In the world of precious metals investing, gold continues to be the top-performing asset, and the one investors spend most of their time thinking about. The thing is, silver and other precious metals often don’t get the love they deserve. And the spread between silver and gold (one of the most-watched in this space) has continued to remain historically wide.
While some have long called for such a gap to narrow, there are reasons why it hasn’t. Silver is often viewed as more of an industrial metal, because it is. Silver is used in the production of various consumer electronics goods and other key equipment that is cyclical in nature. When the economy is doing well, demand for silver surges, making this precious metal a barometer of industrial demand as well as a store of value.
That said, I’m of the view that silver’s essential status makes it a less volatile way to gain exposure to store-of-value assets. Here are two top ways I’d play this trade right now.
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First Majestic Silver
First Majestic Silver (NYSE:AG) is one top silver mining stock I haven’t touched much on, but probably should have.
The company’s core operations in Mexico continue to produce impressive results. This past quarter, First Majestic reported revenue growth of 94% year-over-year, a truly incredible boom. This was driven mostly by a 76% rise in silver production growth, with the rest being fueled by higher silver prices overall.
That’s the kind of growth profile I like to see. First Majestic is one of those rare miners with the ability to ramp up production as prices rise. Thus, for those bullish on the rising price of silver continuing for some time to come, this company could have the best operational leverage to these trends. That’s a factor I think is under-appreciated, but could be one of the most important factors to price in.
With a strong balance sheet driven by operating cash flows of $115 million per quarter, this is a stock that should easily work its way out of the doldrums it found itself in during recent years.
Pan American Silver
I’m growing increasingly bullish on Pan American Silver (TSX:PAAS) as a top way for investors to play the long-term upside in precious metals and silver in particular.
The company’s stock chart above tells quite the story. Of the silver-focused miners out there, Pan American Silver is clearly viewed as a premier way to play this trade.
Now near five-year highs in terms of its stock price, Pan American is one of the more diversified miners in this space. The company has key operations domestically in Canada, with mines in Mexico and Peru rounding out its portfolio. And with the recent acquisition of the Juanicip mine, the company’s high-grade and high-production capacity has improved considerably.
With 23% free cash flow growth projected in coming years, this is a stock I think could have much more upside than other players in this space. For investors looking for a mix of geographic diversification and balance sheet strength, Pan American provides both in spades.
