Buying Silver Stocks? Read This Expert Advice First

At the inaugural SilverFest, run by Arcadia Economics, experts David Morgan, Peter Spina and Chris Marchese weighed in on how to pick silver stocks.

The silver price has enjoyed incredible momentum this year, rising from a low of around US$12 per ounce in March to a high of nearly US$30 during the summer.

Experts are optimistic about silver’s prospects moving forward as well, and investors are unsurprisingly eager to get exposure before the volatile white metal takes off again.

Stocks are a popular option, and at this year’s inaugural SilverFest, held online from September 11 to 13, a panel of experts discussed what to know about silver stocks before entering the market.

Led by Chris Marcus, founder of Arcadia Economics and host of the conference, the panel included David Morgan of the Morgan Report, along with Chris Marchese and Peter Spina of GoldSeek and SilverSeek. Read on to learn what advice they shared for silver investors in today’s exciting circumstances.

Build connections, focus on people

To kick off the discussion, Marcus asked the participants what they recommend when evaluating silver stocks. Morgan was the first to respond, and said that especially when it comes to juniors he’s benefited significantly from being in the industry for a long time and knowing the right people.

“I get information that other people just don’t get,” Morgan said. “How do you do it? You just stick around long enough to make a lot of connections and network with a lot of people and you find out things usually ahead of time that other people don’t know.”

Illustrating his point, he said that once when he spoke at an event in Vancouver he talked about a company, but to the annoyance of one audience member didn’t share its ticker — “There wasn’t even a symbol on the stock yet!” Morgan explained.

For those who haven’t yet had time to build as many connections as Morgan, there’s still hope. In a similar vein, Marchese said that while assets are important, he recommends focusing on people first. “You should really do exhaustive research on the key executive positions,” he told listeners.

“You’re investing in people when you’re buying mining stocks, you really are.”

Get in before generalist hype sets in

Silver’s price rise this year has sparked many conversations about generalist investors, and the consensus seems to be that they’re now entering the market in greater numbers.

Morgan said during the panel that he believes Berkshire Hathaway’s (NYSE:BRK.A,NYSE:BRK.B) recent Barrick Gold (TSX:ABX,NYSE:GOLD) investment will spur even more interest in precious metals.

Warren Buffett, who runs Berkshire Hathaway, is a well-known gold skeptic, and Morgan thinks the move has given the average investor “tacit permission” to own gold stocks — and by extension silver stocks.

Marchese was less sure that Buffett was behind Berkshire’s Barrick purchase (some have suggested another person at the firm may have pulled the trigger), but he agreed that the current situation is a “perfect storm” for precious metals. Contributors to that perfect storm include out-of-control debt and deficit spending, plus the likelihood of more stimulus packages and quantitative easing.

“While there might be a correction (in mining stocks) in the very near term, you want to have some exposure and not try to catch the bottom,” Marchese cautioned the online audience. “Because the bottom won’t be much further down — if there even is one.”

Spina concurred that there’s a big opportunity in mining stocks right now — in his opinion, the sector has started to come off its bottom over the last year and a half or so, and is now attracting outsider eyes.

“It’s a totally different game now. Wall Street’s going to notice very quickly,” he said, noting that mainstream investors are going to pay attention as silver miners’ quarterly earnings reports come out. In his opinion, silver companies’ share prices have been lagging behind the silver price, and that situation will soon begin to correct.

“All of a sudden the risks on these companies have been shifting. The companies have been lagging … it’s as if we’re still trading at US$20, not US$25 or US$30. It’s a whole different situation now,” Spina said.

Don’t be weighed down by the past

While precious metals newcomers may be feeling positive about the sector, the same can’t be said for some long-term investors — many are instead feeling cautious about this year’s rapid gold and silver price increases after being burned previously.

“There are probably a lot of people that think this is the top in gold and silver,” said Marchese. “After 2011, many people are very hesitant to enter the market — so you know, it’s kind of a waiting game.”

He agreed with Spina that silver stocks are currently trading with an implied metal price of US$20 to US$21, and said for gold stocks it’s as though the price is around US$1,650 or US$1,700 per ounce.

Adding his thoughts on seasoned precious metals investors, Spina noted that many have lost faith.

“Like Chris (Marchese) was saying, in 2011 and then in 2016 we had this run up and then the rally collapsed, and there was a lot of disappointment and … depression in the sector,” he commented. “It’s a lot easier to be a new investor in the silver-mining stocks right now than it is to have been through the last 10 years because you’ve just become so skittish.”

In his view, silver’s tendency to rise rapidly when it starts to move is a reason to be in the market now. “We saw this when silver broke through US$19, US$20, US$21 — it happened very quickly, and you’re either in the market or you’re just going to watch it just take off,” Spina said.

“The rule now is you buy the dips. There’s going to be some volatility — you can try to trade it, but it’s going to be very difficult, so it’s better to have a long-term focus. Focus on the fundamentals and don’t sell your winners right away … let the winners run, stick with the leaders in the sector.”