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.

Why Eric Sprott believes silver prices will triple to $100 an ounce in 2012

Famed investor Eric Sprott of Sprott Asset Management christened gold the investment of the 2000s. Now, he’s loudly proclaiming that this decade will belong to silver.

Famed investor Eric Sprott of Sprott Asset Management christened gold the investment of the 2000s. Now, he’s loudly proclaiming that this decade will belong to silver. His pronouncements are particularly interesting as investors seem to have lost interest in the white metal with prices trending down over the past month.

Of course, silver is still in the green this year (up 7 percent around $30 an ounce), but it’s hard to argue the fact that investors are giving the metal the cold shoulder. The gold-silver ratio is in a strong uptrend (per Seeking Alpha), investors fear that the Federal Reserve could potentially raise interest rates after the presidential election and silver production is on the rise.

Despite all those factors, Sprott believes both gold and silver prices will hit new highs before the end of the year. It’s silver, though, that he thinks will shine the brightest. And he bases some of his reasoning on data from the U.S. Mint:

“They sold as many dollars of silver as they sold dollars of gold last year in terms of gold coins,” Sprott said during an April 20 interview with Goldseek Radio. “That means that essentially, with silver trading at a 50 to one ratio, people bought 50 times the amount of silver as did they gold.”

Sprott’s arguments for new highs in the silver market can be boiled down to three factors: silver price manipulation, a gold-silver ratio that could start shifting back toward silver and demand that’s out-pacing supply.

Indeed, industrial demand will be key to ever higher silver prices.

“Annual production is about 900 million ounces per year, including recycling,” Sprott said (per Frank Curzio at Stockhouse.com). “Industrial usage alone will rise to 660 million ounces by 2015. That leaves only 240 million ounces for coinage, central bank purchases, and investment.”

Sprott’s prediction makes silver mining stocks look particularly attractive. “If Sprott is right and silver prices begin pushing toward $100 an ounce, these companies (Fortuna Silver: FSM, Silver Standard: SSRI, and Endeavor Silver: EXK) could go up several hundred percent from these depressed levels,” Curzio writes.

Economically, things feel like they’re improving in the U.S., but that’s just smoke and mirrors, Sprott argues. “It’s a BS rally,” he told an investor audience in Toronto last month (per Gordon Pape). “We have a system that is breaking down.”

When that systems starts showing cracks, Sprott believes silver prices will start climbing. And they won’t stop until we hit new all-time highs for silver.

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Investors tentatively move back into silver after price collapse

Whether or not this is the turning point doesn’t matter in the bigger picture. Unless the global economic picture changes dramatically, silver prices will likely test their all-time record highs again before the end of the year.

Silver bulls started poking their heads out of the woods yesterday after one of the worst weekly declines for the metal in decades. At one point, silver was down 30 percent in four days of trading. Yesterday, though, the selling pressing seemed to lift, and the white metal tacked on a modest gain.

Total damage for the week? Silver plunged 28 percent. That’s got some investors wondering if the tide has turned against the metal for good – particularly since some of those same investors define the start of a bear market as a 20 percent decline in prices.

After four days of panic selling, Friday finally saw inflows for silver ETFs. The iShares Silver Trust ETF (NYSE:SLV) rose 2.25 percent on more than twice the stock’s typical trading volume, and the Sprott Physical Silver Trust ETF (NYSE:PSLV) surged 5.6 percent.

Silver ETFs use their share price to determine how much physical silver bullion to add or sell from their holdings. Since they’re so easy to move in and out of, the products have taken a lot of heat this week for helping to intensify the plunge in metals prices – particularly since retail investors can leverage their positions in the ETFs by using margin.

“Margin calls are eating the little guys alive, forcing them to give up their dreams of a silver-coated world,” ETF analyst Carlos Alexandre at CXA Markets told the Globe and Mail.

Of course, it wasn’t just the “little guys” getting creamed by silver’s decline. The CME Group, which owns the Comex, ramped up margin requirements for silver futures traders, too. And they didn’t do it slowly. Initial margin requirements shot up twice this week and another hike to $21,600 is due on May 9. That’s more than 80 percent higher than margin requirements were just two weeks ago.

The CME, of course, insists that their margin hikes didn’t worsen or lead to the decline in silver prices. “We try to make changes in a way that we can telegraph to the market, so that participants have notice. We try to be routine and predictable and provide no surprises,” Kim Tyler, president of CME Clearing, told the Wall Street Journal.

We can’t draw a direct cause and effect conclusion, but it’s interesting to note that the CME’s margin hike went into effect after trading on Friday, April 29. When the silver spot market opened Monday, prices immediately collapsed 12 percent and kept falling through Thursday.

Turning Point?

ETFs showed signs of stabilization on Friday, and silver mining stocks did, too. The silver streaming company, Silver Wheaton Corp. (NYSE:SLW), rose 1.91 percent, and Silver Standard Resources Inc. (NASDAQ:SSRI) climbed 2.76 percent. Some sanity, it seems, is returning to the precious metals market. Now, the question becomes, will prices bottom out here or continue falling in the weeks and months to come?

