future growth opportunities and market corrections and M&A activity to acquire other funds. We look at deals. We get deals sent to us. And still, we see this sort of a La La Land valuations and other companies that own mutual funds of what they think they're really worth. And when I sometimes get the question, and I say, well, then why don't you buy our assets if you think that's what your funds are worth.

And so it's just what [ it isn't ] the industry that people are still holding on to old valuation metrics for mutual funds. Mutual funds will slowly over time, be replaced with ETFs. That's just an ongoing evolution. They do provide a less expensive, but you need more assets to breakeven. And you have seen that originally, it was more index ETFs -- and now we've seen active ETFs explode in valuations. Smart beta 2.0 is in between both. It is a rules-based discipline of looking at an industry that recalibrates every quarter versus just buying market cap index of an industry. And what we have witnessed, which is very positive in this sort of the adoption of ETFs has been the sort of idea that having active ETFs and the seeding of them and the funding of them. It's evolved. It's evolved just like Bitcoin ETFs evolved and finally got out off the launching pad this year.

Next, please.

So the shareholder value is a simple algorithm, dividends plus buybacks and debt reduction divided by market cap gives you what the shareholder value is. We don't have a debt issue.

So we have lots of cash.

So we're buying back stock, and we're maintaining that dividend. And when you take a look at the relative valuation, it is a very attractive shareholder yield.

Next, please. And I say that because it's 9.34%.

Next, please. U.S. Global Investors committed to returning value to shareholders when compared to treasury yields. 10-year treasury yield is 3.81%, 5-year is 3.58%.

Our dividend itself is higher than the 5-year. And the overall stock buyback, when you combine it, there is a better value proposition buying gold the long-term.

Next, please.

So I'd like to look at some basic comps and give you a quick idea that WisdomTree, they have over $100 billion in assets, and they've had some significant growth in new products in this past year.

And sometimes it's like having a hot technology or a hot car design. It's like having a hot thematic ETF that sort of garners the interest of investors. And it's recognizing that. But WisdomTree is 100% ETFs and their price to book trades at a higher multiple versus Invesco, which 40% of their assets are QQQ, which is a monster of an ETF that covers basic NASDAQ stocks. And you can see that they've had their challenges with their other fund and asset groups and the return on their assets have been negative. We've been slightly higher. And that goes up and down.

Going back a couple of years back, U.S. Global had the highest return on assets. Pretax margins, they've shrunk because the funds have shrunk, and it's a pretty simple math of how many funds do you need to breakeven. And the dividend yield, as you can see, Invesco stock is more significantly down.

So therefore, their yield is higher. And there -- when you take a look at WisdomTree that they trade at a higher price to book.

So when you look as a GARP investor, price-to-book is important.

So automatically, it would show up as Invesco and U.S. Global. And then when you look at return on assets, then it would be U.S. Global and it'd be WisdomTree.

If you're looking at pretax margins, then you're back to WisdomTree, if you're looking for a dividend yield, you'd be Invesco.

So it's the magic of the matrix that you create, which your -- the long-term vision, what's your faith in the company, how they function and what they do.

I think that's what makes that determination.

If you're just a pure, buy the cheapest price to book, then you're going to look at Invesco.

If you're looking for who has the highest return on assets, you're going to like a WisdomTree.

If you're looking for dividend yield, you're going to look at Invesco.

I think the value proposition is right along the middle, and that's U.S. Global.

Next, please.

So when we look at the recent purchase we've made $520,000, I think that it represents the -- represents 14% of market cap.

Now what that really means is that the Board has approved for us to be able to buy up to approximately 14% of the shares. Lisa, you can correct me on that when she speaks, etcetera. But roughly, it's capital to -- which we have on our balance sheet to consistently buy back the stock without any overreaching on 1 day or 1 week -- it's consistent as it's undervalued to be buying back the stock.

Next, please.

So quarterly webcast on our thematic products, gold and interest rates, understanding the interest rate influence on mining stocks. We did a presentation recently on that. And we also did one on why now is the time to consider airline stocks. And just after that, what was interesting for me to share with you is that Spirit jumped 68%. Well, it's after Spirit had fallen over the past year, especially with not being able to merge with JetBlue and all these problems. It had fallen over 80% and had this big pop. And what we see with that is that people were long hedge funds are Jets ETF and short the stock. And all of a sudden, they got an extension on their debt refinancing, and there was massive short covering. And we see that. We see the fund flows.

And so what we're trying to share with you is that when you look at the ecosystem of investors in JETS, it's retail, it's people that trade off the oil price. It's people that use hedge funds to go long JETS to short various airlines. There are GARP investors that are doing asset allocation because the airline industry is a growth industry at a very reasonable price.

So you have a very robust trading around JETS as a proxy. We further launched it in Colombia, and we're expanding that in the marketing in Latin America so that we have a broader interest in our product lineup. What we did this past 6 months was to merge our JETS, which was listed in London with another group and created TRIP. And TRIP is basically has an expanded universe that has more tourism involved with it.

So -- but it's really the backbone is the JETS and so that has more of a critical mass listed over there that we become the global experts in the airline industry, like we are in the world of gold.

Next, please.

So the TSA numbers hit all-time high. They are roughly running or clearing 2.5 million people before COVID, down to 80,000 people in a day. And what you see, I don't think that's right. It wasn't December 2019. That was in March of 2019 and it grew. And Warren Buffett got out. He was worried, he was turning 90 years old, and there was such a negative aspect of it. But the millennials and Generation Z seem to be the big speculators, and we had tremendous fund flows coming in and JETS went from about $11 up to $28. And then to start getting these redemptions, which was really interesting because the TSA numbers had not reached even close to 3 million people.

