Listing the top 8 highest-rated silver stocks

If you’re ready to wade into the silver markets, start with the market leaders. Here are the Top 8 silver mining stocks with the highest analyst ratings. A rating of 1 is a “strong buy.” A rating of 5 is a “sell.”

Company Ticker Analyst rating YTD return
Silver Wheaton Corp. SLW 1.9 -28.8%
Mines Management, Inc. MGN 2 -40.4%
Coeur Mining Inc. CDE 2.6 -37%
Silver Standard Resources Inc. SSRI 2.6 48.6%
Endeavour Silver Corp. EXK 2.7 -18%
Fortuna Silver Mines Inc. FSM 2.7 -45.7%
First Majestic Silver Corp. AG 2.8 -23.3%
Hecla Mining Company HL 3 -17.5%

Just one of the stocks above is in positive territory for the year: Silver Standard Resources. And what a year its had leaping up by nearly 50 percent in value.

Here’s the same group of stocks listed by market cap:

Company Ticker Market Cap
Silver Wheaton Corp. SLW $5.5 billion
Hecla Mining Company HL $834 million
Silver Standard Resources Inc. SSRI $582 million
First Majestic Silver Corp. AG $439 million
Coeur Mining Inc. CDE $438 million
Fortuna Silver Mines Inc. FSM $305 million
Endeavour Silver Corp. EXK $173 million
Mines Management, Inc. MGN $8 million

What do analysts like about the top 3 stocks on the list?

1) Silver Wheaton Corp. Hands down, Silver Wheaton has my favorite business model in the precious metals industry. Known as a “silver steaming” company, SLW helps other companies fund the development of future mines in exchange for fixed-cost silver when those mines becomes operational. That’s how SLW currently has fixed costs for silver production of $4.36 per ounce.

2) Mines Management, Inc. This one makes me nervous. Mines Management has been in danger of getting de-listed by the NYSE after its share price faltered. Additionally, the company has posted losses over the past five fiscal years. Mines Management did submit a compliance plan to the NYSE, which was accepted. The company has until the end of 2016 to get compliant. It’ll likely need an infusion of cash to do so. The company’s primary asset – the Montanore silver-copper project located in northwestern Montana – holds 166 million ounces of silver per a Canadian National Instrument (NI) 43-101 that was completed in 2011.

3) Coeur Mining Inc. Analysts currently have an average price target of $6.46 on Coeur Mining. That’s 100 percent more than the stock’s current price of $3.22. Coeur did surprise analysts with a smaller-than-expected loss last quarter. The company lost $0.11 per share vs. the consensus estimate of -$0.22. Revenue hit $166.3 million vs. an estimate of $165. “On average, equities research analysts anticipate that Coeur Mining will post ($0.76) EPS for the current fiscal year” (source).

See related: I’m a bull on Silver Wheaton: Here are 3 reasons why.

Photo credit: JM Griffin and Michael LaTerz.

I’m a bull on Silver Wheaton: Here are 3 reasons why

This post is part of our 3-up, 3-down series where we look at three bullish arguments and three bearish arguments for momentum stocks. Look at the facts, and you decide. See more posts on SLW here.

The bullish case for Silver Wheaton

1) Low-risk business model. Hands down, Silver Wheaton has my favorite business model in the precious metals industry. Known as a “silver steaming” company, SLW helps other companies fund the development of future mines in exchange for fixed-cost silver when those mines becomes operational. That’s how SLW currently has fixed costs for silver production of $4.36 per ounce.

2) Record production. Other companies may be shuttering mines, but Silver Wheaton continues to hit all-time record production numbers. In Q2 2015, the company produced 11 million silver equivalent ounces and sold more than 10 million ounces of silver for the first time in the company’s history.

“The record production and sales were driven by strong results from all of our flagship assets the Salobo, San Dimas and Penasquito mines as well as the first substantive production from Constancia, which achieved commercial production earlier this year,” said Randy Smallwood, SLW’s president and CEO, during last quarter’s conference call. Those numbers will continue to grow as we’ll see below.

3) Leveraged growth. Silver Wheaton is growing its silver production at a time when silver prices could start edging up. Any rise in silver prices leverages profits that the company books. For 2015, SLW expects production to grow by 23 percent over the previous year. That would put them at 43.5 million silver equivalent ounces. The company expects that growth to continue steadily through 2019 when they should produce 51 million silver equivalent ounces. The higher the price of silver, the higher the company’s profits. Take a look at the table below to see how much a jump in the price of silver could impact Silver Wheaton’s profits (assuming their costs stay at $4.36 per ounce):

Price of silver SLW profit on 50 million ounces of silver
$15.25 $544,500,000
$20.25 $794,500,000
$30.25 $1,294,500,000

Since Silver Wheaton’s cost basis for its silver will not rise, the company can book virtually any gain in the price of silver as profits.

