Gold is the traditional safe haven in volatile markets. But silver prices tend to rise even faster on a percentage basis – and so do silver stocks.
The popularity of precious metals like gold has soared in the wake of the recent financial market crash, with the yellow metal’s price increasing more than 20% in just three weeks between late February and early March. Gold remains a popular safe haven for multitudes of investors who have serious misgivings about the global economic outlook—and with much of the U.S. economy still shut down, safety demand for gold isn’t likely to wane anytime soon.
Lost in the latest excitement, however, is gold’s sister metal—silver. While gold has captured much of the investing world’s focus, silver has been largely relegated to the sidelines and its price has conspicuously underperformed compared to gold. That should soon change, though, and the best-performing silver stocks should outpace most gold mining stocks if history is any guide.
It’s no secret that gold has always been in high demand whenever investors have major concerns about the economy’s health. In October 2008, for instance, when stock prices were still in the doldrums during the final stages of the credit crisis, gold commenced a bull run which lasted almost three years and resulted in a 170% gain in gold prices.
Silver began its bull market around the same time in late 2008 but saw a far more impressive 400% gain in the ensuing three years before its run was over. Due to its lower price relative to gold, silver has always attracted a much bigger following among small investors, and for that reason has been called the “poor man’s gold.” Yet in the last decade, institutional participation in the companies that mine silver has dramatically increased.
One important takeaway from past precious metal bull markets is that whenever gold demand is persistently high, silver sooner or later tends to outperform gold in percentage terms. Since more participants can afford to buy large quantities of the white metal, its volatility factor is magnified and the aggregate force of buyers pushes its price to far greater heights in percentage terms. So, whenever gold is in high demand, it’s usually just a matter of time before silver joins the parade.
One of the best ways to leverage a precious metals bull market is to own shares of the strongest silver mining and exploration companies. While silver’s price tends to outperform gold in a bull market, silver stocks can dramatically outperform the physical metals.
For instance, while silver prices gained 400% during the 2008-2011 bull run, some silver miners (such as Coeur Mining, for instance) gained 850% or more in that same time, while even smaller exploration stage firms saw gains well in excess of 1,000%. This illustrates that if you’re bullish on gold and silver, you should always consider having at least some exposure to the companies that mine the metals.
With that in mind, let’s take a look at some of today’s best-performing silver stocks ranked by relative performance. Each of these companies is positioned to benefit from a secular bull market in silver, and most also have some exposure to gold as well. (As an aside, some of the companies mentioned here will report quarterly earnings at different points in May).
The 6 Best-Performing Silver Stocks
Best-Performing Silver Stock #6: SilverCrest Metals (SILV)
SilverCrest Metals (SILV) is a junior stage silver mining company that hasn’t yet begun production at its Las Chispas silver-gold project in Mexico. According to a company resource summary, however, it’s estimated that Las Chispas contains north of 511,000 ounces of gold and around 50 million ounces of silver. Las Chispas has historically shown some fairly high ore grades, so this could be a worthwhile longer-term investment due to the potential for low mining costs and solid production rates. At this point, however, SILV is definitely more a speculative play and not something conservative investors should be heavily exposed to. That said, based on its recent stock performance, investors evidently see some value in the company, so if you don’t mind the risk, owning a little SILV probably isn’t a bad idea in such a bullish environment for precious metals prices.
Best-Performing Silver Stock #5: MAG Silver (MAG)
When it comes to silver plays, sometimes smaller is better. MAG Silver (MAG) isn’t as well-known as some of its bigger peers, but is one such example. It’s not much of a miner yet, so the company has much to prove before becoming a big player in the industry. Yet it’s an advanced stage development and exploration company and has given investors above-average returns in past silver bull markets. The stock, which trades on the NYSE American exchange, has rallied 160% from its March correction low and has benefitted from a recent $60 million infusion from precious metals financier Eric Sprott of Sprott Asset Management. MAG’s main focus and asset is the Juanicipio Project located in the Fresnillo Silver Trend in Mexico, the world’s premier silver mining camp, and MAG intends to use the net proceeds to fund exploration and development of this project. MAG is a bit speculative since its bull story is predicated on the Juanicipio mine will meet the firm’s expectations and become productive. But with an estimated 19-year mine life, and all-in sustaining costs of around $5 per ounce of silver (versus current prices of $15 per ounce), the potential for future growth is immense.