So you're seeing that the stock still, I believe, has another close to $10 in the upside to go to pre-COVID numbers. And the airline industry remains -- in the summer had incredible traffic.

So it's a very positive inexpensive industry that's critical for global economic activity.

Next, please. And we are the go-to people.

We have that unique product, and it has outperformed the benchmark, which we first started with, was to beat the New York Stock Exchange Global Airline Index. There's been one or two other ones that try to come out, but they do not have the smart beta 2.0. And I believe that, that's a very important discipline of stock selection to outperform the index.

And so what have we seen this quarter since we did our presentation, United also announces a buyback, $1.5 billion buyback. JETS all of a sudden pops 10% of JETS was in United Airlines and United Airlines now is up 36%.

And so I keep reiterating like for the webcast, but going into the election, the sentiment was so pervasively negative. That's just a headwind, and we just continue to be positive and constructive and balanced in how we tell this JETS story.

Next, please. Airline stocks this century have outperformed the S&P from September to November.

So we really tried to highlight that at the beginning of October that the math suggests that there's a higher probability of the airlines outperforming, they have.

In fact, what's really interesting is that the best time to buy is late spring, early summer when it lags the overall S&P because 6 months later, the math is so much in your favor that it trades higher. And it's just interesting for the traders that we have that come in and out. Like I mentioned, there's oil traders that oil prices are rising, they're out of JETS, oil prices falling, they're in the JETS. Then you have individual hedge fund managers that are going longer, short individual names, and they want to what's called a Pairs Trade and JETS becomes the proxy.

Next, please.

So the smart beta 2.0 ETF versus the New York Arca Global Airline Index -- it's outperformed by 26% since we launched this after -- and you got to remember that there's no fees for the global Arca Index. There's fees with us, but we still outperformed. And I think that, that's really a compelling story of the smart beta 2.0.

Next, please. Then just by market cap.

You can see here that it's outperformed this year by 13% after fees.

So it does work. And that's why I try to highlight to investors that the number I showed you just earlier with United Airlines was a shorter timeframe. This is year-to-date.

And so there's been, during the summer, such negative news, but the oil prices were falling and the world is coming to an end and all this negative narrative and the airlines are trading at 6x and 5x earnings. It just didn't make sense when the market is trading at 22x to 25x.

Next, please.

So GO GOLD theme, we're positioned for the GO GOLD theme. And I think it's this idea I mentioned earlier is modern monetary theory. Please subscribe to Investor Alert.

You can get more information and insightful. And on YouTube, we have insightful explanation of what's going on that GO GOLD will continue to be a unique asset class.

Next, please. The big win behind it, it's not a headwind, it's a tailwind, and that is the global debt [ climbs ]. It just continues to be a currency debasement. And that this visual is one of the most shared documents that are out there for the Bitcoin ecosystem. The Bitcoiners and the crypto around the world just say that there's no pulling back in MMT and the global debt continues to climb so one country versus another will just to base its currency faster than the other. And you can sort of see that when you take a look at the next visual, please.

So when we look at CPI, the U.S. is 3.9%, but when you look at global nominal GDP is 7.8%. Gold is slightly ahead of global nominal GDP, which is basically being fueled by all this debt. And then you ought to take a look at how well gold has done in some of these big countries currencies.

Next, please.

Sorry, that's okay. It's also the sort of deficit. U.S. deficit spending continues to make alternative assets like gold attractive. That's called the fear trade. The love trade, which is 60% of gold demand is more correlated to rising GDP per capita. India is surging. China is on the ropes, but they turn in that corner of that GDP per capita is in India and China when you combine them are 40% of the world's population.

You throw in Southeast Asia and the Middle East. And now we're pushing more than -- you're pushing about 60% of the world's population. And I think it's important to recognize that there's a cultural affinity. Gold has given 24-carat gold jewelry for birthdays, for wedding season. There's two big wedding seasons in India, and we have this season of lights Diwali season, very, very significant consumption of 24-carat gold jewelry.

Next, please. This is the visual I want to share with you.

So the Go Gold theme, gold's historic rise is a global phenomenon. Who's had the biggest debt spending for as a percentage of GDP is for Japan and look how strong gold has done for Japanese investors. And if you look at the euro, you can see India, why do Indian women basically have 6x the amount of gold that's in Fort Knox because they trust gold more than they trust government policies for money printing. And that's just a hedge against currency debasement. The U.S. is 32%.

You can see China interesting enough is similar and a lot has to do with China's as currencies come down. And I think that that number is interesting because it's probably going to change after the election cycle here of a strong dollar. But they're doing everything in China to try to manage their currency against the U.S. dollar for trade and against the euro. And they predominantly export their products to Europe and America, and there's a transition taking place.

So what is the theme? Go Gold. BRIC countries want to attack the U.S. dollar and the only way they can get credibility is by buying gold.

And so we're seeing central banks around the world continue to be buying gold.

So gold, we believe, is going to continue to be a unique and special asset.

Next, please.

So now we have gross trading assets of $1.5 billion. Lisa is going to give you what our earnings were.

Our operating income is down. We've lost money. We've made money from an earnings point of view following all the GAAP rules. But from an operating point of view, we've been through these lulls before. And we think that what's behind this is the election cycle and sentiment. And I think we've seen the airlines have a big pop like financials did yesterday.

And so the capital markets are going to open up for capital formation and private sector job creation and innovation.

So I think going forward, it's very, very positive for capital markets, and we are a deep value proposition for that sector. And now I'd like to turn it over to Lisa, please, our CFO.

Holly Schoenfeldt	executive
Frank Holmes	executive
Lisa Callicotte	executive

U.S. Global Investors (GROW) 8 Nov 242025 Q1 Earnings call transcript

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U.S. Global Investors (GROW) 8 Nov 242025 Q1 Earnings call transcript