A Look At Superstar Hedge Fund Manager Eric Sprott's Portfolio (GLD, SLW, JAG, XRA)

Eric Sprott appeared on CNBC this afternoon to talk to Maria Bartiromeo about the markets. He said that he has not bought into the market at these levels and has missed much of the rally. He said that he is still concerned about leverage in the banking system. The interview, and a look at Sprott's portfolio, reveals that he is incredibly bullish on precious metals, particularly gold and silver. Sprott is loaded up in this sector and also is unveiling a new physical gold fund to compete with the SPDR Gold Trust ETF (NYSE: GLD).

Sprott's largest position as of 12/31/09 was Silver Wheaton Corp. (NYSE: SLW). His fund has a position in the mining company which is in excess of $41 million. Sprott's second largest holding was Exeter Resource Corp. (AMEX: XRA). Those shares have gained over 34% in the last 6 months and Sprott's fund owns a big percentage of this company. XRA's market cap is only $585 million and Sprott's position is worth over $35 million. He added this stock to his portfolio between 9/30/2009 and 12/31/2009.

Sprott's hedge fund also has a position in Jaguar Mining (NYSE: JAG) which is in excess of $30 million. This is another small cap mining company. Jaguar (JAG) is engaged in the acquisition, exploration, development and operation of gold producing properties at its 93,000-acre land base in the Iron Quadrangle region of Brazil.

The concentration of Sprott's portfolio in precious metals and mining companies is extraordinary. The companies that I have mentioned are just the tip of the iceberg. This guy is making a huge bet, and he certainly is not an investor who you want on the other side of your trade. His track record is superlative.

Listening to Sprott on CNBC and checking out his portfolio is actually a little disconcerting. If gold and silver go through the roof as Sprott is predicting, it will likely be a result of rampant inflation. In my opinion this is very likely and investors need to allocate capital into the commodities sector to hedge against this risk.