In the world of precious metals investing, gold remains the best-performing asset, and the asset that investors spend most of their time thinking about. The thing is, silver and other precious metals often don’t get the love they deserve. And the spread between silver and gold (one of the most watched in this area) has remained historically wide.
While some have long called for this gap to be reduced, there are reasons why this is not the case. Silver is often thought of as an industrial metal, because that is what it is. Silver is used in the production of various consumer electronics and other important equipment that is cyclical in nature. When the economy is doing well, demand for silver increases, making this precious metal both a barometer of industrial demand and a store of value.
That said, I believe silver’s essential status makes it a less volatile way to gain exposure to stores of value. Here are two best ways I could play this trade right now.
First majestic silver
First majestic silver (NYSE:AG) is a top silver mining stock that I haven’t talked about much, but probably should.
The company’s core operations in Mexico continue to deliver impressive results. Last quarter, First Majestic reported 94% year-over-year revenue growth, truly incredible growth. This was mainly driven by a 76% increase in silver production growth, with the remainder fueled by higher silver prices in general.
That’s the kind of growth profile I like to see. First Majestic is one of those rare miners with the ability to ramp up production as prices rise. So for those who are bullish on the rising silver price sticking around for a while, this company could have the best operational leverage on these trends. That’s a factor that I think is underappreciated, but could be one of the most important factors to price in.
With a strong balance sheet, powered by operating cash flows of $115 million per quarter, this is a stock that should easily claw its way out of the trouble it has found itself in in recent years.
Pan American Silver
I am becoming more and more optimistic Pan American Silver (TSX:PAAS) as an excellent way for investors to take advantage of the long-term upside in precious metals and silver in particular.
The company’s stock chart above tells quite a story. Of the silver-focused miners, Pan American Silver is clearly seen as the best way to play this trade.
With its share price near a five-year high, Pan American is one of the more diversified miners in the space. The company has significant operations in Canada, while mines in Mexico and Peru complete its portfolio. And with the recent acquisition of the Juanicip mine, the company’s high-quality production capacity has been significantly improved.
With expected free cash flow growth of 23% over the next few years, this is a stock that I think could have a lot more upside than other players in this space. For investors looking for a mix of geographic diversification and balance sheet strength, Pan American offers both in abundance.
#Silver #Stocks #Buy