He was looking for a simple silver oriented stock that was outperforming the market, and this one fit the pattern. Seasonally, the strong period is normally from around mid-December right through until around the end of March. This year it looks like we are into the group once again. Technically, the chart shows the stock is bottoming out and starting to move higher. It is starting to outperform the market as well as the gold and precious metals sector. If it gets above $26-$27, that will confirm the seasonal factors are coming into play. (Analysts’ price target is $26.33.)

A royalty company which, up until recently, focused only on silver. They are now moving into gold and will be changing their name to Wheaton Special Metals. There are a couple of things to be wary on. They have an outstanding CRA court case that could be quite big for them, but is something that would be dragging on for the next 5 years. However, the environment for royalties and for these companies to get things done, is still very robust. He loves the space, but would be a little bit wary of this company.

He is pretty fond of the royalty space in general, particularly precious metals. (He owns Franco Nevada (FNV-T).) He is constructive on precious metals, and views it as an inflation hedge. This is not an unreasonable name.

He was a founding shareholder.  It is the highest quality of the silver equities.  The government is trying to shake them down in a tax dispute, but he thinks the case is unfounded.  A settlement will be viewed unfavourably by shareholders, but he thinks it is baked into the price and will not be significant.

He does not trade these stocks because they are volatile and don’t have traditional earnings.  He thinks of them as defensives.  They peaked in the summer.  He would argue that they are tied to the path of interest rates in the future.  You don’t need to own gold as much right now.  They don’t have operating risk so have high PE.  It is not attractive to him. 

Both gold and silver have been under performers since the election. Higher interest rates would be perceived as a negative, because there is a bigger cost to holding on to precious metals as an alternative currency. In theory, the market is sending you a big signal that there is no short-term disaster in the economy. Those things are the negatives. There could be a further bounce if there was a 2%-3% pullback in stocks. This is one of the streamers in silver, and would be one of the ones to own. It does have a tax overhang still, which is getting close to being resolved, probably this year. If they win, he would argue that the stock will bump.

There is a broad number of precious metals companies that have recently seen their weekly momentum flip from negative to positive. This one is sitting right on the 150-week moving average, which is sort of attractive. It may be a candidate for a year end bounce after tax loss selling. He would prefer to wait and see it start playing out.