It sure has been good to be an investor of Silver Wheaton Corp.  (TSX:SLW)(NYSE:SLW) these past few months. The stock has risen from as low as $14.99 all the way up to nearly $25, a 67% increase in the value. More often than not, new investors will see this run-up in price, get excited, and start buying shares without analyzing whether or not the stock is still worthy of consideration.

It’s because of scenarios like this that so many investors shun the stock market. They buy high and then, when the stock drops, get frustrated and sell low. So what we have to ask is whether or not Silver Wheaton can keep going from its 67% increase.

The first thing to understand about Silver Wheaton is that it is not actually a mining company. I like to consider it the banker extraordinaire for mining companies. In other words, if a company wants to launch a new mine, it’ll get funding from Silver Wheaton. In exchange, Silver Wheaton gets the silver by-product for a seriously reduced price. The reason mining companies opt to do this is because it ensures they have the funding to get the mine up and running.

To get an idea on how profitable being a silver streamer can be, consider that its average cash cost for silver in 2015 was US$4.58 per ounce. If you subtract that from the spot price, you are left with the difference, which is typically a very significant margin. Silver Wheaton doesn’t have to take on much risk, but it still has significant room for profit generation.

But Silver Wheaton is a play on silver increasing in value. The good news for investors is that the increase in price for silver doesn’t appear to be slowing down.

Most silver is actually a by-product of mines; in other words, there aren’t many companies launching strictly silver mines. With the serious drop in commodities over the past few years, there are fewer mines being launched, which presents an opportunity for there to be a shortage in silver.

According to one analyst, this is the first time since 2011 that silver mine output dropped. And at the same time, fabrication demand is expected to increase through 2016.

One sector that I am particularly bullish on for silver is the solar industry. Unlike electronics that only need 1.25 grams of silver, a single solar panel needs 20 grams, or two-thirds of an ounce. That means that as solar panel fabrication continues to grow, I expect to see the demand for silver continue to rise.

There’s no denying that this rally was completely unpredictable. Silver prices had a six-year low in December, reducing the margins for the company. However, now that the rally has started, there is belief that silver will continue to appreciate in price. Should that occur, I expect Silver Wheaton stock to also appreciate in value. Nothing is for sure, but I am confident that this rally still has legs to run.

Urgent update: Motley Fool issues rare "double down" stock alert

Not to alarm you but you recently missed an important and rare event. Stock Advisor Canada issued a "double down"... and history suggests it pays to listen. Because 10 of the most lucrative "double downs" in one of the Motley Fool's premier services skyrocketed an average of 434%! So, simply click here to discover why Motley Fool "double downs" have some investors rocking with excitement. Five years from now, you'll wish you'd grabbed this stock. Click here to learn more.


Let’s not beat around the bush – energy companies performed miserably in 2015. Yet, even though the carnage was widespread, not all energy-related businesses were equally affected.

We've identified an energy company we think offers one of the best growth opportunities around. While this company is largely tied to the production of natural gas, it doesn't actually produce the gas. Instead, it provides the equipment required to get natural gas from the ground to the end user. With diversified operations around the globe, we think it's a rare find in the industry.

We like it so much, we’ve named it as 1 Top Stock for 2016 and Beyond. To find out why, simply enter your email address below to claim your FREE copy of this brand new report, "1 Top Stock for 2016 and Beyond"!

Fool contributor Jacob Donnelly has no position in any stocks mentioned. The Motley Fool owns shares of Silver Wheaton. (USA).  Silver Wheaton is a recommendation of Stock Advisor Canada.