By Michael Williams
While there is a lot of discussion among investors about buying gold and silver, many fail to consider an investment in the mining companies. Although the prices of both precious metals continue to climb, 2012 could be a very good time to consider investing in silver by purchasing stock in companies like Silver Wheaton Corp (SLW), Pan American Silver Corp (PAAS), Endeavor Silver Corp (EXK), First Majestic Silver Corp (AG) and Hecla Mining Co. (HL).
Gold and silver have both been used by many investors as inflation hedges. The price of both metals tends to run counter to the value of the U.S. dollar, meaning that their value soars in times of unrest or economic instability. With nearly four years since the start of the global financial crisis, both precious metals have performed very well. According to many analysts, however, silver is now undervalued in comparison with gold, suggesting that it is time to take positions in the white metal.
Silver Wheaton Corp
Silver Wheaton Corp is one of the better-known silver mining companies for a good reason. SLW has consistently produced well over the past five years, turning a 2006 loss into 62.8% gain in free cash flow in the last year alone. Analysts are also excited by the company’s results, with most listing the stock as either a buy or a strong buy.
That kind of gain does not appear ready to change course. Currently at just over $30 per share, Silver Wheaton is trading below both its 50-day and 200-day moving averages. The Canadian company has a PEG of 10.56 and a one-year price target of $49.55, an increase of over 64%. With many analysts predicting a continued climb in the price of silver for 2012, SLW looks like a very strong investment.
Pan American Silver Corp
Silver Wheaton isn’t the only producer poised for a big gain this year. Another mining and exploration company with over 30 years in the business, PAAS offers a year-to-year quarterly revenue growth of 34.10% and return on equity of 23.13%. The Canadian company has the bulk of its mining operations in South America, and while it isn’t as strong as Silver Wheaton, it still has a PEG of 2.15.
In addition to the potential of rising silver prices, Pan American Silver also has a very solid corporate footing. At $22.48 per share, the stock is trading below both its 50-day and 200-day moving averages, and its one-year target of $36.75 offers a healthy 63% potential return on investment. With a staggering year-to-year quarterly earnings growth of an astounding 250,000%, this is another stock in which investors should consider taking a position.
Endeavor Silver Corp
Another of the profitable mining and exploration companies from British Columbia in western Canada, Endeavor Silver Corp has some very promising aspects in its favor for 2012. Recently announced results from the EXK Lucero Mine near Guanajuato, Mexico are quite hopeful, and added to current operations, this discovery has EXK positioned for another solid year in 2012.
With a $10.43 share price hovering near the middle of its 52-week range, EXK is just below both its 200-day and 50-day moving averages; it has a great PEG of 68.54. With the recent results at the Lucero Mine suggesting additional expansion, Endeavor looks ready to beat its sagging one-year estimated target of 9.05 and keep moving upward with the rest of the industry. If the company’s stock can maintain its momentum, this could be a very good investment in 2012.
First Majestic Silver Corp
Yet another Canadian firm from British Columbia, First Majestic Silver, appears ready to make another run in 2012. After AG stock made a solid climb that lasted from mid-2010 through mid-2011, another move appears likely in 2012. Sitting at a very affordable $18.39 per share, AG has a one-year target of $23.64, representing an increase of nearly 30% for the year.
Since hitting nearly $26.00 per share in April 2011, the stock has hit a plateau; however, most analysts have it listed as a buy. Production volume is expected to rise from its 7.56 million ounce in 2011 to an impressive 10 million ounces in 2012. Its PEG is sitting at 32.24 and with an enterprise value of nearly $5.00 per ounce of silver; this is a good investment to consider going forward.
Hecla Mining Co
Although the saying goes that bigger is better, that is not always true. It is especially not true for Hecla Mining Co, a mid-cap mining and exploration company based in Coeur d’Alene, Idaho. Although it lost over 50% of its stock value in 2011, the company’s metrics suggest that better days are ahead in 2012. Hecla is a top four U.S. producer of silver 10.6 million ounces in 2011, and the company had an average total cash cost of $1.46 per ounce.
Hecla has more positive numbers coming its way for 2012. The one-year target for the company is $8.16, up more than 26% over its current price of $5.67 per share. With a PEG of 33.34, a dividend or 0.08 and a yield of 1.4%, Hecla is an excellent choice for investors who are looking to diversify their portfolio with an affordable stock.
Finding a Silver Lining in 2012
While there are still negative factors affecting stock prices in 2012, the silver lining is that mining and exploration companies can bring great results, thanks to the strength of precious metals. For investors looking for a diverse basket of metals stocks, I'll suggest these ETFs. Investors who are looking to add solid performers to their portfolios should consider Silver Wheaton Corp, Pan American Silver Corp, Endeavor Silver Corp, First Majestic Silver Corp and Hecla Mining Co.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.