Best Silver Stocks To Watch In October 2014

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One of the hallmarks of improved investor sentiment is when folks are willing to pay ever greater premiums for equities in expectation of future profit growth. And since the market started rallying from its early March lows, it's clear that sentiment seems to be improving, at least in certain corners of the market.

One indicator of improved sentiment is the rise in forward price-to-earnings multiples. Forward P/E is derived by dividing a company's share price by analysts' average estimate for future earnings per share; for the 500 stocks in the Standard & Poor's 500 Index ($INX), this ratio has risen to 16 from 13 in March, according to The Wall Street Journal Market Data Group.

Such growth is a clear indication that investors are starting to shake off the shock of last year's meltdown and have regained some appetite for risk, says Hank Smith, the chief investment officer of equity at Haverford Investments in Haverford, Pa.

 

As risk appetite grows, Smith says, many bigger, "safer" shares have been left in the dust; that's keeping a lid on the Dow Jones Industrial Average ($INDU). The forward P/E on this bastion of the bluest of blue-chip stocks is less than 14, down from nearly 18 in March, according to Dow Jones Indexes. In other words, as the broader market has gotten more expensive, the Dow has become cheaper.

Such low valuations could lead one to believe that the Dow is just chock-full of blue-chip bargains. In some cases, that's true. But sometimes cheap stocks are a steal, and sometimes they're cheap for a reason.

Here is a look at the Dow's cheapest stocks, as measured by forward P/E, including an assessment as to whether these inexpensive bets are likely to become investor darlings or dogs in the next 12 to 18 months.

Best Silver Stocks To Watch In October 2014:First Majestic Silver Corp. (AG)

 First Majestic Silver Corp. engages in the production, development, exploration, and acquisition of mineral properties with a focus on silver in Mexico. The company owns interests in La Encantada Silver Mine comprising 4,076 hectares of mining rights and 1,343 hectares of surface land located in Coahuila; La Parrilla Silver Mine consisting of mining concessions covering an area of 69,867 hectares; and San Martin Silver Mine comprising approximately 7,841 hectares of mineral rights and approximately 1,300 hectares of surface land rights located in Jalisco. It also holds interests in Del Toro Silver Mine consisting of 393 contiguous hectares of mining claims and an additional 129 hectares of surface rights located in Zacatecas; Real de Catorce Silver Project comprising 22 mining concessions covering 6,327 hectares located in San Luis Potosi state; and Jalisco Group of Properties consisting of mining claims totalling 5,240 hectares located in Jalisco. The company was founded in 1979 and is headquartered in Vancouver, Canada.

Advisors' Opinion:

• By Sy_Harding At 2011-10-30

  First Majestic Silver is one of the purest silver plays on the market. The company owns and operates three primary silver mines in Mexico: La Parrilla, San Martin, and La Encantada.

  Shares of AG have risen more than 60% for the year.

  First Majestic generates 85% of its revenue through the production and sale of silver. The rest of the company's revenue is generated through gold, lead, and zinc.

  First Majestic expects to increase total silver output from its operations to 7.5 million ounces of silver in 2011, and up to 16.0 million ounces by 2014.

• By Goodwin At 2011-9-26

  The shares closed at $88.19, down $1.1, or 1.23%, on the day. Its market capitalization is $77.08 billion. About the company: Siemens AG manufactures a wide range of industrial and consumer products. The Company builds locomotives, traffic control systems, automotive electronics, and engineers electrical power plants. Siemens also provides public and private communications networks, computers, building control systems, medical equipment, and electrical components. The Company operates worldwide.

Best Silver Stocks To Watch In October 2014:Endeavour Silver Corporation (EXK)

 Endeavour Silver Corp., a mid-cap silver mining company, focuses on the growth of its silver production, reserves, and resources in Mexico and Chile. It principally holds interests in two producing silver mines in Mexico, including the Guanacevi mine, located in Durango State; and the Guanajuato mine located in Guanajuato State. Endeavour Silver Corp. was formerly known as Endeavour Gold Corp. and changed its name on September 14, 2004. The company was founded in 1981 and is headquartered in Vancouver, Canada.

