Value Investors: 1 Safe Stock That Stores Gold

Goldmoney Inc. (TSX:XAU) uses quantitative metrics to optimize the cost per acquisition of a client compared to the estimated client lifetime value

Goldmoney (TSX: XAU) enables eligible clients to purchase, hold, sell, and exchange a weight of physical gold, silver, platinum, and palladium. Precious metals acquired by a Goldmoney client are allocated to the client on the company’s books and records, recorded in the client’s holdings, and stored in the client’s choice of one or more of 15 high-security bullion vaults.

Robust business model

All precious metals are stored on an insured basis, and clients may withdraw and receive physical delivery of the metal from the vault where the metals are stored. Goldmoney acts as agent for the client, who, at all times, retains the title to the metal they own. The only precious metals inventories recognized on Goldmoney’s balance sheet are those owned by the company as principal.

Goldmoney is not a bank and does not fractionally reserve assets. The precious metals sold are physical bullion. All metal is owned by the relevant Goldmoney client, which may instruct Goldmoney to dispose of the metal on behalf of the client or to instruct the vault to withdraw and deliver the physical metal to the client.

Long-term track record

Since Goldmoney was founded in 2001, the company has never experienced a client claim for missing metal, metal theft, nor any failure in precious metal reconciliations during audits. This achievement speaks to the robustness of the company’s full-reserved system. Goldmoney has been built on the fundamental principle that clients can only increase precious metal ownership with physical bars and coins that must always reside in the specific vaults chosen by the client. A decrease in metal at the vault can only be achieved through physical redemption or sale by the client.

Goldmoney’s marketing strategy is focused on individuals, small businesses, online merchants, and others who are underserved by traditional savings or payment choices and high-net-worth individuals seeking safety for some accumulated wealth by diversifying financial assets into tangible wealth to avoid counterparty risk. The precious metals serve this function well and the company’s offering is geared to providing assurances of integrity to Goldmoney’s clients.

Strategic partnerships

The company focuses heavily on six different market segments. These include traditional bullion buyers, consumers with exposure to volatile digital and fiat currencies, users of international payment and remittance services, investors in precious metal mining stocks or exchange-traded funds, and corporate users exposed to multiple currency payments.

Further, the company uses traditional and online marketing to drive awareness of Goldmoney’s product and service offerings and the Goldmoney brand. Marketing campaigns emphasize the security, convenience, and liquidity of precious metals purchased through Goldmoney, and aim to attract new and existing precious metals market participants. Marketing programs are designed and executed by marketing professionals employed by the company and outside consultants. The company also expands through strategic partnerships.

As part of the company’s marketing strategy, it uses quantitative metrics to optimize the cost per acquisition of a client compared to the estimated client lifetime value. The aim is to seek an attractive return on the investment of time and money while also optimizing the long-term value provided by users.

Fool contributor Nikhil Kumar has no position in any of the stocks mentioned.

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