Silver Wheaton (SLW) Climbs as Spot Silver Bounces (SLV)
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Silver Wheaton Corp. (NYSE: SLW) moved higher by 1.10 percent in pre-market trading as the price of silver recovered from a decline in the spot price yesterday. iShares Silver Trust (NYSE: SLV) is higher by 0.80 early on Friday.
Silver Wheaton is the largest silver streaming company in the world and its stock price is correlated to the price of silver. In the past 90 days, shares of Silver Wheaton have decline by 17.46 percent. This compares to a 13.75 percent decline in iShares Silver Trust (NYSE: SLV).
The spot price of silver trades at $27.40 and is hovering just above very strong support at $26 per ounce. Technical analysts say other highly correlated precious metals, such as gold, trade near similar support levels, and this is giving bulls reason to hold onto hope despite a strong downward trend and negative returns.
If silver does manage to rally off these levels, Silver Wheaton might be a good way for silver traders to play the rally. Analysts are expecting SLW to earn $1.70 in 2012 and $2.14 in 2013. If SLV rallies, these estimates could jump.
Investing in SLW is not without its risks. While no one is predicting cash flow problems at SLW, traders should be cautious. A bar of silver can never go bankrupt, companies can. Silver streaming companies like Silver Wheaton have earnings and pay dividends, and to many this outweighs the relative risks of commodity related equities.
In June, RBC capital initiated coverage on Silver Wheaton with an Outperform rating and a price target of $43.
This week an analyst at Morgan Stanley said "a floor may be in sight" for industrial-exposed metals such as base metals, silver and platinum. The analyst is essentially picking a bottom in metals prices, and it is a risky call considering the downward trend, but it might pay off. If correct, it could also pay off for Silver Wheaton.
Silver Wheaton is the largest silver streaming company in the world and its stock price is correlated to the price of silver. In the past 90 days, shares of Silver Wheaton have decline by 17.46 percent. This compares to a 13.75 percent decline in iShares Silver Trust (NYSE: SLV).
The spot price of silver trades at $27.40 and is hovering just above very strong support at $26 per ounce. Technical analysts say other highly correlated precious metals, such as gold, trade near similar support levels, and this is giving bulls reason to hold onto hope despite a strong downward trend and negative returns.
If silver does manage to rally off these levels, Silver Wheaton might be a good way for silver traders to play the rally. Analysts are expecting SLW to earn $1.70 in 2012 and $2.14 in 2013. If SLV rallies, these estimates could jump.
Investing in SLW is not without its risks. While no one is predicting cash flow problems at SLW, traders should be cautious. A bar of silver can never go bankrupt, companies can. Silver streaming companies like Silver Wheaton have earnings and pay dividends, and to many this outweighs the relative risks of commodity related equities.
In June, RBC capital initiated coverage on Silver Wheaton with an Outperform rating and a price target of $43.
This week an analyst at Morgan Stanley said "a floor may be in sight" for industrial-exposed metals such as base metals, silver and platinum. The analyst is essentially picking a bottom in metals prices, and it is a risky call considering the downward trend, but it might pay off. If correct, it could also pay off for Silver Wheaton.
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