Wheaton Precious Metals (WPM.TO)

The highest quality silver stock in the world. The risk is the greed and larceny of the Canadian government. His suspicion is that they will succeed in shaking the company down, but thinks that is built into the stock. When the shakedown materializes, he suspects there will be some near-term disappointment.

Still has this in his portfolio, but is one that he is looking at possibly redeeming now in order to buy more companies. His company has this as a sector outperform. This is not a producer, but is more on execution and as a finance company. His company has this with a US $20 target.

A royalty and streamer on the silver side. It trades at a discount and there is a temptation to own it. He got out because of a potential CRA judgement that could be worth a $Billion. You don’t want that potential liability hanging over your neck.

This is attractive from a pure price point of view, but they are involved in a tax dispute with the Canadian government. This will hang over the stock until there is some sort of political settlement. He believes the litigation is already priced in the stock.

Made money on this the 1^st time, and then went back in for a 2^nd trade which gave him a negative transit, so he sold it. Has a model price of $25.79. It’s these precious metals and material stocks where the next 300%-400% are coming. They are hard to hold in this market, but he would be watching them carefully.

You want gold to hold $1090 for another month and that would be a good omen for the whole precious metal sector. It was a tremendous rebound bull ’09-’11. It is now outperforming most of the sector.

Ran into some problems with Revenue Canada and got hit with a big tax bill, which hit the stock. This is a silver royalty company, and whatever the price of silver does, this is what this company eventually does. Normally silver prices bottom around this time of year and then go higher into around the beginning of October. It then tends to take a bit of a break and then goes higher again from around the middle of December through to the end of February. Currently the stock is in a downward trend, underperforming the market, below its 20 day moving average and momentum indicators are negative. Usually around the end of July is when you look for an opportunity. (See Top Picks.)

Recently reached an agreement with the government on taxation, which has had an impact. They own royalties for silver production, and whatever the price of silver does tells what the stock is going to do going forward. This, along with other silver stocks, is finally trying to form a bottom. There are no indications of this yet, but he is expecting it in the next 3-4 weeks.

Not a good entry point for 2 reasons. They just received a letter this morning from the CRA, potentially challenging their tax structure. If the CRA wins, it could be as much as a 20% hit to their NAV. Mexico might not be far behind. Stock has been trending down along with the price of silver. All of the royalty stream companies tend to trade at very high valuations, and this one is at 20X EBITDA and 30X earnings. Missed a little on their last earnings. Very low ROE’s. It’s a long ways down before value buyers step in.

Silver and Gold bottom July 9^th, seasonally. SLW-T is connected to what is happening with Silver. You see signs of it basing out. Watch the technicals for Silver as well as this stock. If short term momentum indicators start to go up then consider stepping in.

1 in 4 times the numbers do not work for this seasonal play. When you get into a narrow trading range you would look for a volatility explosion.

He likes the royalty model. So much of the silver demand is in the South Asian retail, so demand is based on those economies. Most of the supply comes as a byproduct from base metal mines, so supply is dependent on mining activity in unrelated metals. It is very difficult to discuss silver market fundamentals.

Silver can start forming a bottoming pattern between November and December, and then it really takes off in January and February. Silver has actually shown a bit of bottoming pattern in the past few weeks, and this stock has really shown strength ever since the beginning of November. This looks great and should benefit from the rise in silver over the next few months.

Silver is not an area that he has invested heavily in, but tends to be more on the gold side. This is one of the few exceptions, but doesn't currently own it. Finds the drivers for silver seem to be dissipating.

Silver is weak and he expects gold to go down. Silver tends to be more volatile. This will go lower.