Executive Summary / Key Takeaways

• U.S. Global Investors (GROW) leverages its proprietary Smart Beta 2.0 strategy to identify and capitalize on secular growth themes in specialized sectors, including airlines, gold and precious metals, and aerospace & defense.
• Despite a net loss of $334,000 in fiscal year 2025, primarily due to a 23% decline in operating revenues driven by outflows from its JETS ETF, the company maintains a robust balance sheet with $37.2 million in net working capital.
• GROW is strategically increasing its exposure to the Bitcoin ecosystem, redeploying capital from its HIVE debenture, and anticipates significant growth in this regulated digital asset space.
• The company consistently returns value to shareholders through a monthly dividend, yielding 3.49%, and an active share repurchase program, contributing to a compelling shareholder yield of 9.1%.
• GROW's thematic ETFs, such as JETS, GOAU, and the newly launched WAR, have demonstrated outperformance against their respective benchmarks, validating the efficacy of its quantitative and fundamental investment approach.

A Specialized Approach to Global Markets

U.S. Global Investors, Inc. (GROW) has evolved from its origins as an investment club in 1968 into a specialized asset manager with a distinct footprint in global markets. The company's foundational strength lies in its early innovation, notably launching the first no-load gold fund, which established its expertise in niche sectors like gold mining and natural resources. This historical emphasis on specialized markets and pioneering product development continues to shape its strategic direction.

GROW operates through two primary segments: Investment Management Services and Corporate Investments. The Investment Management Services segment offers a range of products and services to mutual funds (USGIF) and exchange-traded funds (ETFs), while the Corporate Investments segment manages the company's own capital. The firm's overarching strategy centers on creating "Smart Beta 2.0" thematic products, a proprietary methodology that combines rigorous quantitative analysis with fundamental insights. This approach involves extensive back-testing, often spanning thousands of hours and decades of data, to construct portfolios that are systematically rebalanced quarterly. The goal is to identify stocks with strong momentum in revenue, EBITDA, and cash flow, alongside deep value discounts, high free cash flow yields, and favorable debt-to-equity ratios. This disciplined process aims to optimize returns and manage risk effectively for shareholders.

The asset management industry is intensely competitive, characterized by a vast number of mutual funds and ETFs. Larger players like BlackRock (BLK), Invesco (IVZ), Franklin Resources (BEN), and T. Rowe Price (TROW) command significant scale, broader distribution networks, and more extensive technological resources. While GROW, as a smaller entity, faces inherent challenges in matching the sheer size and marketing budgets of these giants, its competitive edge is carved out through its specialized thematic focus and the demonstrated efficacy of its Smart Beta 2.0 strategy. This differentiated approach allows GROW to target specific market segments where its expertise can lead to outperformance, fostering customer loyalty and potentially enhancing pricing power in its niche areas.

Technological Edge and Strategic Expansion

U.S. Global Investors' Smart Beta 2.0 strategy is a core technological differentiator. This "quantamental" methodology is not merely a black box but a dynamic investment process that integrates cutting-edge technology with robust data analysis. The tangible benefits are evident in the performance of its thematic ETFs. For instance, the U.S. Global Jets ETF (JETS) has outperformed the New York Stock Exchange Arca Global Airline Index by 26% since its inception, including fees, and by 13% year-to-date in fiscal year 2025. Similarly, the U.S. Global GO GOLD and Precious Metal Miners ETF (GOAU) has demonstrated its ability to beat gold mining stocks, and the U.S. Global Technology and Aerospace Defense ETF (WAR) has outperformed other national security-focused ETFs since its launch in December 2024. This outperformance is a direct reflection of the strategy's ability to select superior stocks and manage portfolios effectively across various market cycles.

The company's R&D initiatives are closely tied to identifying and developing new thematic products that align with significant global trends. The WAR ETF, for example, was launched to capitalize on the "super cycle" in artificial intelligence (AI) and military spending. This ETF invests in companies at the intersection of national security and innovation, including semiconductors, data centers, cybersecurity, and defense systems. Management projects substantial growth in military spending, with global defense expenditures reaching $2.7 trillion in 2024 and expected to exceed $3 trillion, driven by geopolitical risks and the accelerating application of AI in defense. The AI market itself is projected to grow at a 28% compound annual growth rate (CAGR). This strategic focus positions GROW to benefit from massive infrastructure spending, such as the $500 billion high-performance computing data center project in Oplin, Texas, where 70% of the demand is for Open Chat GPT.

A significant technological and strategic pivot for GROW involves the Bitcoin ecosystem. Recognizing regulatory limitations on direct Bitcoin ETFs in 2017, the company co-founded HIVE Digital Technologies Ltd. (HIVE), gaining early exposure to cryptocurrency mining. As the regulatory environment for digital assets evolves, particularly with the approval of the GENIUS Act in July 2025, GROW is strategically increasing its direct and indirect investment in Bitcoin and related assets. The company is redeploying capital from its HIVE convertible debenture, which is being gradually paid down, into the broader Bitcoin ecosystem and HIVE shares. Management is bullish on HIVE's growth opportunities, including a projected 4x increase in its Bitcoin production, and views Bitcoin's scarcity (capped at 21 million coins) and growing adoption as compelling investment factors. This move positions GROW to capitalize on the increasing institutional acceptance of digital assets as a legitimate portfolio diversifier.