Check out more coverage on SLW here.

2016 silver price predictions: Are we headed up or down?

Let’s take a look at the latest silver price predictions for 2016 as part of our Three-up and Three-down series. We’ll present three bullish arguments for silver prices and three bearish arguments as well. Then, you decide where you think silver’s headed next year.

The bullish case for silver in 2016

1) Devaluing the yuan. Earlier this year, China abruptly announced it would devalue the yuan by 2 percent against the U.S. dollar. The government wanted to spur economic activity in the People’s Republic. Instead, they spooked currency traders who started selling the yuan. In turn, that forced China to start selling some of its dollar holdings, so the country could buy its own currency. That heavy selling is putting downward pressure on the dollar. Some speculate it could lead to a considerably weaker dollar, which might encourage more investment in hard assets like gold and silver. Gaurav S. Iyer, a research analyst and editor at Lombardi Financial, speculates that the weaker dollar might push silver back toward its 2011 peak around $50 an ounce.

2) Supply strain. Most of the silver that’s mined in the world is a byproduct of mining for other metals (copper, zinc, gold and lead). Since metal prices have fallen across the board, mining companies have drastically cut expenses and lowered their production levels by shuttering some mines. Less gold, copper and zinc means less silver, too. “Take Canada, one of the world’s major silver producers, for example,” writes Michael Lombardi. “Year-to-date, silver mine production in Canada has declined by 20%.” This could lead to a silver supply crunch if the global economy starts picking up steam (as many expect it to do next year). That’s because silver’s used extensively in many high-tech products.

3) A skewed ratio. The silver-gold price ratio is north of 70. Put another way, an ounce of silver costs more than 1/70th the amount of an ounce of gold. “Over the last 40 years, the grey metal averaged a 42.8 conversion rate with gold,” Iyer writes. “History has shown that a rise in silver prices are all but guaranteed when the ratio tops 70. It’s sitting at 75 right now.” According to him, that means we could see silver prices surge 420 percent from where they are today.

The bearish case for silver in 2016

1) A strong dollar. China’s devaluing the yuan. India and the Eurozone are increasing their quantitative easing programs, and the U.S. Federal Reserve is planning to hike interest rates this year or early in 2016. All signs point to a strengthening dollar. And that negates one of the most powerful incentives to invest in silver: using it as a hedge against a dollar collapse.

2) Deflation. What will be the biggest determinant of silver prices in 2016? Whether we see inflation or deflation. Since precious metals have a finite supply, they act as a hedge against inflation (much like real estate and even stocks). When we’re in a low-inflation environment – or worse, a deflationary environment – it just doesn’t make sense to hold a large position in silver. Across the globe, signs are pointing toward deflation. Credit default swaps are rising, currencies in emerging countries are declining (a sign of slowing global growth) and the rising dollar is disproportionately punishing companies outside the U.S. If we tip toward deflation, we’re probably not going to have rising silver prices.

3) The bear market continues. I always follow momentum until that momentum is broken. Silver’s down more than 70 percent from its 2011 peak. The metal is in a bear market, and I’m not ready to call a bottom yet. Neither is JP Morgan.

Here’s their 2016 silver price prediction: “Silver prices will broadly continue their bearish trend for the coming two quarters before finding greater strength in the second half of 2016,” they said early last month. Specifically, JP Morgan is predicting silver prices will average $14.08 in Q1 of 2016 and $14.65 throughout the year.

Where do you think we’ll see silver prices in 2016?

Where will silver prices go in 2015?

Silver price forecasters are all over the map in their predictions for 2015. It’s hard to deny there’s something interesting happening in the silver market, though. After falling 20 percent in 2014, silver prices have surged nearly 10 percent in the first six weeks of 2015 with prices now hovering around $17.25 per ounce.

Continue reading “Where will silver prices go in 2015?”