Advisors' Opinion:

• By Christopher Barker At 2012-2-22

  Fools who endeavored to participate in this tremendous growth story following my August 2010 interview with CEO Bradford Cooke have seen Endeavour's share price promptly quadruple to reach a 2011 peak of $13.10. My recent tour of Endeavour's expanding Guanajuato mine complex confirmed for me just how well-deserved that glistening performance has been. And now that a substantial retracement in the sector has driven Endeavour back into the $10 range, I see a timely opportunity for investors to embark on Endeavour's continuing journey of well-executed growth.

  With a major expansion of its plant capacity in Guanajuato (to 1,600 tpd) completed during 2011, Endeavour is beautifully positioned to capitalize on steady output expansion from the growing array of near-surface vein structures surrounding the plant. Recent confirmation of high-grade silver and gold mineralization within the vein structures of La Joya and Belen have the company touting "a substantial increase in reserves and resources at Guanajuato" for early 2012, and offer a near-term roadmap for matching production to the expanded plant capacity.

  I consider Endeavour's San Sebastian, Parral, and La Brisa exploration projects very promising elements of the company's project pipeline, but I urge Fools to pay particular attention to the recently acquired target for bulk-mineable silver and gold in Chile called Lomas Bayas. With a 10,000-meter drill program already under way, I expect successful assays from that project to provide additional stock catalysts during 2012. I consider Endeavour's management the best in the business, and I recommend the stock as a long-term silver holding without reservation.

Best Silver Stocks To Watch In October 2014:Silver Wheaton Cor Com Npv (SLW.TO)

 Silver Wheaton Corp., together with its subsidiaries, operates as a silver streaming company worldwide. The company has 14 long-term silver purchase agreements and 2 long-term precious metal purchase agreements whereby it acquires silver and gold production from the counterparties located in Mexico, the United States, Canada, Greece, Sweden, Peru, Chile, Argentina, and Portugal. Silver Wheaton Corp. is headquartered in Vancouver, Canada.

Advisors' Opinion:

• By Glenn At 2011-10-30

  Silver Wheaton is considered to be one of the most stable silver stocks due to its unique and stable business model.

  “They don't have the risks of excavating and not finding anything,” said Yu Dee Chang, Principal at ACE Investments. “Their costs are fixed. That's why their profit margin is also fixed. I like this as a more stable play.”

  Silver Wheaton's core approach lies in buying already-excavated ores from miners, then extracting silver from it. The company's portfolio includes silver streams from Goldcorp's Peñasquito mine in Mexico and Barrick's Pascua-Lama project spanning the border of Chile and Argentina.

  The company says it currently has 15 silver purchase agreements and two precious metals agreements where it has the right to purchase all or a portion of the silver production at a low fixed cost from high-quality mines located in politically stable regions. Silver Wheaton estimates that it will have exposure to 40 million silver equivalent ounces of annual production by 2013, from about 23.5 million silver equivalent ounces in 2010.

  David Christie of Scotia Capital has a sector outperform rating and one-year, $40 price target for the stock. “Silver Wheaton performed better than any other silver investment including the metal itself year-to-date,” he told investors in late 2010, noting that few silver stocks have outperformed the metal. Christie praises the company for being the best-leveraged and safest operational growth story of the precious metals companies he covers.

Best Silver Stocks To Watch In October 2014:Silver Standard Resources Inc (SSRI)

 Silver Standard Resources Inc. engages in the exploration, development, and production of mineral resource properties in Argentina, Australia, Canada, Chile, Mexico, Peru, and the United States. The company primarily explores for silver, gold, tin, zinc, lead, and copper deposits. Its principal projects include Pirquitas project located in the Province of Jujuy, Argentina; San Luis project in central Peru; Pitarrilla and San Agustin projects in Durango State, Mexico; and Diablillos project in Salta Province, Argentina. The company was formerly known as Consolidated Silver Standard Mines Limited and changed its name to Silver Standard Resources Inc. on April 9, 1990. Silver Standard Resources Inc. was founded in 1946 and is headquartered in Vancouver, Canada.

