Silver, like gold, is a precious metal. However, it is not just valued because it makes for pretty jewelry- it is also extremely practical, and used in a wide variety of different industrial applications.
Of all the metals, silver is both the best thermal conductor and electrical conductor, making it especially highly valued for use in the world of electronics. In fact, as a result, over 50% of the demand for silver comes from industry.
Having said that, silver is still valued in large part because it has many of the same qualities, at least to investors, as gold (see also ‘How Much Gold Should You Have In Your Portfolio?‘). By that, we mean that silver is also considered a safe-haven metal.
At times of economic and geopolitical instability, many investors use silver- like gold- to mitigate against losses elsewhere and as a hedge against inflation. The events of early 2022, including the Russian invasion of Ukraine, saw many investors make this move.
Having said all that, investing in silver can be a little tricky. Many companies involved with metal extraction focus on industrial metals like copper and iron, and those engaged with extracting precious metals.
Naturally, tend to put most of their efforts into gold. As a result, although many companies mine silver, few use it to make up the backbone of their revenues.
Luckily for you, you’ve come to the right place to find some great silver stocks. In this article, we’ll run through some of the best silver stocks to invest in today. Let’s get cracking!
First Majestic Silver (AG)
Although named for silver, First Majestic Silver gets approximately half of its revenue from silver, with the other half coming from gold.
This might not sound like a lot, but it actually makes First Majestic one of the purest ‘silver stocks’ around, as few other companies make anywhere near as big a portion of their revenue from silver.
First Majestic is a Canadian mining company, but does most of its business in Mexico, and with good reason- Mexico is the world’s foremost producer of silver.
At present, the company has three mines operational in the country and has several new mines in the development stages. Outside of Mexico, the company also operates a gold mine in Nevada in order to diversify its business.
Although the 2021 acquisition of the Jerritt Canyon Gold mine has undoubtedly increased First Majestic’s interest in gold mining, the company remains one of the most silver-oriented mining companies around.
This strongly silver-focused strategy puts First Majestic in pole position to make the most out of increases in silver prices, even to the extent that it can outperform its price.
It does this by increasing production whilst reducing costs at the same time, which should see company profits increase more quickly than the value of silver itself.
Of course, this strategy also makes First Majestic vulnerable, particularly to cost overruns and general operational issues.
Problems with extraction, mistakes among management, as well as interest in other metals and commodities can all inhibit the performance of the stock of a silver mining company.
First Majestic has ambitious goals, seeking to outperform the competition long term and become the largest primary silver producer on the planet. Whether it does so remains to be seen, but it isn’t for the want of trying.
The company is investing millions of dollars every year into the exploration and development of new silver mines.
Wheaton Precious Metals (WPM)
Wheaton Precious Metals is a Canadian precious metals company founded in 2004. Unlike First Majestic, Wheaton Precious Metals does not itself operate silver mines.
Instead, it makes most of its money by operating as a precious metals streaming company, with a strong focus on silver.
The company expects silver streams to account for about 40% of its production in the coming years, and the company’s interest in the precious metal is comfortably higher than amongst its competitors in the field.
So what is metal streaming? In essence, Wheaton offers to cover portions of the development costs for the mines of other companies, and in return receives the right to buy a portion of the metal the mines produce at a fixed price.
For example, the company has a contractual right, up until 2025, to buy silver for an average price of just $5.81 an ounce.
It’s a clever business model, as selling that silver on for anything above that price will generate profit for the company.
The result is a company that is pretty flush with cash, which Wheaton uses to pay dividends to shareholders and to invest in new, potentially even more profitable streams.
Another major benefit of this strategy is that whilst it allows the company to profit from rising silver prices, just like a mining company, unlike a mining company.
It assumes fewer of the overheads and risks associated with being physically involved in the extraction process.
One thing it has in common with First Majestic is that Mexico is its primary interest, with a plurality (40%) of its silver coming from there, with significant percentages also coming from Portugal (20%), the USA (10%), Peru (9%), and Chile (9%).
