Silver Standard is a fairly large silver mining company, with a market cap now of about $2.25 billion and it controls the worlds largest published in-ground silver resources of any publicly traded silver company. Like many mining stocks, the PE of Silver Standard is quite high, currently at about 34. However with stocks like this the earnings are of little consequence as the increase in shareholder value is the most important part, and this is the area that will generate the majority of the profit, not earnings.
That said, the financial position of Silver Standard is improving and their asset value seems to be increasing and increasing in value at an extraordinary rate. In 2005 the total value of their assets was $219.29 million but they dramatically increased this to $471.01 million in 2006. This is largely due to the increase in the silver prices over that period, but a lot of credit must go to the management team who are advancing their projects superbly, increasing the asset value of the company and the stock price. Silver Standard’s cash flow situation is also looking positive with the net change in cash up from a loss of $22.67 million in 2005 to a surplus of $206.59 million in 2006.
To some, Silver Standard’s size may be viewed as a negative aspect of the company, as some investors may view SSRI as too large and so unable to offer enough leverage to silver prices. Well although it is true that many smaller silver stocks can rise more dramatically than SSRI, volatility works both ways and these small stocks that shoot up, can easy be shot right back down to where they started, or even lower.
SSRI offers quality silver mining projects, a strong management team and a stable stock price that is rising with silver prices and even outperforming them.
With silver stocks it is key that they outperform silver prices and that is why we are investing our hard earned money in them. However what is more important is that they do rise with silver prices. This is imperative as you may own a junior silver company with all the potential in the world, but if its stock price is not moving up with silver prices, they are not worth owning. It is fine to own a few speculative explorers on the off chance that they go to the moon, but the majority of our capital invested in silver is in companies that will follow silver and outperform it all the way up. If you don’t have some silver stocks that are moving with silver prices, then it is possible that you could watch silver prices go all the way up into the sky, and yet your stocks are not rising due to the fact that the market is not sure that they have any silver reserves/any commercially viable silver/any silver that can be mined in time to take advantage of the current bull market in silver.
Silver stocks like SSRI are key to a good silver portfolio, as you know that they are going to rise with silver prices and that they will perform better than them.