Advisors' Opinion:

• By ChemTrade At 2011-10-30

  Silver Standard (NASDAQ: SSRI) has the largest in-ground silver resource of any publicly-traded primary silver company, with a pipeline of 15 projects ranging from grassroots exploration to production in Argentina, Peru, Mexico, Canada, Chile, the United States, and Australia.

  Silver Standard expects to produce a total of 8.5 million ounces of silver in 2011.

• By Jim Lowell At 2011-10-30

  Silver Standard's transition to production from exploration has inevitably led to many challenges for the company; but its high-quality assets and new leadership are keeping the eyes of investors glued to the company.

  For the third quarter ended September, Silver Standard reported loss of 10 cents a share vs. loss of 6 cents that Wall Street was expecting, as the company experienced lower-than-expected silver production and higher-than-expected interest expense, cash costs and income tax. Adjusting for foreign-exchange loss and stock-based compensation, Silver Standard reported loss of 4 cents a share vs. loss of 2 cents that industry observers such as BMO was expecting. The impact of the loss on BMO's view of the stock was “slightly negative,” leading BMO analyst Andrew Kaip to maintain a market perform rating on the stock.

  “They're in the bridge period where they're moving from having been a very successful exploration company finding silver to now trying to ramp up the mines into production,” says TEAMX's Dailey; and with that comes with a natural set of challenges that can be political, environmental, weather-related and permitting related.

  Still, Dailey believes that as long as silver prices continue to cooperate; and given Silver Standard's high-quality assets, the stock's relative underperformance “could be laying the groundwork for outperformance as we go forward.” In his opinion, the company's logistical issues are short term.

  In August, Silver Standard brought in new CEO John Smith. A veteran of the mining industry, Smith had spent the last 18 years of his career with mining giant BHP Billiton.

Best Silver Stocks To Watch In October 2014:MineFinders Corp. Ltd. (MFN)

 Minefinders Corporation Ltd. engages in the exploration, development, and mining of precious and base metal properties. The company?s principal project includes the Dolores gold and silver mine, which consists of 7 claims in 3 concessions totaling an area of 27,700 hectares, located in the Madera Mining District in the state of Chihuahua, Mexico. It also has property interests in Sonora, Mexico; and in Nevada and Arizona, the United States. The company was formerly known as Twentieth Century Explorations Inc. and changed its name to Minefinders Corporation Ltd. in May 1979. Minefinders Corporation Ltd. was founded in 1975 and is headquartered in Vancouver, Canada.

Advisors' Opinion:

• By Paul At 2011-10-30

  As a pure play, small cap stock, Minefinders could greatly benefit from a jump in silver prices, yet fall just as easily.

  That said, MineFinders is more of speculative play.

  ACE Investments' Chang says if silver jumps, Minefinders, currently trading at about $10.80, could hit $13 to $15 almost instantly. “This one could go up like crazy,” he said.

  “By the same token, I think there is a risk that the stock could be at about $7 to $7.50. So before you know it, it could have 30 per cent downside risk.”

  For the third-quarter ended Sept. 30, Minefinders reported loss of 7 cents a share; above BMO's estimate of 9 cents loss a share, but below the consensus estimate of loss of 2 cents a share, as sales of gold and silver fell due to ongoing production problems. But the negative production impact was offset by lower-than-expected cash expenses.

  BMO analyst Andrew Kaip told clients that the company's weak production had a “slightly” negative impact on his view of the stock and maintained his market perform rating for Minefinders.

  Minefinders, precious metals mining and exploration company, currently operates the multi-million ounce Dolores gold and silver mine in northern Mexico. In late 2010, Minefinders received credit approval from The Bank of Nova Scotia for the renewal of its existing US$50-million revolving credit facility.

