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Nathan Rapport
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I have a BSc in applied mathematics and physics. My basic investment strategy is to buy fundamentally strong companies when I believe they are undervalued. Pretty straightforward, but easier said than done. I also try to look for values in special situations like spin-offs, mergers and... More
  • Silver Wheaton Corp Notes 0 comments
    Dec 14, 2013 3:25 PM | about stocks: SLW

    Not much point in writing an article for a stock I'm not going to recommend, but I did some research so I might as well write up my notes.

    * established in 2004

    * market cap down to $7.3B from peak of $13B

    * $40B demand for silver/year

    * SLW revenue < $1B

    * historical growth >30%/year from 2004

    * excellent balance sheet and business model

    * SLW forecasts 9% growth for next 3 years; current PE=10

    * SLW's growth coincided with a decade-long run-up in silver prices, peaking in 2011

    * 33.5M silver equivalent ounces production in 2013

    * SLW's forecasts have been pretty accurate so far (judging by past 10-K's), however, SLW originally forecast that it would reach 43M silver equivalent ounces by 2015 - target now moved back to 2017

    Conclusion: Silver prices may not peak again for decades. SLW is unlikely to continue its 30% growth in coming years. Stock is currently about fairly priced.

    Decision: Pass

    I've also decided not to invest in any other precious metal mining stocks, probably not for several years. If I were going to invest in any precious metal stock, SLW would have been a top choice. Some of them look pretty tempting at the moment, but with gold/silver prices still far from bottoming out, the precious metal mining stocks could still be a long way from the bottom, or end up moving sideways for years to come.

    Stocks: SLW
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