Sunday , 19 May 2024

Top Silver Stocks for 2016: September Update

Right before the start of the year, I [wrote an article outlining]…my top 5 overall silver stock picksSilver Bars for 2016…I may not be as bullish on these picks as I was back in December 2015 so here’s an update… including the performance of my picks and my current recommendations.

The comments above and below are excerpts from an article by Gold Mining Bull which may have been enhanced – edited ([ ]) and abridged (…) – by (Your Key to Making Money!)  to provide you with a faster & easier read.

Top 5 Silver Stocks for 2016: Performance

#5 Silvercorp Metals (OTCPK:SVMLF)

The stock is up 579% since the end of December, 2015, boosted by:

  • higher silver prices,
  • lower cash costs and
  • strong quarterly results…

I originally picked Silvercorp for two main reasons:

  1. I liked the company’s strong balance sheet and very cheap valuation….[and]
  2. Silvercorp’s…share buyback program to repurchase its undervalued shares. Since last year, the basic share count has been reduced by approximately 4 million shares.

Current recommendation: Unfortunately, I can no longer recommend buying Silvercorp given the stock’s massive run-up over the past 10 months. The stock is no longer undervalued, in my opinion.

  • When I first wrote that article, Silvercorp was trading at $.50, well below its book value per share of $1.39, and traded at an EV/EBITDA of just over 1.
  • The stock now trades well above its book value and carries an EV/EBITDA of 15.1.

I would only consider buying shares if they pulled back below $2 per share.

#4 First Majestic Silver (NYSE:AG)

First Majestic has been a solid performer, as the stock is up 243.90%

First Majestic hit a high of about $19 per share back in August and, as I pointed out in my Q2 earnings analysis article, I felt investors should sell shares and wait for a pullback. That pullback came soon after, as First Majestic now trades at $11.90 per share.

Current recommendation:

  • The company is on track for significant growth over the next 3-5 years, as it aims to increase silver production from just over 10 million ounces to close to 20 million ounces as its Plomosas and La Luz mines are brought to production.
  • The company also has huge leverage to silver prices and estimates $180 million in annual EBITDA with silver at $24 per ounce, up from $126 million with silver at $18 per ounce, which well exceeds its estimated 2016 capex of $89 million, according to its corporate presentation.

The bottom line? The pullback in First Majestic from $19 to $11.90 is a gift for long-term investors looking to buy shares.

#3 Hecla Mining (NYSE:HL)

Although it hasn’t outperformed nearly as much as the picks mentioned above, Hecla is another outperformer, as the stock has returned 173.35% since article publication. The stock has risen from $1.915 per share to the current price of $5.36 per share.

I chose Hecla initially mainly because of its:

  • strong growth prospects and
  • solid cash position

but the company has also reported earnings that far exceeded my expectations. For example, in the second quarter, Hecla reported:

  • a massive silver production increase of 71% to 4.2 million ounces,
  • a revenue increase of 64% to $171.3 million,
  • strong adjusted EBITDA increase of 164% to $77.8 million, and
  • net income of $24.11 million, or $.06 per share, compared to a net loss of $26.6 million last year.

Current recommendation: Like First Majestic, Hecla stock has pulled back a bit in the past few months, as it traded as high as $7.14 per share in early August but more upside could be ahead if the company continues to execute like it did last quarter. I’m also a fan of Hecla’s recent acquisition of Mines Management, Inc. and its Montanore silver/gold project in Montana.

Hecla has outstanding long-term growth potential, and I currently recommend buying the stock on any pullbacks. I view a price of under $5 per share as a buying opportunity.

#2 Silver Standard Resources (NASDAQ:SSRI)

…Silver Standard has returned 131.32% since article publication…

Silver Standard:

  • smashed my expectations in Q2 as it reported strong net income of $12.5 million ($.25 per share) and $30 million in operating cash flow, thanks to a strong operating performance and higher gold and silver prices.
  • The company has announced a favorable resolution of its previous tax dispute with the Canadian Revenue Agency, and is due to be refunded $19.2 million.

Current recommendation: …Silver Standard has a solid balance sheet with $232 million in cash and cash equivalents, plus $193 million in marketable securities, compared to a reasonable debt balance of $213.9 million, so I think the company could look to make an acquisition. My current recommendation is to buy Silver Standard on a pullback below $11 per share.

#1 Great Panther Silver (NYSEMKT:GPL)

Great Panther is my #1 overall silver stock to own this year [up approx. 170% since the end of last year]…

Great Panther’s Q2 financial results exceeded my expectations:

  • all-in sustaining costs fell 43%, leading to a 134% increase in adjusted EBITDA to $9.84 million and a 48% jump in cash and cash equivalents to $28.8 million.

Current recommendation: I’m giving the same recommendation I gave back in August – I think investors who are long-term bullish on silver should consider buying a few shares here and then buy more if shares pull back. I think Great Panther has a very bright future, and that the company is a strong takeover target, but shares can be extremely volatile, so investors should try to use this volatility to their advantage.

Follow the munKNEE – Your Key to Making Money! “Like” this article on Facebook; have your say on Twitter; register to receive our bi-weekly Market Intelligence Report newsletter (see sample here , sign up in top right hand corner)