By SD Contributor SRSrocco:
While it is true that the gold & silver miners have underperformed the bullion… I believe we are going to see a different story in these stocks in the next several years. Right now, you can’t give the da*n things away. Of course, it’s not as bad as the end of 2008… early 2009, but the sentiment is pretty bad.
I believe the gold and silver miners have been hammered… yes. I disagree with many of those on KWN that the stocks are way UNDERVALUED… they AIN’T
I wanted to show why I believe certain of the SILVER MINERS are holding up rather well. First, lets take a look at a comparison of several of the silver miners to the SLV:
You will see that First Majestic has done the best out of all the primary silver miners. Second place goes to Endeavour, followed by Couer and then Fortuna. Only First Majestic and Endeavour actually did better than the SLV in the past 2 years… however, Couer and Fortuna at least kept almost even with the SLV.
So, why are these miners doing better than the others. The bottom three are Hecla, Pan American Silver and Silver Corp. If we take a look at the last nine months of 2012 OPERATING EARNINGS RATIO…. we can see a very interesting comparison.
Three of the top four silver miners according to their operating earnings to revenue ratio, were in the top four in the chart above. First Majestic was number one, Endeavour was number two, and Fortuna was number four…. as in standings in the chart above.
We can clearly see that their operating earnings to revenue ranking put them in order in how they have performed in their stock price. Of course, this is not an exact science…. but it does help understand why some of these silver miners are doing better than the others.
Investors want stocks that are going to show good earnings as well as increased reserves and production. Even though Pan American had decent operating earnings, its annual production has declined since 2009. On the other hand, Couer has actually increased its production from 16+ million ounces in 2009 to 19-20 million ounces in 2012.
SilverCorp is another matter. They actually have excellent operating earnings ratios, but this ongoing problem with the NEGATIVE PRESS has killed their stock price. I have not looked too deeply into SilverCorp, but sometimes it is very difficult for whatever reason to break away from BAD PRESS.