Silver Bull Market And 54 Silver Mining Stocks

January 29, 2021

silver coins

  • A list of 54 silver mining stocks that I find attractive.
  • An overview of the silver bull market and what could unfold.
  • Some strategies on how to play this silver bull market.

List of Silver Mining Stocks





It is my opinion that the silver bull market that began in July 2020, when silver broke out of its 6-year channel and closed above $18.50, is getting ready to go on an historic run. The stocks above are poised to take advantage of this situation.

I want to share this list with you so that you are aware of all of the players. Plus, if I happen to miss a stock or two, I’m sure they will appear in the comments below. I will comment on any that I missed and why they were not included.

This list is intended for investors who already own a few silver miners and are looking for a few more. I have pre-screened these, and now you can go and have a look. Consider it an excellent list of leads.

Overview of the Silver Bull Market

Before I tell you some strategies on how to play this silver bull market, let’s take a look at the historical situation. Silver is currently 50% below its all-time high. It reached $49 in 1980 and 2011. On both of those occasions, they were blowoff highs that did not last very long. In fact, they were both similar events. They both ran from $20 to $49 and then crashed back down. Silver has never spent very much time above $35.

I think silver is getting ready to make another run at $50. If I am right, then the silver miners are going to do exceptionally well. Not only do I think we are close to making a run at $50, but this time, I expect $50 to become the new low. Instead of crashing back down, like we experienced last time, I think we will trend higher.

I think the above-ground inventory of silver bullion bars is limited. Once we get above $30, the retail crowd is going to jump into physical silver in a big way. I don’t think there is going to be enough inventory. In fact, I expect a shortage to arise sometime between $40 and $50 silver, and it will be this shortage that pushes silver above $50.

Once the shortage arises, it will take some time to alleviate. Somewhere between 70% to 75% of silver supply is needed by fabrication businesses. A large portion of this is used in manufacturing, such as electronics and vehicles. Those industries will be forced to hoard silver, pushing the price higher.

Investors are only going to get more aggressive as the silver price goes higher. There will be a struggle between investors and fabricators for supply. I don’t know when or how this will unfold. I only know that I expect it to happen.

What is likely to happen is that initially there will be tight supplies which drive up prices, and not technically a shortage. However, over time, as investors become more aggressive, I expect the term shortage to be used more and more to explain global silver inventories of bullion bars.

If I am right about the silver inventory situation, then silver prices are going much higher. The run from $30 to $50 will be epic for the miners, but it could only just be beginning. We could easily run to $100 and beyond during this bull market. My target is $150, and that is actually low for many analysts.

You may think that $100 or $150 is crazy talk, but it clearly isn’t if we have shortages and physical silver cannot be found. Once investors begin to soak up a larger percentage of supply, it is only a matter of time before shortages arise. The only question is, when do investors begin to get aggressive? Any billionaire on the planet could be the next Hunt brother (the Hunt brothers cornered the silver market in 1979-80). All they have to do is start buying physical. It’s simply a matter of supply and demand, and there isn’t enough silver.

Even if you dismiss the silver shortage theory, you can’t deny the GSR (gold-silver ratio), and the potential for higher gold prices. If gold reaches $3,000 and the GSR is 40, then silver will reach $75. That seems likely to me. Then, if gold reaches $4,500 and the GSR is 30, silver will reach $150. Perhaps gold will not get that high, but I expect to see it above $3,000.

Strategies for Investing in Silver Miners

My strategy of choice is to buy nearly all of the silver miners. I own 41 of the 54 stocks on the list. I want nearly total exposure. My cost basis is low for nearly all of them. My average cost basis is less than 1% per stock. I tend to keep my cost basis down for individual stocks.

You may think 1% is low. But it can go a long way when a stock breaks out, especially if you get a good entry price. I only invest 2% for high-quality producers, and only 3% on rare occasions. I’m not comfortable investing 3% of my cost basis on an individual stock (excluding ETFs and mutual funds). I feel like I am taking too much risk, because after all, these are mining stocks. This is perhaps the highest risk sector you can invest in as a speculator.

Strategy number two is to focus on producers. I actually do this, allocating 60% of my overall portfolio cost basis on silver and gold producers. So, if you focus on silver producers that is a good strategy. These are the stocks with the best risk-reward. They will benefit immediately as silver prices rise, because their costs will remain somewhat steady, and their revenue will increase. Thus, their free cash flow will increase.

The thing about the mining business is that it is cash-intensive. It takes money to mine silver, develop mines, and find more silver. This tends to put pressure on balance sheets. When free cash flow increases, balance sheets improve, and with that comes higher valuations. For this reason, owning producers during a bull market is a very smart thing to do.

Strategy number three is to include some of the exploration stocks. There are a lot of good drill stories out there. The silver that they already have in the ground, plus the additional ounces they can find, create big upside opportunities. Some of these are optionality plays, and others are pure exploration plays. What makes them exciting is that there simply are not very many of them. Any company that finds a large silver mine is going to be extremely valuable at higher silver prices.

Strategy number four is the development plays. These are not as exciting unless they are also a good drill story, where they can add ounces while they develop their project. Development plays can be frustrating because it takes a long time and a lot of money (share dilution) to develop a mine. These are usually long term plays that require a lot of patience. Plus, they are always risky because they can get taken out by a larger company that gets the spoils, instead of you.

Conclusion

While silver seems well-positioned to make another run at an ATH, timing is everything. The ideal entry price is probably $30, with a stop-loss at $26, if you want to be conservative. Perhaps even waiting a couple of weeks after we close above $30 would be prudent. If you do that, you will reduce the likelihood of catching a falling knife. Of course, no one can predict the future, and the metals can be highly volatile.

It’s tempting just to load up and wait for the breakout, but that strategy has a lot of risk. If you are going to invest in silver miners, make sure you understand that you could easily lose money. When you are looking at huge returns, you are also vulnerable to huge losses. If silver drops below $18, many of these stocks will crash more than 50%.

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Don Durrett

Don is an expert gold and silver mining stock analyst, author, and founder/owner of GoldStockData.com – a website for gold and silver mining stock data. He is the author of How to Invest in Gold and Silver: A Complete Guide with a Focus on Mining Stocks. He is a contributing analyst on SeekingAlpha.com and a frequent guest on internet financial podcasts. 

1 cubic foot of silver weighs approx 655 pounds whereas 1 cubic foot of gold weighs more than half a ton.

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