All told, it produces some 26 million ounces of silver and sells another 29 million ounces of silver mined by other major companies, like Goldcorp.
Another company, another kind of business model. The iShares Silver Trust is an ETF, or exchange-traded fund, that aims to track the performance of physical silver.
It does this by holding physical silver itself, usually in the form of silver bars stored away in bank vaults in financial capitals like New York City and London, England.
The majority of the fund’s assets are held by a custodian institution, JPMorgan Chase, on the trust’s behalf, although they may also hold limited amounts of cash in certain situations.
As of 2021, the trust had $14.7 billion worth of assets under management.
Because the trust actually holds silver, the price of its stock tends to match the price of the precious metal quite closely.
A quick glance at the figures will tell you that over the long term the trust has marginally underperformed compared to the price of silver as a commodity, but that’s to be expected for an ETF.
It’s down to the trust’s annual expense ratio of 0.5%, which is a comparatively good ratio.
The iShares Silver Trust is a passive operation, not taking any measures- either buying or selling- to exploit market price swings, though it will occasionally sell off some silver to cover operating expenses.
The trust nonetheless has managed to generate an average annual return of 4.53% since it was founded back in 2006.
Commodity ETFs like the iShares Silver Trust can be somewhat risky, because the price of precious metals themselves can be volatile and impacted by various market factors.
Nonetheless, buying shares in the iShares Silver Trust is both a convenient and relatively cost-effective way to invest in the precious metal. It should be said that buying shares in the trust is not the same as holding silver itself.
Nevertheless, it provides a useful alternative to either participating in the complex commodities market or buying shares in a silver mining company, which must deal with additional operational risks.
MAG Silver Corp (MAG)
If you’re looking for a stock with a great deal of momentum, MAG Silver Corp might be the stock for you. The company’s twelve-month trailing total return stands at an impressive 12.6%, and the company has a market cap of $1.8 billion.
Founded in 2003, MAG Silver is a Canadian company, headquartered in Vancouver, that primarily concerns itself with the exploration and development of silver mining projects, as well as exploring for other metals like gold, zinc, and lead.
One of MAG’s leading interests is the Juanicipio project, in the area of Fresnillo, Zacatecas State, Mexico. MAG silver owns a 44% stake in the venture, with the remaining percentage being owned by the local project operators Fresnillo PLC.
The project is tipped to be one of the highest-grade and highest-margin exploration and extraction projects in the Americas, and conducted on a grand scale.
A 4,000 tonnes per day (TPD) processing facility has already been constructed, and expectations are high that the extraction of metals from the high-grade silver-gold-lead-zinc epithermal vein deposits will be a success for the company.
On top of this, MAG Silver announced on the 11th of March 2022 that it had recently sealed an agreement to buy Canadian gold exploration company Gatling Exploration Inc in a transaction that was limited to shares only.
The company said it had purchased Gatling for a premium of 47.4%, but declined to say what the total worth of the deal was.
Either way, it’s a significant move, as Gatling has recently been focused on the development of the Larder Gold Project, a cluster of three high-grade gold deposits in the north of Ontario.
Although a top performing stock in recent months, it’s worth noting that MAG Silver shares are not cheap, currently running at $14.78 per share.
It’s also worth noting this is significantly down from a 52-week high of $24.13 per share this time last year. Although many experts rate the company highly in terms of momentum, few would call it a good value stock.
Pan American Silver Corp (PAAS)
Pan American Silver is another Canada-based mining company, and one of the world’s largest silver producers. The company, as the name suggests, is focused on the production of silver, but also dabbles in other metals like copper, lead, zinc, and gold.
The company is involved in a wide range of mining activities, running the whole gamut from exploration and extraction to processing, refining, and even reclamation.
It has operations at home in Canada, but also has operations in Latin America, including Mexico, Bolivia, Peru, and Argentina.
It has been operating in the region for over 27 years, and over that time has earnt itself a reputation as an industry leader for both operational excellence and corporate social responsibility.
