While the prices of many metals have fallen sharply since the Spring, Malcolm Gissen, portfolio manager for the Encompass Fund (ENCPX), expects a bounce in shares of Avalon Rare Metals (AVL) because of rising demand for the rare earth metals they specialize in.
"The demand for rare earth elements is spiking and prices have gone up eight to ten times in the last year," Gissen said. "So this is a company that will be vertically integrated that will do the mining as well as the producing."
The $21 million fund, which garners 3 stars from Morningstar (MORN), has returned 31% over the past year, better than 99% of its peers in the world stock category. Over the past three years, the fund has returned an average of 27% annually, once again outpacing 99% of its Morningstar rivals.
And despite the Japanese nuclear meltdown and fears about what that means for uranium prices, Gissen is not ready to give up on the metal, holding Texas-based Uranium Energy Corp. (UEC)."We think that this company is going to be at the forefront of Uranium production and the demand for uranium production is increasing considerably faster than supply. There are a lot of uranium projects and nuclear power plants being constructed around the world despite what many people in the United States might believe," Gissen said. The Encompass Fund also holds a position in Endeavour Silver (EXK - Get Report) despite volatility in the silver market. "The company is in production and expanding through some smart acquisitions," said Gissen, adding that he sees the demand for silver outstripping supply.