The Motley Fool

Silver Wheaton Corp.: Should You Buy Now?

Silver prices are on the slide again, and investors are wondering if the pullback in Silver Wheaton Corp. (TSX:SLW)(NYSE:SLW) is a buying opportunity.

Fed effect

The long-expected interest rate hike by the Federal Reserve is driving the U.S. dollar higher and hitting gold and silver prices. Silver is now trading below US$14 per ounce again, extending a losing streak that has lasted nearly five years.

With more rate increases on the horizon, there is a risk that gold and silver could remain under pressure, but silver might buck the trend and actually rise.

Demand and supply

Most of the planet’s silver production comes from mines that are set up to produce base metals such as copper and zinc. Theses commodities are also under heavy pressure, and mining companies are scaling back expansion plans and shelving projects for new development.

That is going to impact silver supplies in the coming years just when it looks like demand could surge.

Silver is an important component in the manufacturing of solar panels. The solar industry has gone through some rough times in recent years, but the future looks particularly bright.

A global push toward the use of renewable energy is gaining steam and solar panel costs have come down to the point where choosing the technology makes economic sense.

Industrial installations are popping up all over the planet, and that means silver demand is going to increase.

The solar industry also just received a shot of support in the United States as big tax credits for wind and solar projects have been extended. Solar installations in the U.S. could increase by 50% over the next five years as a result, according to one analyst.

Silver Wheaton’s outlook

Silver Wheaton is not a miner; it simply provides upfront cash to mining companies in return for the right to purchase the gold or silver by-product produced at the mine for several years or even the entire operating life of the facility.

The company is taking advantage of the difficult conditions in the market to secure new supply deals at favourable rates and more agreements are likely on the way.

Silver Wheaton expects 2015 production to be about 44.5 million silver equivalent ounces. That should to grow to at least 55 million ounces by 2019.

The best part for investors? Most of the production growth is already funded.

Should you buy?

The market could be volatile in the near-term as the effects of the rate hike work their way through the system, so investors should be careful about jumping in with both feet at this point.

As a long-term investment, Silver Wheaton looks like an attractive bet. I wouldn’t back up the truck, but it might be worthwhile to start adding the stock to your portfolio if the shares fall much further.

The 10 Best Stocks to Buy This Month

Renowned Canadian investor Iain Butler just named 10 stocks for Canadians to buy TODAY. So if you’re tired of reading about other people getting rich in the stock market, this might be a good day for you. Because Motley Fool Canada is offering a full 65% off the list price of their top stock-picking service, plus a complete membership fee back guarantee on what you pay for the service. Simply click here to discover how you can take advantage of this.

Click Here to Learn More Today!

Fool contributor Andrew Walker 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.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.