Gold prices have been consolidating their prior gains for the summer season. And while the next leg higher may not all be too far off for the high-flying yellow precious metal, I think that it’s about time that investors had shown more love to silver, which has shown no signs of slowing down in the past three months.
Silver, which tends to stand in the shadows of gold, has been up a whopping 16% in three months. To put it simply, it’s been a hot summer to be an investor in silver and a fairly lukewarm one for the gold bugs, which have seen a flat (1.7%) gain since the end of May.
Indeed, silver definitely seems like the timelier of the two metals, especially as we head out of an incredibly quiet month for markets. Indeed, how many times have we seen stock markets trending sideways with minimal volumes over the past few weeks? In any case, I think there’s a strong case for hanging onto gold as volatility rears its ugly head again.
For investors who want something a bit more affordable, with timelier catalysts going into the year’s end, though, perhaps it’s the silver mining companies that could deliver more bang for the buck, given their operating leverage and ability to make the most out of the latest run in silver prices.
Let’s have a look at a pair of silver mining plays that still look like stunning buys right now. Their valuations are modest, and if the strength in silver persists through the fall and perhaps into early winter, the following names, I think, could be in for a strong finish to the year.
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Pan American Silver
Pan American Silver (TSX: PAAS) is a $16.3 billion miner that amplified silver’s three-month surge, now up more than 33% in the timespan. With shares at fresh multi-year highs (no new all-time highs quite yet, but they are coming within reach after the latest summertime melt-up), I think silver investors should give the name a closer look.
It’s got a robust production outlook for the year, and the means to keep growing its well-covered dividend (1.5% yield) for years to come. Indeed, perhaps more generous dividend raises could be in the cards if silver is poised to continue outshining gold.
With smart merger and acquisition moves (the MAG Silver acquisition stood out as genius), a top-tier management team, and a dirt-cheap 17.45 times trailing price-to-earnings (P/E) multiple, there’s a lot to love about the less-volatile (0.75 beta) miner, which, I think, could really boost the diversification of a Tax-Free Savings Account (TFSA) growth fund, especially one that’s light on the precious metal miners.
First Majestic Silver
First Majestic Silver (TSX: AG) is another great name to buy for investors who are bullish on silver prices. It’s picking up traction with its production in Mexico and could be in for continued momentum going into the new year, especially if silver’s surge isn’t quite over. The $6 billion miner is much smaller than Pan American, the five-year chart isn’t as attractive, and the dividend yields just 0.22%.
Either way, I consider First Majestic as a fantastic option for value investors following its recently-hiked full-year guide. In the past three months, shares gained over 50%, making the miner one of the preferred high-upside ways to bet on the recent wave of momentum hitting silver.
Higher upside tends to come at the cost of more risk and volatility, though. So, investors should be ready for more correlation with broad markets (1.03 beta) compared to PAAS shares.
