Despite continued chatter of lower rates for longer from the Federal Reserve, the recent waffling on the stimulus bill has led to some volatility in the precious metals space, with the Silver Miners Index (SIL) falling nearly 25% from its August highs. While valuations across the sector are beginning to get more interesting, the key is focusing on quality, as there are over 20 names in the index, and only five are truly worth owning.
The key to hunting down the superior names is looking for those with the highest likelihood of dividend growth, as well as those with annual earnings per share either at or heading to new all-time highs. Currently, there are three names in the sector that fit these criteria, and we’ll take a look at them in a little more detail below:
Many of the speculators in the precious metals space are chasing the lowest-priced names that are yet to build mines as they believe that these will provide the highest reward if the silver price (SLV) does hit $50.00/oz again.
While they may be correct in terms of upside potential, the best reward to risk is in the silver producers as they pay investors to wait, and they are shielded from downside given their earnings power. Currently, Pan American Silver (PAAS), Fortuna Silver (FSM), and Hecla Mining (HL) have one thing in common, and that’s explosive earnings growth.