Top 5 gold and silver mining stocks over the past month

These gold and silver miners appear to be heating up:

  • Solitario Exploration & Royalty (XPL). Four-week return: +18.18%. Solitario recently announced its initial NI 43-101 compliant resource estimate for its high-grade Bongará zinc project in northern Peru. The June 23 report showed “Measured and Indicated Resources totaling approximately 2.8 million tonnes grading 13.0% zinc; 1.9% lead and 19.3 g/t silver; or 15.5% zinc equivalent and Inferred Resources totaling approximately 9.1 million tonnes grading 10.9% zinc, 1.2% lead and 12.2 g/t silver; or 12.4% zinc equivalent.” HC Wainwright initiated coverage on the stock after the news and set a price target of $1.80 on the stock (which is currently trading at $1.56).
  • Minco Gold Corporation (MGH). Four-week return: +14.36%. Minco’s stock popped on news that it’s selling its Gold Bull Mountain Project located in Hunan Province, China for total consideration of RMB 7 million (approximately CDN $1.2 million). The company will now “focus on its core exploration properties in Gansu, China and its continued efforts to dispose of its other non-core assets and to diversify its investment outside China.”
  • Revett Mining Company (RVM). Four-week return: +13.59%. Early in June, Revett Mining announced it’s on schedule to resume full production at its Troy Mine in roughly a year. Permitting for the Rock Creek project in northwest Montana also appears to be going well.
  • Tasman Metals Ltd. (TAS). Four-week return: +12.37%. Notes: Tasman’s Norra Karr project contains one of the world’s largest rare earths deposits. The stock has a $1.75 price target in the next 12 months. Tasman’s currently trading at $1.09.
  • Endeavour Silver Corp (EXK). Four-week return: +11.36%. Endeavour, which operates several silver mines in Mexico, reported strong results earlier this month. Silver production in the Second Quarter, 2014 was up 9% to 1,669,609 ounces.

3 reasons silver prices could head higher in near-term

It’s the second-worst bear market for silver in history (the first being the bear market from 1980-1982 when the precious metals bubble burst). If you believe we’re in a longer-term uptrend for precious metals, that means we’re likely nearing a bottom in silver prices.

1) Gold-silver divergence. Since the start of the year, the price of gold is up more than 5 percent while the price of silver is off 1 percent. Typically, the white metal outperforms gold during uptrends, and it underperforms gold during downtrends. This year, silver just hasn’t kept pace with gold. In fact, the gold-silver ratio is hovering around 65, a level we haven’t seen since last summer. Admittedly, gold supplies are currently under pressure, but the gold-silver ratio tends to revert to its mean in the low 50s over time. If the gold-silver ratio were at 55 today, we’d be looking at silver prices around $23.50 an ounce.

2) The bear market to beat all bear markets. Jordan Roy-Byrne at SilverSeek points out just how bad silver’s bear market has been since 2011. In fact, it’s the second-worst bear market for silver in history (the first being the bear market from 1980-1982 when the precious metals bubble burst). “Our technical work suggests that we should watch for a final low and end to the bear market in the coming months,” Roy-Byrne writes.

3) Contraianism. If you buy the argument that we’re in a decades-long bull market for precious metals, then you’ve got to look at silver’s current setback as a blip in a longer-term uptrend. In 2011, analysts were bullish on silver. Had you followed their advice and plowed into silver that year, you’d be down more than 50 percent. Contrarians do the opposite of what the broader market does: they buy when everyone else is selling and sell when everyone else is buying. It takes tenacity to stick to your convictions, but if your investing timeline is long, the spring months could be the perfect opportunity to begin re-building a position in silver.

Note: Always remember ‘opportunity costs.’ If you tie your money up in one investment, you’re unable to invest in something else. In my mind, digital currencies present a more appealing investment opportunity than precious metals. Check out my post Bitcoin inflation hedge: The new gold and silver to see why.

Five factors propelling silver prices higher in 2014

Tepid growth, China and base metals mining are just a few of the factors contributing to bullish arguments for silver prices.

I recently presented the bearish case for silver prices. I’d be remiss if I didn’t take a look at the bullish side. Here are five core factors motivating silver investors in 2014:

1) Tepid growth. Q4 economic growth in the U.S. was markedly weaker than analysts expected with the economy growing just 2.6 percent. Slow growth during the busiest shopping months of the year doesn’t bode well – particularly since Q3 was so strong (with 4.1 percent growth). Slow growth means continued easy monetary policies from the Fed.

2) The Fed is posturing. Janet Yellen and co. have hinted that they may hike interest rates sooner than we thought, but no rational investor or market analyst believes that. The economy is simply too fragile to start raising rates in six months. With interest rates near zero, banks continue to slosh cash into the economy.

3) China slowdown. China’s aiming for GDP growth of 7.5 percent in 2014. That’s ambitious after what’s roundly viewed as a very weak Q1 for the Middle Kingdom. If it doesn’t look like they’re going to meet that target, though, expect the Chinese government to step in and aggressively ensure that growth continues. “We have gathered experience from successfully battling the economic downturn last year and we have policies in store to counter economic volatility for this year,” China’s Premier Li Keqiang said in a speech this week (per Reuters). “We will launch relevant and forceful measures.” QE out of China would likely mean higher inflation and higher silver prices.