It is viewed by many as a good value stock to invest in, with a twelve-month trailing price to earnings ratio (P/E) of 58.9.
The lower the P/E the better- because profits can be returned to shareholders via buybacks and dividends, a low P/E ratio demonstrates that you’re paying less for each dollar of profit.
Investors will also have been pleased to see that on February 24th, the company declared a dividend of $0.12 per share, payable by the following month.
The stock has at times seen a 0.97% dividend yield, making the stock a decent option for income investors.
Company stock is currently trading at $28.68 per share at the time of writing, having generated revenue of $439.9 million in the first quarter of 2022 according to expert estimates.
In April, the stock was trading at yearly highs of over $30 per share. It might not be the cheapest stock to invest in, but with earnings expected to come in at $1.14 per share ($1.14 EPS), it’s no surprise many investors are prepared to pay a premium for one of the Industry’s leading companies.
Buying Silver Stock: What To Look For
There are a few factors to consider when investing in silver stocks. Here are three things you’ll want to consider:
- Earnings Per Share (EPS)- In essence, EPS is one of the most significant indicators of the potential profitability of your investment. The higher the EPS, the more money you’ll be getting back from each individual share you’ve invested in.
- Price Earnings Ratio (P/E Ratio)- The P/E ratio of a company is its current stock price divided by its EPS. In general, it’s a good way to evaluate and compare different silver stocks. A high P/E ratio could either imply that a stock is expecting significantly improved returns in the near future, or that the stock is overpriced. To work out which is the case, you’ll have to do your digging.
- Experience- Before you invest in silver stocks, it’s worth finding out how long the company has been around. Longest established doesn’t necessarily mean best, but decades of experience in the field without going under means you can make your investment with that little bit more peace of mind.
Frequently Asked Questions
Are Silver Stocks Volatile?
Yes, one of the first things you should know about investing in silver is that the market is notoriously volatile.
Take the last few years as an example. Silver prices increased by more than 45% back in 2020, only to fall back somewhat the following year, before significantly rallying once again in the early part of 2022.
Like other ‘safe haven’ investments, silver prices are prone to ebb and flow based on world events, and are particularly sensitive to the economic landscape and geopolitical fears.
Are Silver Stocks A Good Investment?
Although volatile, silver stocks are still considered a ‘safe haven’ investment, and are thus highly valued by investors. In fact, silver’s role as an ‘inflation protection’ investment is only one of the reasons why silver stocks are a good investment.
Being an essential industrial metal, particularly for electrical applications, means that silver is likely to have a key role to play in the coming green energy revolution.
In particular, the electric vehicle industry and the solar energy industry, both expected to grow substantially in size over the next few decades, should drive demand for silver.
Higher demand means that silver prices should slowly continue to rise in the coming years, even if there are hiccups along the way due to world events.
Should I Invest In Silver Or Silver Stocks?
Whilst investing in silver as a commodity works better as an inflationary hedge, most investors still choose to invest in silver stocks rather than physical silver. The reason is quite simple.
For starters, when demand for silver rises and the market price increases, silver companies are well placed to pursue growth opportunities at a much quicker rate than the price of silver itself rises.
In other words, when silver is performing well as a commodity, silver stocks will outperform it. The other reason is simple convenience.
Not owning the metal itself is just easier, as investors avoid the hassles associated with procuring, storing, and then ensuring the physical asset.
Silver is fairly unique as a precious metal in the sense that it has a threefold demand, from industry, consumers, and investors. It looks set to play an ever more important role in the global economy in the coming decades, particularly in the green energy sector.
That makes silver stocks, whether they are involved in mining, streaming, or are a silver-focused ETF, an attractive proposition for any investor to add to their portfolio.
It’s not for us to decide which silver stock to invest in, as each investor will have their own priorities and preferences. All that said, we hope that you enjoyed our article on the best silver stocks to invest in.
If you enjoyed this article, you might enjoy our post on ‘How To Invest In A Franchise‘.
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