Stock Analysis & Valuation Sprott Physical Gold and Silver Trust (CEF.TO)

• Previous Close: $67.58
• Sector Valuation Confidence Level: High

Valuation method	Value, $	Upside, %
Artificial intelligence (AI)	151.20	124
Intrinsic value (DCF)	7439.40	10908
Graham-Dodd Method	69.60	3
Graham Formula	1574.00	2229

Strategic Investment Analysis

Company Overview

Sprott Physical Gold and Silver Trust (CEF.TO) is a leading exchange-traded commodity fund managed by Sprott Asset Management, LP, offering investors direct exposure to physical gold and silver bullion. Launched in 2017 and domiciled in Canada, the trust invests exclusively in London Good Delivery (LGD) bars, ensuring high liquidity and purity standards. As part of the financial services sector, CEF.TO provides a secure and transparent way to invest in precious metals without the complexities of physical storage. With a market capitalization of approximately CAD 7.91 billion, the trust appeals to investors seeking a hedge against inflation, currency fluctuations, and market volatility. Its structure allows for redemption in physical bullion, distinguishing it from many other commodity ETFs. Operating in the asset management industry, Sprott Physical Gold and Silver Trust is a key player in the precious metals investment space, catering to both institutional and retail investors.

Investment Summary

Sprott Physical Gold and Silver Trust (CEF.TO) presents an attractive investment opportunity for those looking to gain exposure to physical gold and silver with the convenience of an exchange-traded product. The trust's focus on high-quality London Good Delivery bullion ensures liquidity and reliability. With no debt and substantial net income (CAD 1.02 billion in FY 2024), the fund demonstrates financial stability. However, the lack of dividends may deter income-focused investors, and the fund's performance is heavily tied to volatile precious metal prices, as reflected in its low beta (0.30). The negative operating cash flow (CAD -22.25 million) suggests potential liquidity constraints, though the absence of capital expenditures mitigates some risk. Overall, CEF.TO is best suited for investors seeking a pure-play, low-cost precious metals investment with the backing of a reputable asset manager.

Competitive Analysis

Sprott Physical Gold and Silver Trust (CEF.TO) differentiates itself in the crowded precious metals investment space by offering direct ownership of physical bullion, redeemable by unitholders—a feature not commonly available in competing ETFs. Its focus on London Good Delivery bars ensures high liquidity and trust among investors. The trust's structure under Sprott Asset Management provides credibility and expertise in commodity investing. However, CEF.TO faces competition from both physical bullion funds and futures-based ETFs. Its competitive advantage lies in transparency, as it discloses bar lists and storage details, appealing to investors wary of synthetic or leveraged products. The absence of management fees (though it incurs operating expenses) makes it cost-competitive compared to actively managed funds. On the downside, the trust's performance is purely tied to spot prices of gold and silver, lacking the potential upside from mining equities or derivatives. Its redemption feature, while unique, may involve logistical complexities for average investors. The fund's large size (CAD 7.91B market cap) provides economies of scale in storage and liquidity, but it must continuously attract inflows to maintain its premium/discount to NAV within a reasonable range.

Major Competitors

• SPDR Gold Trust (GLD): GLD is the largest gold-backed ETF globally, offering high liquidity and lower expense ratios (0.40%). Unlike CEF.TO, GLD does not allow physical redemption, which may deter some investors. Its sheer size (over USD 50B in AUM) provides unmatched trading volume but lacks the silver exposure and direct bullion ownership features of CEF.TO.
• iShares Gold Trust (IAU): IAU is a cost leader among gold ETFs with a 0.25% expense ratio, undercutting both CEF.TO and GLD. However, like GLD, it doesn't permit physical redemption. Its structure is simpler than CEF.TO's but lacks the dual gold-silver diversification. IAU's lower price per share appeals to small investors but may not satisfy those seeking physical ownership.
• Sprott Physical Gold Trust (PHYS): Also managed by Sprott, PHYS is CEF.TO's sister fund focusing solely on gold. It shares the physical redemption feature but doesn't offer silver exposure. PHYS has a similar expense structure and credibility but may be less attractive to investors seeking diversified precious metals exposure. Its US listing provides easier access for American investors compared to CEF.TO.
• iShares Silver Trust (SLV): SLV is the largest silver-backed ETF, competing with CEF.TO's silver component. It offers high liquidity but, like other iShares products, doesn't allow physical redemption. SLV's 0.50% expense ratio is competitive, but its singular focus on silver makes it less diversified than CEF.TO. Storage costs and contango risks in silver may affect performance relative to gold-focused products.
• Sprott Physical Silver Trust (PSLV): Another Sprott product, PSLV competes directly with CEF.TO's silver holdings. It allows physical redemption and invests in LGD silver bars. While more specialized than CEF.TO, PSLV appeals to silver bulls. Its smaller size (compared to SLV) may result in wider spreads, but its physical focus aligns with CEF.TO's value proposition for precious metals purists.