The rally we’ve seen play out in precious metals thus far this year has been impressive to say the least. Whether we’re talking gold, silver or other precious metals, investors who have put some capital to work in an asset class that’s generally considered to have a very low correlation to other assets like equities have done quite well for themselves.
Now, this rally has stalled a bit in recent days, as various recession indicators begin to once again agitate investors. We’ll have to see if broad-based selling continues, or if the market will rebound from here.
But for those who believe that silver miners are the best way to play a rally in the price of silver (and I’m among this investor group), here are two top ideas for investors to consider right now.
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Pan American Silver
Pan American Silver (TSX: PAAS) is a company I haven’t touched on much in the past. That’s because when I typically cover precious metals, I’m usually honed in on gold (given this asset’s size and importance, particularly in the Canadian market).
That said, Pan American Silver has one of the best balance sheets among the so-called “pure plays” in this space. The company’s recent acquisition of the Juanicipio mine in Mexico has added significant high-grade and low-cost silver production to the company’s portfolio.
This has allowed Pan American Silver to see its free cash flow surge. And on top of that, the silver miner projects this trend will continue, with forecasted free cash flow growth in the coming years expected to be around 23%.
As far as fundamentally sound miners with low all-in sustaining costs per ounce are concerned, this has to be a top stock investors interested in playing the silver trade will consider.
Wheaton Precious Metals
One of the worlds largest precious metals streaming companies, Wheaton Precious Metals (TSX: WPM), is known more for its gold streaming operations, though the company does have a world-class portfolio of silver assets and other precious metals as well.
Given the streaming business model, which essentially provides Wheaton with upside to the price of silver via production claims (in exchange for up-front financing), the company’s margins are among the best in the industry. This business model also allows for an extremely low fixed cost from miners, meaning if you’re of the belief that gold and silver prices are likely to rise from here, this is a company that could provide the best upside to this trade among the group.
With little jurisdictional and single-mine risk, Wheaton Precious Metals continues to be one of my top ideas as a way to play rising commodity and precious metals prices over time.
