I have a video for you, today. A video interview with a miner that is so undervalued by the market, it’s like finding a diamond in the dust bin. Only this is a silver miner. And I’ve put my money where my mouth is: I own it.
We’ll get to that in a minute. First, why can you buy this miner so darned cheap?
I’ll tell you why. Because silver has been beaten flat with a mining shovel. Sentiment is so bad, hedge funds are now the most bearish they’ve ever been on silver. Ever!
Here’s a chart from Bloomberg to illustrate what I mean.
In the most recent tally, money managers extended their net-short position in silver to 16,593 futures and options contracts.
That’s the most since record-keeping began in 2006.
I believe those hedge fund managers are making a historic mistake. And they’re about to get silver-speckled egg all over their faces, when this short-silver trade blows up on them.
Not Just Another Pretty Face
I can get why they are wondering when silver is going to go up again. After gaining 6% last year, silver is down 4% this year. That’s hardly a performance worthy of the kind of loathing we see in that chart. At the same time, silver coin sales fell through the market. Talk about giving up at the wrong time!
Indeed, I believe there is a lot to like about the metal …
We can start with the fact that mine production of silver probably peaked in 2015, at 850 million ounces. In 2016, production fell to 800 million ounces. The numbers for 2017 aren’t in yet. But a bunch of miners reported declining production.
At the same time, industrial demand for silver looks poised to rise, after falling in 2016. That’s important, because industrial use has grown from 50% of silver demand in 2013 to 60% more recently.
Solar demand for silver is leading the way. There’s a little silver in every solar panel. Why? Because silver makes for excellent electronic connections. It’s expected that 109 million ounces will be used in solar panels this year. That’s up from 92 million ounces last year and 88 million ounces in 2013. That’s compound annual growth of 4.5%.
And then there is the growing silver demand from the automobile industry. More than 36 million ounces of silver are used annually in cars, according to the Silver Institute. That’s because every electrical action in a modern car is activated with silver-coated contacts. And the more electric cars take over the road, the more silver will be needed to add the zoom-zoom to their vroom-vroom.
The wild card is always ETF demand. Physical ETFs add their own kind of “zoom-zoom” on the way up … as well as selling pressure on the way down.
But silver is so cheap, it’s hard to think it can go anywhere but up.
You know who agrees with me? Keith Neumeyer. He’s the president, CEO and founder of First Majestic Silver (NYSE: AG).
In the following video, Keith lays out a case for why his company has been fundamentally mispriced by the market. And why silver is on the launchpad.
Some of you might think Keith is talking his book. My view is no one has a better view of the silver mining industry, as well as keen insight on the silver market and its price potential.
And yeah, I think First Majestic’s share price is on the launch pad. Let’s look at the chart …
First Majestic has trended lower since January. But you can also see the stock has put in a double-bottom. It looks primed to blast higher. It just needs a higher silver price.
I’ve put my money where my mouth is, and I own this one. I may buy more. This is a company with multiple mines, excellent prospects and management that repeatedly shows it knows how to squeeze the most “oomph” out of every ounce of rock.
What First Majestic needs is for the price of silver to head higher. I don’t have a crystal ball; I don’t know when that will happen. But mine supply is falling …. While industrial demand is rising. That sure looks like a supply/demand squeeze in the making.
When the silver squeeze happens, be sure you make the most of it. Buy those diamonds in the dust bin now. They’ll make your portfolio shine later.
All the best,