Pan American Silver
This is another top pick, and it doesn’t get the coverage on Wall Street that some of the bigger companies do. Pan American Silver Corp. (NASDAQ: PAAS) is one of the largest primary silver producers globally, with mines in Bolivia, Mexico, Peru and the world-class undeveloped Navidad silver project located in Argentina. Gold production of more than 500,000 ounces annually (with gold mines in Canada and Peru) is sufficient for it to qualify as a mid-tier gold producer. The company is also a producer of lead, zinc and copper.
The Deutsche Bank analysts like the company’s diversity and said this in the research report:
We maintain a BUY rating on Pan American Silver, as we continue to believe in the portfolio optionality, which could drive upside to the company, such as Escobal mine or the Navidad project. We also believe further drilling at La Colorada could be a positive catalyst. Silver price trading has improved, but is still trading at a wide range vs gold compared to historical ratios.
Pan American Silver investors receive a 0.88% dividend. Deutsche Bank has a price target of $20, while the posted consensus target is $18.45. The shares closed at $16.99 on Thursday.
Wheaton Precious Metals
Shares of this precious metals company make good sense for more conservative accounts looking for exposure to the sector. Wheaton Precious Metals Corp. (NYSE: WPM) is a Canadian-based precious metals streaming company with approximately 60% of its revenues from the sale of silver and 40% from gold.
Under long-term contracts, the company purchases silver and gold from a variety of mines, including Goldcorp’s Penasquito mine in Mexico, Vale’s Salobo mine in Brazil, the Lundin Mining Zinkgruvan mine in Sweden and Glencore’s Antamina and Yauliyacu mines in Peru, then it sells the silver and gold into the open market.
Last December, Wheaton Precious Metals announced that it had reached a favorable settlement with the Canada Revenue Agency with respect to the 2005 to 2010 tax years. The company now anticipates that there will be no additional cash taxes for those taxation years for its international subsidiary. This tax case had depressed the valuation, and its resolution should help the shares continue to move higher.
Shareholders here receive a 1.35% dividend. The $29 Deutsche Bank price objective compares with the $31.80 consensus target price, and the stock closed Thursday at $26.66 per share.
Proper asset allocation should always include at least a single-digit percentage holding of precious metals like gold and silver. Not only do they hedge inflation over the long term, but they can really help if the market does go into correction or bear market mode, as they tend to trade inverse to the markets.