Best silver stocks to invest in 2020 – market overview
10:00, 25 August 2020
Silver mining stocks are gearing for a rebound as the global uncertainty triggered by the coronavirus pandemic continues to wane. The price of silver dipped to $12 in March, hitting an all-time low since the global financial crisis of 2009.
Largely to blame for the plummet is the decline in demand as most manufacturing companies that use silver as a raw material were closed to enforce lockdown measures. Most silver mining companies also temporarily suspended operations hence driving the supply down. In May, Global Data reported that nearly two-thirds of worldwide silver productions had been put on hold.
Fast forward in August, most manufacturing companies have already resumed full operations pushing the demand past the pre-corona peak levels. The supply is also back to normal, since most mining companies are also back on high gear. The silver price is almost hitting the 52 weeks high as demand continues to skyrocket.
Most analysts anticipate a violent silver bull market triggered by a weak USD and faltering global economy. Case in point, the US Federal Reserve has pumped trillions of dollars into the economy in a bid to prop it up. As a result, inflation fears have gone up hence triggering the demand for inflation-resistant commodities including gold and silver.
Thomas Puppendahl, the founder of Chancery Asset Management, as quoted on Kitco News, predicts that silver is likely to hit $50 per ounce in the next three years. The boom is positive news for investors looking to diversify their portfolios through good silver stocks.
Silver is notoriously volatile compared to gold but tends to bring significant portfolio growth under favourable market conditions. Here are the best silver mining stocks to buy now, according to David Jones, our Chief Market Strategist.
Silver stocks to invest in: Pan American Silver Corp (NASDAQ: PAAS)
Pan American Silver Corp (PAAS) is a silver mining company founded in 1979 in Vancouver, Canada and with operations in Mexico, Peru, Bolivia, and Argentina.
From both technical and fundamental perspectives, this stock seems like a good bet for the medium term and long term investing. Bank of America gives Pan American Silver Corp a "strong-buy" rating and a $53 price target. The stock is currently trading at $33.22 , which is 17 per cent lower than its 52 weeks high of $40.11 and 213 per cent higher than its low of $10.61.
Data from Stock News shows that the stock is undervalued by approximately 5.5 per cent on a Discounted Cash Flow (DCF) basis. Moreover, Pan American Silver Corp has reported strong cash flow and quarterly dividends since 2018.
However, the cash flow plunged 25 per cent year-over-year in Q2 of 2020 – following the Coronavirus disruption on demand and supply. The market has recovered, but the ripple effect is likely to be felt in the last quarter of 2020. Consequently, this stock may still be a good bet for short term investment.
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iShares Silver Trust (SLV)
iShares Silver Trust is an ETF that gives investors exposure to the price of silver. It is the world largest silver ETF in the market with $12.6bn in assets under management. SLV is currently trading at $25 per share from 52 weeks high of $26.90 and a low of $10.86 per share.
As explained above, silver prices are bound to go through the roof due to several factors among them the rising post-corona inflation in major global economies. This means that stock price is bound to gain steadily, at least in the long run. Data from Financhill shows that the stock is currently moderately bullish and is experiencing buying pressure.
Invest.US predicts that the stock will rise by 63.34 per cent during the next three months and most probably hold a price between $36.51 and $46.69. SLV Relative Strength Index of 57 shows that the stock is currently moderately bought and sold.
iShares Silver Trust has over 570 million ounces of silver in its vaults and about 615 million shares outstanding. This means that each of its shares corresponds to 0.93124 ounces of Silver. While this is a drop from the 1 ounce per share ratio during the ETF’s inception in 2006, it is still better than competitors.
First Majestic Silver Corp (NYSE: AG)
First Majestic Silver Corp has gained over 47 per cent for the last 30 days and is hence among the best silver stocks to watch today. Analysts have given this stock an overall rating of Overweight meaning that it is a strong buy.
Even so, the price growth of the silver miner stocks may dive in the next few months and continue to lag for about a year before rebounding and maintaining steady growth. The stock’s average price target in the next 12 months is $12.75 per cent with a low of $9.25 and a high of $16.5.
Moreover, its revenues in the last quarter of 2020 are expected to plummet 6 per cent compared to the same period last year. Consequently, First Majestic Silver Corp may be a good bet for those looking to invest for more than a year.
Wallet Investor predicts that the revenues for this stock will grow by 18.31 per cent in the next five years. This means that $100 investment today will be worth $118.31 in 2025. This stock is highly volatile and hence a good bet for day trading.
Wheaton Precious Metals Corp (NYSE: WPM)
According to Yahoo Finance, WPM delivered solid returns in the first half of 2020 reporting over $500m in revenue and $330m in operating cash flow.
The earnings for the second quarter are expected to decline due to the coronavirus, but the stock remains a strong bet for inflation hedge nonetheless. WPM generates 55 per cent of its revenues from gold, 41 per cent from silver, and the rest from palladium.
Gold and silver prices are expected to maintain significant growth as global inflation continues to increase. Bank of America gives WPM a “buy” rating and a price target of $64.50. Consequently, this stock is a good bet for those interested in investing in silver stocks in 2020.
Silver stocks to buy now: bottom line
Best performing silver stocks are currently a must-have in a portfolio given their role as a hedge against inflation. The top silver stocks have shown steady performance over the years, despite the momentary dips as a result of the disruption triggered by the coronavirus pandemic. Follow the latest silver price news at Capital.com YouTube channel.
Read more: Silver price predictions for years ahead: more precious than ever before?
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