Another Way to Play Gold: M&A

Gold isn't all that glitters for Thomas Winmill, head manager of the $171 million (MIDSX Quote)Midas fund. His fund is cashing in on a strategy that plays on growth stocks as much as gold and mergers as much as metals.

"The stocks we invest in do well regardless of the price of gold," Winmill says.

That's a good thing, because gold has lost some of its luster as of late. Although futures for June delivery closed Friday up $4.80 at $662 an ounce on the Nymex, they have lost more than $10 for the week.

The Midas fund has been a solid performer in all kinds of gold markets. According to Morningstar, it has had an 8.6% total return so far this year, and returned 44% in 2006. The fund has outperformed its peers for each of the past three years.

Midas' top holdings as of March 31 included gold miners such as Golden Cycle Gold(GCGC Quote), Cumberland Resources(CLG Quote) and Eldorado(EGO Quote), companies Winmill says give him a lot of ways to win.

"We get operating leverage," Winmill told TheStreet.com TV on Friday. (Click here to see the video.) "So as soon as a company makes its operating costs, the percentage increase in its earnings with a one dollar increase in gold is higher than you will get in the percentage increase in the gold price itself."