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SIL: Why Silver Miners ETF Has More Upside Potential Than SLV

Jun. 05, 2020 3:24 PM ETGlobal X Silver Miners ETF (SIL)SLV7 Comments


  • Global X Silver Miners ETF launched 100%+ off the lows in March alongside the resurgent silver.
  • SIL's top holdings' earnings growth has been solid for the past years and is expected to continue next year.
  • A strengthening Canadian dollar is supportive of further upside in SIL.
  • SLV has mounted a comeback relative to GLD and plenty of upside remains based on long-term historical relationship.
  • Both fundamental and macro factors point to further outperformance in SIL relative to SLV.

It has been quite a rollercoaster ride for silver (SLV) this year. After collapsing to 2009 levels and yet another record low relative to gold prices (GLD), a swift V-shaped recovery ensued in SLV which erased all year-to-date losses. Meanwhile, Global X Silver Miners ETF (NYSEARCA:SIL) has had a similar trajectory albeit with more beta and has notably outperformed SLV since the March bottom:

As of 6/4/2020. Source: WingCapital Investments

From a longer-term perspective, SIL's relative performance to SLV (i.e. SIL/SLV ratio) has been in a whipsaw for the past decade and recently bounced off multi-year lows to around the middle of the range:

Source: WingCapital Investments

Strong Fundamentals Point To New Bull Trend in SIL/SLV

Looking back, we observe that earnings growth in SIL's underlying holdings has been the key driver in SIL/SLV ratio. Using 2010 year-end as the starting point, below, we track the cumulative revenue growth of the top 9 holdings, which make up close to 80% of SIL's exposure. (Note the 10th name Korea Zinc Co Ltd was excluded due to lack of access to their financial statements).

Symbol Name % Weight 2010 YE (Starting Point) 2012 YE 2015 YE 2019 YE TTM
WPM Wheaton Precious Metals Corp. 23.68% 1.00 1.95 1.34 1.58 1.63
POLY Polymetal International PLC (OTCPK:POYYF) 14.83% 1.00 1.89 1.33 1.84 1.84
PAAS Pan American Silver Corp. 10.15% 1.00 1.08 0.74 1.11 1.15
AG First Majestic Silver Corp. 5.02% 1.00 1.84 1.43 1.51 1.49
HL Hecla Mining Co. 4.90% 1.00 0.69 0.76 0.88 0.85
SSRM SSR Mining Inc. 4.78% 1.00 2.08 3.24 3.45 3.65
BVN Buenaventura Mining Co. Inc. ADR 4.36% 1.00 1.35 0.84 0.79 0.72
FRES Fresnillo PLC (OTCPK:FNLPF) 4.23% 1.00 1.53 1.00 1.46 1.46
CDE Coeur Mining Inc. 3.57% 1.00 1.69 0.73

This article was written by

Quantitative Strategies utilizing Empirical Analysis, Pattern Recognition and Statistical Arbitrage techniques. Identifies high-probability long/short opportunities with short-medium term horizon in large caps, ETFs, commodities and FX. Macro Commentary and Market Research.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in SIL over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

We may have options, futures or other derivative positions in the above tickers mentioned.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (7)

adriano321 profile picture
I like SILJ and slvp even better...
They went down Friday @adriano321 . When do you think they will bottom?
adriano321 profile picture
The entire sector was down last week. The trend is bullish and silver is lagging gold ( as one would expect). I'm not going to attempt to call tops and bottoms, but global monetary debasement should bode well for AU and AG. Of the two I feel AG has more upside potential from here. Of the available funds in that space, I like the composition of the silj fund better. I do wish HCL and CDE had lower weightings...
Very useful info and overview . Thankyou.
Thanks for the article and charts.
Doofnut profile picture
Here is another chart of silver you might like www.macrotrends.net/...
Nice chart taking in inflation. In 1981 when silver hit $50 per ounce that is equivalent to $120 in today's dollars @Doofnut .
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