Make Money in Beaten-Down Silver Stocks the Easy Way
Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect the silver industry to prosper over time, the Global X Silver Miners ETF (NYS: SIL) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in a lot of them simultaneously.
ETFs often sport lower expense ratios than their mutual fund cousins. The silver ETF's expense ratio -- its annual fee -- is 0.65%. That's a bit higher than the typical ETF, but far lower than the typical stock mutual fund. Note that the fund is relatively small, so if you're thinking of buying, beware of occasionally large spreads between its bid and ask prices. Consider using a limit order if you want to buy in.
This ETF is too young to have enough of a track record to assess. Even so, as with most investments, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.
What's in it?
Most major silver companies posted poor performances over the past year, but they could see their fortunes change in the coming years.
Silver Wheaton (NYS: SLW) , down 28%, is an interesting beast -- not simply mining silver like other companies, but instead buying discounted silver from miners and selling it at a profit. It's been called "the most profitable company in the world," and sports gross margins above 80%.
Silvercorp Metals (NYS: SVW) , down 47%, is the largest silver producer in China and has the lowest production costs among its peers. There are other reasons to like the company, but it has also had a cloud of uncertainty over it, fighting some allegations it denies.
Hecla Mining (NYS: HL) dropped 52%, partly because it had to temporarily close a major mine due to safety concerns. Still, it has lots of proven and probable reserves, enough to provide profits for years, and its stock has been beaten down to attractive levels.
McEwen Mining (NYS: MUX) , down 60%, is a relatively small company, but its CEO is respected due to his impressive tenure at Goldcorp. The hope is that McEwen can build another Goldcorp, but the prices of silver and gold in coming years will have a lot to do with that.
The big picture
Demand for silver isn't going away anytime soon. A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.
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At the time this article was published LongtimeFool contributorSelena Maranjian,whom you canfollow on Twitter, holds no position in any company mentioned.Click hereto see her holdings and a short bio. The Motley Fool has adisclosure policy.We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.