Precious metals related stocks have been under selling pressure all year, but smart investors are having a field day scooping up some of these best "bargain" silver stocks to buy right now.
Companies that mine gold and silver have seen their stock prices punished as the metals' prices have declined. So far this year gold is down 18% while silver prices have been punished even more severely, falling 28%.
The metals had experienced a multiyear strong run as fears of contrary instability and potential inflation drove investors into metals and miners alike. As the economy has shown signs of stabilizing and inflation concerns remain subdued, the rally has stalled.
The mining stocks have been hit even harder as marginal capacity became too expensive to maintain and profits fell sharply.
Now we appear to have reached an unsustainable condition in the price of silver mining stocks.
The total cost of producing an ounce of silver is estimated by some analysts to be as high as $24 an ounce. When this happens marginal capacity is forced out of the market place as higher cost mines are simply shuttered rather than run at a loss. Plans for expansion or exploration are delayed or eliminated and the level of production decreases.
We are seeing this in silver right now.
Although first-quarter silver production was up slightly year over year, it was down compared to the fourth quarter of last year.
Eventually the production decline puts in a price floor for the metal and demand will once again exceed supply. When this happens the surviving silver mining companies should do very well.
Silver mining stocks may face additional pressures in the short term but as marginal capacity is phased out supply reductions should lead to higher metal prices and higher profits. It may take some time for this to begin but it appears that that silver mining stocks are now cheap enough when compared to their asset value to represent a long-term bargain.
Of course if we get any signs of inflation or geopolitical unrest metal prices and stock values could increase much faster than anticipated.
Three "Bargain" Silver Stocks to Buy Now
The first on our "bargain silver mining stocks to buy now" list is one our own analyst David Mamos recently profiled...
About the Author
Tim Melvin is an unlikely investment expert by any measure. Raised in the "projects" of Baltimore by a single mother, he never attended college and started out as a door-to-door vacuum salesman. But he knew the real money was in the stock market, so he set sights on investing - and by sheer force of determination, he eventually became a financial advisor to millionaires. Today, after 30 years of managing money for some of the wealthiest people in the world, he draws on his experience to help investors find "unreasonably good" bargain stocks, multiply profits, and build their nest eggs. Tim tirelessly works to find overlooked "hidden gems" in the stock market, drawing on the research of legendary investors like Benjamin Graham, Walter Schloss, and Marty Whitman. He has written and lectured extensively on the markets, with work appearing on Benzinga, Real Money, Daily Speculations, and more. He has published several books in the "Little Book of" Investment Series and a "Junior Chamber Course" geared towards young adults that teaches Graham's principles and techniques to a new generation of investors. Today, he serves as the Special Situations Strategist at Money Morning and the editor of Peak Yield Investor.