Best-Performing Silver Stock #4: SSR Mining (SSRM)
SSR Mining (SSRM), formerly Silver Standard Resources, is an established intermediate gold-silver producer and exploration company, with operations throughout North and South America. While the company has become more gold focused in recent years, it’s still heavily involved in silver production through its Puna (Argentina) mine, and through its San Luis and Pitarrilla (Mexico) development projects, as well as through its Amisk (Canada) exploration project. In the last quarter, the firm reported a 71% revenue increase and a 256% increase in income from mine operations. Analysts expect 18% revenue growth and a 56% EPS growth in 2020; meanwhile, the firm recently guided for new production records at its Marigold and Seabee gold mines. Sporting a stellar gross margin of 30% (well above the industry average of 6%), SSR is well positioned to benefit from a continued precious metals bull run. Earnings are due May 14.
Best-Performing Silver Stock #3: Pan American Silver (PAAS)
Pan American Silver (PAAS) is one of the world’s largest silver producers with mines and exploration projects in Mexico, Peru, Bolivia and Argentina. Pan American saw record cash flow in the last quarter of 2019 on the back of a strong operating performance and rising metals prices. The firm further expects production increases of 7% for silver and 16% for gold in 2020, and analysts expect revenues to rise 15% this year while per-share earnings are expected to trend impressively higher in the next couple of years. The stock took a hit during the coronavirus-related panic in March, but has since rebounded strongly and has already risen over 80% in just the last few weeks. It’s still well below its 2011 high, though, and appears to have plenty of upside potential ahead—especially if silver prices continue to rise. Pan American also recently increased its quarterly dividend by 43% to $0.05 per share, which is icing on an otherwise delectable cake.
Best-Performing Silver Stock #2: Franco-Nevada (FNV)
We previously covered top performer Franco-Nevada (FNV) in our Cabot Top Ten Trader advisory. Franco-Nevada’s main business is streaming, which involves providing up-front payments to miners in exchange for the right to buy gold, silver and other resources at a set price. Franco’s extensive portfolio includes some 300 royalties in gold, silver and platinum metals mining (two-thirds) and oil/gas projects (one-third). With financing likely to become harder to come by during the pandemic-related downturn, miners will increasingly turn to companies like Franco to provide money to sustain their operations. In exchange for providing assistance, Franco can leverage downturns to grow its portfolio in exchange for cash (as happened in the 2015 commodity slump). This makes it especially attractive right now, but assuming silver prices finally catch up to gold’s meteoric rise, there should be even more leverage opportunities for investors who own FNV.
Best-Performing Silver Stock #1: Wheaton Precious Metals (WPM)
Wheaton Precious Metals (WPM) is the hands-down leader among actively traded silver stocks listed on the major U.S. exchanges. The world’s largest silver streaming company, it has 14 silver purchase agreements, as well as gold and palladium agreements. Wheaton focuses mainly on high-quality, high-margin operations with a goal of returning a minimum of 30% of cash flow to its shareholders, with the remainder used to grow the company. It further has significant cash flow ($500 million in 2019) and manageable debt levels, and is well positioned to fund commitments and contingencies, including dividends. Assuming silver prices eventually track gold’s stellar bull run, Wheaton is well positioned to see additional growth as the safe-haven precious metals demand of recent years is expected to continue.
Based primarily on relative performance, these are six of the best-performing silver stocks in the U.S. equity market right now. They also stand to benefit from a sustained rising trend in precious metals prices. While past performance doesn’t guarantee future results, it usually pays to follow the path of the smart money traders and institutional investors. And the stocks mentioned above appear to be among the favorites of this market-moving crowd.
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Timothy Lutts heads one of America’s most respected independent investment advisory services. Each week, Tim personally picks the single best stock in his exclusive Cabot Stock of the Week advisory. Build your wealth and reduce your risk with the top stock each week for current market conditionsLearn More