4) Geopolitics. Russia seems to be speaking out of both sides of its mouth. Leaders there say they just wanted Crimea, but reports of a troop build-up on the country’s border with Ukraine persist. Should Russia invade its neighbor, the effects would destabilize the global economy and likely generate powerful safe-haven buying in the precious metals sector.

5) Base metals price decline. A slowdown in the emerging markets would translate into decreased demand for base metals. As prices fall, many base metal miners are forced to take lower-margin mines offline. What’s that got to do with silver? Two-thirds of all the silver mined around the world comes from base metal mining (per Nasdaq). Less base metal mining disproportionately impacts the world’s silver supply.

All five arguments sound convincing enough, but until we see inflation seriously start ticking up in the U.S., I’m laying my chips elsewhere, particularly on digital currencies. Check out my post Bitcoin inflation hedge: The new gold and silver to learn why.

Look for silver prices to average $19.40 in 2014

There are just too many headwinds for metals right now. The economy’s improving, inflation is low and the Fed’s talking about tightening monetary prices. While I do believe the government has flooded the economy with too much cash to avoid an extended period of inflation, that inflation isn’t coming in the near-term.

British banking giant Standard Chartered just lowered its silver price forecast by 5 percent according to Metal.com. They’re looking for the white metal to average $19.40 this year. That’s less than 2 percent below the current price for silver ($19.78 at the time of this writing).

March has been a rough month for silver with prices falling 10 percent from $22 to $19.78. Silver’s now down for the year, and Standard Chartered believes that’s par for the course in 2014. The bank says recent gains in metal prices came on “U.S. growth concerns and safe-haven buying.” Now, they believe those gains went too far, too fast.

I tend to agree. I find it interesting that silver and gold prices have continued to trend down despite the ongoing crisis in Ukraine. If that can’t generate some ongoing safe-haven buying, we’d need an all-out war to drive up silver prices and that’s something no one wants to see.

There are just too many headwinds for metals right now. The economy’s improving, inflation is low and the Fed’s talking about tightening monetary policies. While I do believe the government has flooded the economy with too much cash to avoid an extended period of inflation, that inflation isn’t coming in the near-term. Until it does (or the Fed announces some new form of QE) look for investors to put their cash elsewhere. In the interim, I’m betting on bitcoin. Check out my post Bitcoin inflation hedge: The new gold and silver.

Watch out below: Silver prices low and heading lower

At prices below $20 an ounce, silver is now flirting with 3 month lows. And it may have further to fall. In fact, I wouldn’t be surprised to see it hit new lows for the year and then target lows we haven’t seen since 2010.

At prices below $20 an ounce, silver is now flirting with 3 month lows. And it may have further to fall. In fact, I wouldn’t be surprised to see it hit new lows for the year and then target lows we haven’t seen since 2010. There are just too many headwinds out there. To name a few:

1) Inflation is anemic at 1 percent.

2) Stocks are outperforming other asset classes. They’re paying great dividends and carry much less risk. Why invest in precious metals and watch your capital shrink when you could buy shares in Wal-Mart (WMT), be up 15 percent on the year and be earning a 2.3 percent dividend?

3) The Fed surprised the market by signaling that tapering is “in the cards relatively soon.” That doesn’t sound very damning in and of itself, but officials took it a step further when their recent meeting minutes revealed they were willing to taper even if the job market wasn’t improving significantly.

That says one of two things to me:

a) The Fed is nervous about inflation.

b) The Fed trying to head off an asset bubble in stocks.

Inflation worries just aren’t here yet. That means, Option B is likely with two of the three leading stock indices at record highs. On the year, the Dow’s up 22 percent, the S&P’s up 25 percent and the Nasdaq is up 31 percent. We can’t keep that pace up without some assistance or some serious economic growth – and we’re definitely not seeing serious economic growth.

Silver price predictions

If the bearish trend continues, MIG Bank in Switzerland is predicting that we’ll test silver’s summer lows around $18.23 an ounce (per Bloomberg). That’s 8.7 percent below the current price of $19.98. If we do close below this summer’s low of $18.23, silver could tumble precipitously. Indeed, we might not find real support until we hit 2010 lows around $15 an ounce. That would be a plunge of 25 percent.

Of course, if we do see a big sell-off in silver, I don’t think it will be long-lived. Check out my post Silver price forecasts and predictions for 2014. I do however wonder if Bitcoin’s stealing some of the white metal’s luster, and I’m quite a bit more bullish on it than I am on precious metals right now. Check out my post Bitcoin inflation hedge: The new gold and silver to learn why. And, if you like that, you’ll love this: The case for bitcoin at $100,000.