Best Silver Stocks To Watch In October 2014:Coeur d'Alene Mines Corporation (CDE)

 Coeur d'Alene Mines Corporation, together with its subsidiaries, engages in the ownership, operation, exploration, and development of silver and gold mining properties located primarily in South America, Mexico, the United States, and Australia. The company also explores for lead and zinc ores. Its properties include the Palmarejo mine located in the state of Chihuahua, northern Mexico; San Bartolome mine located near Potosi, Bolivia; Kensington mine located north-northwest of Juneau, Alaska; Rochester mine located in northwestern Nevada; Martha mine located in Santa Cruz, Argentina; and the Endeavor mine in New South Wales, Australia, as well as Joaquin, Tornado, and Satelite properties in Santa Cruz, Argentina. The company was founded in 1928 and is based in Coeur d?Alene, Idaho.

Advisors' Opinion:

• By Barker At 2011-10-30

  In a sector this scorching hot, I enjoy turning my focus to stocks that investors have loved to hate. Following a brush with outright failure that prompted a 1-for-10 reverse stock split last year, I believe Coeur d'Alene Mines offers one of the more pronounced turnaround opportunities in the space.

• By Lowell At 2011-10-30

  Coeur d'Alene Mines has the potential for a strong rally in light of rising silver prices.

  Over the last couple of years, Coeur d'Alene was a no show relative to the performance of its peers and silver. But the company started the perform in the second-half of last year, gaining more and more recognition for being one of the top producers in terms of silver output.

  “As people dig more and more into rising silver prices – who benefits from silver prices, and who's been left behind, and who would play the biggest catch-up rally, Coeur d'Alene would be one I think people could easily buy and feel more confident that they were getting something that had not already run up,” says Sorrentino of Huntington Funds.

  For the third quarter ended Sept. 30, excluding special items, the company had operating earnings of 2 cents a share, which was better than RBC's estimate for loss of 2 cents a share, but below the consensus estimate of earnings of 7 cents a share.

  In the longer-term, RBC Capital Markets analyst Michael Curran tell clients that he considers the company's balance sheet to be one of the weakest among its peers and predicts that it will have below-average production growth compared with its peers.

  However, Curran still raises Coeur d'Alene stock to “sector perform” from “underperform” given the company's improving operations. “We now believe more consistent operating results can be achieved by Coeur,” he said in a client note. “Adding in our view of increased investor interest in the silver equity space, CDE shares should better track the peer group of silver producers.”

• By David Sterman At 2011-9-23

  At the start of each year, investors fret that this may be the year that China finally cools. But that’s been a bad bet recently and I’m betting that this year’s China scare will also prove to be unwarranted, despite possible troubles in that country’s housing sector. The rest of the economy simply has too much momentum, which is why I agree with commodity bulls that China’s insatiable demand for all kinds of metals and minerals will keep this asset class on the rise in 2011.

  My favorite current commodities play is Couer D’Alene, an 80-year-old company that is ramping up production of gold, silver, zinc and iron ore. It’s been a “show-me” stock lately as it starts to boost output at some new mines. Shares have fallen 15% since last week, creating a compelling entry point. Although Couer D’Alene has decent exposure to gold, it’s first and foremost a play on silver. And demand for silver, especially in industrial applications, looks set to keep rising in 2011. Silver is an excellent electrical conductor, is used as a reflective material, as an anti-bacterial agent, a heat conduit (think rear-window defrost units in cars) and of course in jewelry.

  So why is Couer D’Alene, which is expected to mine more than 20 million ounces of silver by next year, seeing a slumping share price? Because press reports are circulating that silver is due for a bit of profit-taking. It surged to $31 an ounce in early January, has fallen back to $28, and some think it’s headed toward the $25 mark.

  But silver has plenty of bulls as well. Standard Bank’s Bruce Ikemizu told Bloomberg last month that he sees a move to $40 in 2011, citing new industrial applications for the eponymously-colored metal in 2011. Analysts at Deutsche Bank are even more bullish, predicting that silver will rise to $50 in 2011. If that happens, shares of Couer D’Alene would likely double from current levels as analysts sharply elevate their cash-flow forecasts for the company.

  Time will tell how the silver trade plays out. It looks like some see roughly 10% downside from current levels while others see 30% or even 60% upside. This means shares of Couer D’Alene will likely simply tread water in coming quarters (after slumping badly in recent sessions), or see its shares rise sharply. Potentially high-reward and moderate risk are an appealing recipe.

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