The two biggest ways to play a rise in the price of silver are either to buy silver or buy silver stocks. While the former is a great option for those seeking general exposure, picking specific companies with strong growth prospects can offer higher returns. Let’s take a look at six important players in the silver industry.
First Majestic Silver Corp. (NYSE:AG) – This stock has been steadily rising since the end of 2008, and many investors are excited about the company’s future prospects. The company’s Del Toro and Real de Catorce projects certainly look promising. In fact, some great information about the Del Toro mine can be found at another article on Seeking Alpha. One important point raised there is that AG may be less risky than other silver stocks due to the company’s strong production. Specifically, the company’s stable cash flows will help make it less volatile to future changes in the price of silver as well as other factors that affect this industry. AG could also be in the market to buy one of the smaller silver companies, notably Ecu Silver Mining (OTC:ECUXF) or Cream Minerals (OTC:CRMXF). Aside from a possible acquisition, look for the earnings release on August 11 to affect this stock going forward. Additionally, downward movement at the time of this writing should put the stock in a strong place from a technical perspective. See this article for more information on that. With a P/E ratio of 36.31, this stock is clearly more expensive than many, but this is not particularly unusual for stocks in this industry. In addition, upcoming mines definitely have the company poised for growth.
Endeavour Silver Corp. (NYSE:EXK) has been on the rise for quite some time now, but the stock is currently down 13.85% as the market is in the midst of a mass selloff. Despite this, P/E is still a whopping 125.34. There is certainly an argument to be made that Endeavour Silver is a rather overvalued stock, especially compared to competitors with lower P/Es like BHP Billiton (NYSE:BHP), Grupo Mexico SA de CV (OTCPK:GMBXF), and Rio Tinto (NYSE:RIO). Additionally, the stock represents a certain amount of risk because the company only operates two mines, both of which are in Mexico. As one can imagine, Mexico is not the safest country at the moment, and there are a variety of events that could jeopardize this company’s operations. If one is considering buying a silver stock as a relatively safe play, this may not be it. All this risk can also amount to some serious upside though, and there are definitely some bright spots to keep an eye on. Recently announced earnings showed an increase of 85% for revenues, and the gross profit margin for silver skyrocketed. Chairman and CEO Bradford Cooke added to this by saying, “As a result of rising silver and gold production and substantially higher precious metal prices, our sales revenues, operating cash-flow, and adjusted earnings were all up sharply compared to Q2, 2010.”
Denison Mines Corp. (NYSEMKT:DNN) – Unlike some other stocks on our list, Denison Mines has been on a decline lately. More specifically, the stock hit a 52-week high back in the winter but has fallen since then. This can probably be attributed to the fact that Denison is a uranium company more than anything else, and the catastrophe in Japan certainly hurt people’s confidence in nuclear energy. The stock is also sensitive to the price of uranium though, which should help shareholders in the future. This is because the price of uranium will appreciate as demand from nuclear utilities increases. Additionally, some aspects of current uranium supply should start to trail off, which would also benefit price accordingly. For example, if the Labour Party of Western Australia is elected in 2013, uranium mining there will be banned. Trailing-twelve-month earnings for Denison are currently negative, but with a quarterly revenue growth of 21.80%, this could definitely increase. In fact, development in Saskatchewan has shown some recent success as discussed in this article. Despite this, competitor Cameco (NYSE:CCJ) may offer more solid numbers for the time being. Notably, Cameco’s P/E is 19.94 and PEG is 0.89. Both of these definitely seem reasonable, whereas P/E and PEG are both currently incalculable for DNN.
Great Panther Silver Ltd. (NYSEMKT:GPL) – Many investors wish they could’ve jumped on this bandwagon when it was just a penny stock a few years ago, but times have changed with the stock trading in the mid-3s now. Regardless, many statistics are still working in Great Panther’s favor as discussed here. Perhaps most importantly, this stock has been a favorite of institutional investors, currently buying 5.76% of the company’s share float. Additionally, this company has seen rising profitability as evidenced by numbers like net profit margin. Another great Seeking Alpha article can be found here, notably explaining how one of Great Panther’s mining operations, Topia, is doing incredibly well. Like Denison though, the company’s operations are all based in Mexico, which adds a certain amount of risk as discussed above. Although operations are not located ideally, Great Panther’s success with its techniques have been well-documented. Essentially, the company seems to have a knack for finding very high quality ores. With a P/E of 39.30, the possibility remains that the company is undervalued. Look for earnings growth to continue to explode. In addition, this Seeking Alpha look at Great Panther options is also worth reading. That article also explains some reasons to like GPL based on technical analysis, and we are inclined to agree.
Silver Wheaton Corp. (SLW) has had its ups and downs in 2011, as this stock seems to more closely follow general economic trends than some others on this list. Silver Wheaton is also somewhat unique for the dividend it offers. Although this represents a measly yield of 0.30%, it is worth noting due to the fact that many other companies on this list are not offering a dividend of any size. (More information about mining companies that offer dividends can be found here). Two of Silver Wheaton’s biggest competitors are actually privately owned companies (Mitsubishi Materials and Industrias Peñoles, S.A. de C.V.), and while Coeur d’Alene Mines (NYSE:CDE) is publicly traded, the two companies are offering very different valuation setups. P/E for CDE is incalculable due to negative earnings, while P/E for SLW is a reasonable 33.66. Additionally, PEG for SLW is 9.32 while PEG for CDE is 0.40. Other interesting facts about Silver Wheaton stem from the company’s operation locations. With mines throughout the Americas as well as Europe, the company’s business is certainly geographically diverse. While this stock may not be as flashy as some others on this list, the business’s stability should be well noted. Some even think the stock still has enormous upside, as detailed here.
Silvercorp Metals Inc. (NYSE:SVM) – This stock has been quite volatile in 2011, and shareholders around the country are wondering when the roller coaster will stop. This stock is interesting due to its 0.80% dividend yield despite a market cap of only $1.57b. As discussed in the Silver Wheaton section, mining companies are frequently reluctant to offer dividends. Silvercorp Metals also has a relatively low P/E ratio of 21.83. With many other stocks on this list trading at a price-to-earning ratio nearly twice that, one would be remiss to ignore this diamond in the rough. The stock recently reported strong earnings, and there is certainly reason to believe that this will be one of the stocks that recovers the fastest after Thursday’s selloff. Highlights from the earnings report included all-time highs for both sales and silver production. Considering these are the most important statistics for a company like SVM, the feeling here should definitely be bullish. Also, the company’s operations are in China and Canada, which could be a wise alternative to companies whose focus is in Mexico. SVM also has some exposure to lead and zinc, which certainly can’t hurt either. Additionally, technical analysis reveals that the company is currently trading at a level of support.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.