Your editor: Armed and not very dangerous
- .357 magnum
- Silver in the mail
- An ETF that isn’t completely horrible
It’s been really hot in Vermont this week. It scratched into the 90s yesterday, and it looks like it’ll do it again today. I usually try to get outside for some exercise, either some bike riding, tennis or golf, but at this point I’m just not acclimated to summer weather.
You might remember just a couple weeks ago when I talked about the snow we were getting. There’s a saying in Vermont that goes something like, “if you don’t like the weather, wait 10 minutes.”
So yesterday I took it easy and just decided to shoot some empty beer cans with my Ruger .357 magnum single action revolver. While not as strenuous as a few sets of tennis or a 10 mile bike ride, throwing some lead down range is at least as therapeutic, even if I only managed to hit two of the four cans with a full box of ammo at 50 yards.
In the meantime, some of you sent in some great commentary about silver stocks for me to peruse. And, not surprisingly, many of you hit the nail on the head.
George C. wrote in asking about Silver Wheaton (NYSE: SLW).
George writes,
“You asked for any questions about silver investments; so, here's one: What is your opinion of Silver Wheaton (SLW)?”
Thanks for writing in George.
SLW comes up frequently in discussions about silver stocks. That’s mostly because it’s the biggest company that focuses entirely on silver, and it's done a good job of multiplying gains made in silver's price over the long run.
The stock sold off massively at the end of 2009, but it bounced back immediately, and over the long haul, it’s magnified gains made in silver’s price by three-fold. That’s what you should expect from a good precious metal stock.
The downside is that like many precious metal stocks, it's richly valued. It's not as richly valued as a similar company in the gold industry - Royal Gold (Nasdaq: RGLD), and it's not extremely overvalued with regard to industry peers (of which there are few) - but it's richly valued in comparison to what I would call a typically "safe" investment.
Charles S. also wrote in with some good tickers for silver investors:
“Here are my three recommended silver stocks:
SLW – one of the largest silver miners with a significant anticipated productivity increase for 2010. Expect this to hit $25 before year end
SVM – Lowest cost producer of silver. Currently at around $7 but will go to above the recent high of $9 in the next 3-6 months
CDE – With their Kensington mine ramping up production by mid-2010, silver production will reach record highs. Expect this to reach $22-23 in 3-6 months
A good silver ETF I like is AGQ which tracks silver price movement X 2 hence you get double the benefit of iShares when silver moves up. Expect this to be in the $70-75 range when silver makes the next good run which based on my estimates should be between 3-6months from now.”
Thanks Charles – you’ve definitely got your bases covered. I haven’t done too much analysis on Silvercorp Metals (NYSE: SVM) or Coeur D’Alene Mines Corp. (NYSE: CDE) – but these look like some good starting points.
I am intrigued by this Proshares Ulra Silver ETF (NYSE: AGQ) for the very reason that it seems to be designed to actually make money. I’ve talked frequently and at length about how I despise most ETFs because they seem designed to lose money, or at the very least, to do nothing but generate “small” fees for their managers.
But I’m concerned that this ETF, just like many others, has been unable to “live-up” to its proposed goals of doubling the performance of spot price increases in silver.
I have to express this concern because when this ETF was launched, it sold for $22.74 a unit. At the time, silver sold for about $9.50 an ounce.
Since then, silver has nearly doubled to $18.40 an ounce, but AGQ now sells for $58.91, or only a 159% gain. That’s great, but it’s not living up to what it’s supposed to do. It’s not terribly far off from the 186% gain that it would need to be on target, but it’s disappointing nevertheless.
At the end of the day it’s certainly better than most other ETFs I’ve seen, and it’s definitely better than the Ishares Silver Trust ETF (NYSE: SLV) that barely keeps pace with silver. So, if you’re looking for upside in the price of silver, you could do a lot worse. I would caution everyone to remember that these leveraged ETFs, and leveraged investments in general, can fall at least as quickly as they rise.
This ETF kicks the crap out of my least favorite – the United States Natural Gas Fund (NYSE: UNG).
Of course, I advise everyone to do their own research when it comes to any investment. But to get the ball rolling, I’m excited to announce that I will be sending my full report about UNG, to all Resource Prospector subscribers tomorrow morning, free of charge. If you want to find out why this dog has done nothing but lose money, look for my report in your inbox tomorrow.
Good investing,
Kevin McElroy
Editor
Resource Prospector