Most analysts seem to agree that the long-term trend for silver prices is up. Some are even calling on investors to buy even more aggressively in the face of the sell-off. “This argument will be hard to resist, but should be,” GMO forecaster Jeremy Grantham wrote in a recent letter to his clients (per Mineweb). “A second commodity collapse [after the 2008 plunge] may be psychologically hard to invest in…[But] in the next decade, the prices of all raw materials will be priced as just what they are, irreplaceable.”

Whether or not this is the turning point doesn’t matter in the bigger picture. Unless the global economic picture changes dramatically, silver prices will likely test their all-time record highs again before the end of the year. In an era of global currency debasement, commodities offer one of just a few safe places to hide. As I pointed out yesterday, silver prices are still up 18 percent on the year, and I expect them to be much higher come 2012.

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How to pick winning small-cap gold and silver mining stocks

If you’re considering dipping your toes into the junior mining market for the first time, follow these tips to maximize your chances of success.

The number of gold and silver mining companies that trade on major exchanges can be overwhelming for investors who are moving into the space for the first time, and the fact of the matter is, it’s easier to find a dud than a company that could become a takeover target or a viable producer in the future.

Mining companies typically operate in three distinct spheres: exploration, development and production. It’s a niche-driven market with very different risk-to-reward ratios. Exploration mining stocks, for example, promise the greatest rewards but also pose the greatest risk. They’re seeking out properties that could, one day, yield great amounts of precious metals. But it’s just as likely they’ll end up with a portfolio of desert land that will lie dormant for the next century.

If you’re considering dipping your toes into the junior mining market for the first time, follow these tips to maximize your chances of success:

1) Stick with producers. Junior mining companies that are already extracting metals from the ground are a much safer bet than companies that are yet to produce an ounce. Not only will they have company-sustaining cash flow, but those greenbacks could multiply quickly if the current bull market in metals continues. That will help the company expand it’s mine or break ground on additional deposits.

2) Seek out strong management teams. While beginning investors tend to think of mining stocks as a bit of a gamble, the fact is, it’s a highly technical field that relies on institutional knowledge and years or decades of managerial and geological experience. Because the community is small, it’s not hard to track outstanding industry experts who have a record of joining successful companies. Several executives from Silver Standard Resources Inc. (NASDAQ:SSRI) recently joined up with exploration miner Pretium Resources, Inc. (TSE:PVG). You probably wouldn’t leave Silver Standard without a good feeling (and a lot of hard data) that indicates Pretium will be successful.

3) Watch out for share dilution. Jordan Roy-Byrne, a Chartered Market Technician at TheDailyGold.com, recommends junior mining companies with operational mines and fewer than 100 million shares. A tight share structure indicates a management team that’s careful with its capital and committed to seeing the company succeed over the long haul.

4) Think small-cap; not micro-cap. “Micro-cap” generally refers to companies with market capitalizations of $250 million or less. Shares in these companies can be illiquid and extremely volatile, and – in most cases – you’ll have trouble finding actual gold and silver mining companies that are in production and still fall into the micro-cap category. Roy-Byrne recommends small-cap companies with a capitalization of $300 to $600 million. They’re still small enough to rise five or ten fold in a few years, but not so small they might end up in bankruptcy court.

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Pretium Resources (TSE:PVG) lands major execs from Silver Standard (SSRI)

Talk about a big transfer of institutional knowledge. Last week, Silver Standard Resources, Inc. (NASDAQ:SSRI) announced it was losing two senior execs to Pretium Resources, Inc. (TSE:PVG).

Talk about a big transfer of institutional knowledge. Last week, Silver Standard Resources, Inc. (NASDAQ:SSRI) announced it was losing two senior execs in Kenneth McNaughton, Senior Vice President Exploration and Joseph Ovsenek, Senior Vice President Corporate Development. McNaughton and Ovsenek will “pursue other interests in mineral exploration with Pretium Resources, Inc.” (TSE:PVG) as of February 15, 2011.

Pretium also appointed Kenneth J. Konkin Project Manager of its flagship Snowfield and Brucejack Projects. “Mr. Konkin managed Silver Standard’s exploration programs at the Snowfield and Brucejack Projects since exploration started in 2006, and was instrumental in their success,” Pretium said in a statement. “He started working with Silver Standard in 1993, and has 30 years of exploration experience in the region.”

All told, Pretium’s projects contain combined measured and indicated resources totaling 25.8 million ounces of gold, 2,561 million pounds of copper and 127.1 million ounces of silver; inferred resources of 15.9 million ounces of gold, 1,307 million pounds of copper and 113.1 million ounces of silver, as well as molybdenum and rhenium mineralization.

I was surprised there wasn’t more of a pop in Pretium Resources’ shares, but I suspect it’s due to the fact that Pretium’s still in its start-up stages. The fact that the company’s been able to recruit so much talent, though, bodes well in an industry that relies on great management and hands-on field experience.

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