Ongoing volatility remains for the materials sector in March 2024. And that includes metals. This area of the market has seen ongoing dips and dives all over the place, though there are macro and micro issues at play.
Metals such as steel, copper, and aluminum have been quite volatile in particular. This comes from supply-chain disruptions continuing since the pandemic disruptions in global metal production and transportation. There has also been a rise in energy costs, and as metal is energy intensive, this has led to higher production costs.
Not to mention the geopolitical events such as the war in Ukraine, weighing on metal supplies and causing price spikes. Yet despite all this, prices in general are higher than pre-pandemic levels, with the future dependent on lower energy costs and increased metal production.
So the question is, should investors get in, or stay out?
Consider streaming services
If you’re interested in investing in materials for the long term, then it might be a good idea to consider a streaming company for lower volatility. Streaming companies don’t own or operate mines directly. Instead, they secure agreements with miners for a pre-determined share of future production at a fixed price. This provides exposure, without the risks associated with mine development and operation.
This also provides streaming companies with the means to create more diversification, with multiple mines and various metals on hand. What’s more, the demand for key materials is growing and expected to continue. This could lead to increased production from miners and higher revenues for streaming companies.
WPM a solid option
If you’re looking into these streaming companies, then Wheaton Precious Metals (TSX: WPM) could be a strong option. The company focuses on precious metals like gold and silver. This offers exposure to a potentially lucrative market, but does limit the diversification compared with other streaming companies holding a broad portfolio.
Even so, WPM stock has a strong track record, which continued during its most recent earnings report. The company achieved a record eight acquisitions, totalling over $1 billion in commitments. This is meant to bolster its growth profile, forecasting growth of 40% production over the next five years.
The fourth quarter brought in $313 million in revenue, with the full year hitting $1.2 billion in revenue. These metrics and earnings were beyond analyst estimates.
Still a deal
Despite seeing growth and beating estimates, the company’s share price remained relatively stable. This perhaps was due to the acquisitions, with many investors hoping to keep cash on hand during the current troubling times.
But honestly, these are great investments given the price of gold right now. It recently hit an all-time high, providing WPM stock with higher revenue and income. So producing as much as possible for the next year at least is ideal.
Meanwhile, investors can bring in a 1.34% dividend yield, which looks quite stable with a 50.8% payout ratio as of writing. So while the rest of the materials market may be down, it looks as though WPM stock could just be getting warmed up.