Financial Performance and Shareholder Value

U.S. Global Investors reported a net loss of $334,000, or $0.03 per share, for the fiscal year ended June 30, 2025, a notable shift from the net income of $1.3 million, or $0.09 per share, in fiscal year 2024. This change was primarily driven by a 23% decrease in total operating revenues, which fell to $8.5 million from $11 million in the prior year. The decline in revenue was largely attributable to lower assets under management (AUM) in the ETF segment, particularly outflows from the JETS ETF. Average AUM decreased from $1.9 billion in fiscal year 2024 to $1.4 billion in fiscal year 2025.

Despite the revenue headwinds, the company's operating income (adjusted, before depreciation, interest, and income taxes) saw a significant increase, rising to $2.92 million in fiscal year 2025 from $0.28 million in fiscal year 2024. This improvement was partly due to lower downward adjustments for performance fees in the USGIF segment, which contributed to a 15.86% increase in USGIF advisory fees to $1.68 million. Net investment income also increased by 11.68% to $2.39 million, primarily due to lower realized and unrealized losses on equity securities compared to the previous year. However, dividend and interest income declined due to principal repayments on the HIVE convertible debentures. Management indicates that operating income would turn positive at approximately $1.9 billion in average assets under management, highlighting a clear target for profitability.

The company maintains a strong financial position, boasting net working capital of approximately $37.2 million and a current ratio of 20.90 to 1 as of June 30, 2025. Its liquidity is robust, with $24.6 million in cash and cash equivalents and $12.2 million in fair value securities, collectively representing about 76.40% of total assets. U.S. Global Investors has access to an unutilized $1 million credit facility, further underscoring its financial flexibility.

A cornerstone of GROW's shareholder value proposition is its consistent capital return strategy. The company has paid a monthly dividend since June 2007, with the Board of Directors authorizing $0.0075 per share through September 2025, representing a trailing twelve-month (TTM) dividend yield of 3.49%. Complementing this, GROW actively engages in a share repurchase program, having bought back 801,043 Class A shares at a net cost of approximately $2 million in fiscal year 2025. This two-pillar approach to shareholder returns results in a compelling shareholder yield of 9.1%, significantly exceeding the yield on the 10-year Treasury bond. This strategy reflects management's conviction that the stock is undervalued and serves to enhance value for all shareholders.

Competitive Landscape and Outlook

The asset management industry is characterized by intense competition, with numerous firms vying for investor capital. U.S. Global Investors differentiates itself through its specialized thematic ETFs and its Smart Beta 2.0 investment methodology. While larger competitors like BlackRock, Invesco, Franklin Resources, and T. Rowe Price benefit from immense scale, diversified product offerings, and extensive distribution networks, GROW focuses on carving out niches where its quantitative and fundamental expertise can yield superior results. For example, GROW's luxury goods fund is a unique offering in the mutual fund space, consistently outperforming other luxury-related products.

GROW's competitive positioning is further strengthened by its ability to adapt to evolving market dynamics. The company's expansion of its ETF listings to international markets, including Mexico and Colombia for JETS, SEA, and GOAU, demonstrates its commitment to broadening its global reach and capturing new investor bases. The strategic decision to increase exposure to the Bitcoin ecosystem, following regulatory clarity and the approval of the GENIUS Act, positions GROW in a rapidly growing, albeit volatile, asset class. This proactive stance contrasts with the more cautious approaches of some traditional asset managers.

Despite these strengths, GROW faces several competitive vulnerabilities, primarily stemming from its smaller scale. This can lead to higher operational costs relative to larger competitors and limits its resources for extensive marketing and technological development. The company's reliance on a few key ETFs, particularly JETS, for a substantial portion of its AUM and revenue also presents a concentration risk. However, GROW mitigates these challenges by focusing on its proven Smart Beta 2.0 methodology, which has consistently delivered outperformance in its chosen thematic areas.

Looking ahead, U.S. Global Investors remains committed to sustainable growth and innovation. Management is bullish on the long-term secular trends supporting its thematic asset classes. Frank Holmes anticipates gold prices could reach $6,000 by the end of the current U.S. presidential term, driven by global debt, de-dollarization efforts by BRICS nations, and central bank buying. The airline industry, despite persistent negative narratives, is viewed as transitioning from a cyclical business to a growth industry, supported by record passenger numbers and strong pricing power, partly enhanced by AI applications. The WAR ETF is expected to benefit from the ongoing military spending super cycle and the increasing integration of AI in defense. GROW also plans to continue pursuing M&A opportunities to acquire fund assets and expand its subscriber base, recognizing the importance of an educated and engaged investor community.

Conclusion

U.S. Global Investors (NASDAQ:GROW) presents a compelling investment thesis rooted in its specialized thematic ETF offerings and a disciplined approach to shareholder value. The company's proprietary Smart Beta 2.0 strategy provides a distinct technological advantage, enabling its funds like JETS, GOAU, and WAR to consistently outperform benchmarks in their respective niche markets. While fiscal year 2025 saw a net loss and a decline in AUM, primarily due to JETS outflows, GROW's robust balance sheet, consistent monthly dividends, and active share repurchase program underscore its commitment to returning capital to investors.

The strategic pivot towards increasing exposure to the Bitcoin ecosystem and capitalizing on the military spending and AI super cycle through the WAR ETF positions GROW for future growth in dynamic sectors. Despite operating in a highly competitive industry dominated by larger players, GROW's focused expertise and proven investment methodology allow it to carve out and thrive in specialized segments. Investors should consider GROW for its unique thematic exposure, its commitment to shareholder returns, and its strategic positioning in evolving global markets, particularly as its AUM approaches the $1.9 billion threshold for positive operating income.