It will turn around when the last person who is frustrated
like you is finished taking profits and selling. Stocks are
forward looking and for the past year, many silver stocks
outperformed the price of silver big time. Although we
expect profitable, producing silver stocks with strong
balance sheets to continue outperforming silver over the
long-term, you won't always see silver stocks outperform the
price of silver on a continuous basis.
At this time, we believe most silver stocks are extremely
undervalued compared to the price of silver. Although silver
miners are seeing their costs rise with oil prices soaring,
their costs aren't rising by nearly as much as the price of
silver. The largest cost for silver miners is labor and very
few silver miners are giving raises to their employees.
The profitability of silver miners will explode in the
upcoming quarters. If the price of silver stays in the
mid-$40s, some silver miners will be earning a record
breaking $40 profit per ounce of silver produced. In our
opinion, there is pent up demand for silver stocks and
unless there is a major short-term correction in the price
of silver, we are about to see a major short-term rally in
silver stocks by somewhere between 15% and 30%.
Another reason why silver stocks aren't reaching new highs
is because we have been seeing nearly all silver miners
raise money in large private placements. Silver mining
companies are taking advantage of rising silver prices to
issue new stock to the public so that they can increase
their cash reserves in order to either expand their mills
and production capacities, or possibly make acquisitions.
Although in the short-term this is creating some dilution in
silver stocks and holding their share prices down, we will
likely begin seeing some acquisitions in the industry
announced in the near-future, and that will be a catalyst
that will drive many silver miners to new all time highs.
