What Makes A-Mark Precious Metals (AMRK) a Unique Investment?

Praetorian Capital, an investment management company, has published its investor letter for the third quarter of 2024. A copy of the letter can be downloaded here. The fund declined 2.29% net of fees in the third quarter. Core portfolio holdings mostly declined in the quarter, while the Event Driven book posted a slightly positive return. In the first nine months, net performance was driven primarily by the event-driven book, with a slightly negative return from the core book. For more information on the fund’s top picks in 2024, see the top five holdings.

Praetorian Capital highlighted stocks like A-Mark Precious Metals, Inc. (NASDAQ:AMRK) in its Q3 2024 investor letter. A-Mark Precious Metals, Inc. (NASDAQ:AMRK) is a precious metals trading company. A-Mark Precious Metals, Inc. (NASDAQ: AMRK)’s one-month return was 1.12%, and its shares gained 50.16% of their value over the last 52 weeks. On October 18, 2024, A-Mark Precious Metals, Inc. (NASDAQ:AMRK) stock closed at $43.55 per share with a market cap of $998.112 million.

Praetorian Capital stated the following about A-Mark Precious Metals, Inc. (NASDAQ:AMRK) in its third quarter 2024 investor letter:

“A-Mark Precious Metals, Inc. (NASDAQ:AMRK): As the world gets crazier, I believe people will realize that owning precious metals in physical form rather than in a brokerage account is part of financial prudence. You will most likely purchase these coins from a coin dealer, either in person or online. A-Mark serves both markets as one of the largest players in online coin trading through its JM Bullion, LPM, Silver Gold Bull, Goldline etc. verticals, while also acting as one of the largest wholesalers to local coin shops. A-Mark also has interests in two mints (Silver Towne and Sunshine).

A-Mark benefits from times of chaos in two ways. They see transaction volumes increasing and the spreads they can charge increasing. During the three years from fiscal 2021 to 2023, A-Mark earned an average of approximately $7 per share per year, when adjusting for certain one-time items and excluding non-cash intangible amortization. We purchased our shares for about four times this level of earnings, which seems quite cheap for a company with such high returns on capital. However, the company has seen lower revenues in recent quarters due to declining transaction volumes and spreads. I believe this decline in activity has created a unique opportunity to purchase a high quality company with significant insider ownership at a bargain price. I am of course excited about the counter-cyclical nature of the business, which will hopefully help offset risks to our portfolio in future times of crisis.

I believe this company can earn up to $10 per share at a healthy multiple in such a time of crisis. For years I have been looking for a way to increase the price of precious metals without the risk of owning a mine. I believe A-Mark is the ideal indicator of this view and as other investors discover this, the valuation will be reassessed.”

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A-Mark Precious Metals, Inc. (NASDAQ:AMRK) is not on our list of the 31 most popular stocks among hedge funds. According to our database, 17 hedge fund portfolios held A-Mark Precious Metals, Inc. (NASDAQ: AMRK) at the end of the second quarter, up from 19 in the previous quarter. In fiscal year 2024, A-Mark Precious Metals, Inc. (NASDAQ: AMRK) reported despite headwinds, reported net income of $66.2 million and diluted earnings per share of $2.75. While we recognize A-Mark Precious Metals, Inc. (NASDAQ: AMRK)’s potential as an investment, we believe AI stocks have more promise for delivering higher returns, and within a shorter time frame. If you’re looking for an AI stock that has the same promise as NVIDIA but costs less than five times its earnings, check out our report on it cheapest AI stock.

In another article, we discussed A-Mark Precious Metals, Inc. (NASDAQ: AMRK) and shared Praetorian Capital’s views on the company in the previous quarter. You can also find additional investor letters from hedge funds and other leading investors on our Q3 2024 Hedge Fund Investor Letters page.

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Disclosure: None. This article was originally published on Insider Monkey.

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