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Silver prices have recently fallen alongside almost everything else (except oil) these days. Indeed, silver is a great alternative asset to own to further diversify your portfolio. That said, it’s not without risk, as silver tends to be quite volatile in nature, especially when compared to gold.
While gold or cryptocurrencies may be more in the spotlight, I think there are good reasons to inject some silver exposure into your portfolio as well. Unlike gold, silver has practical applications (think electric vehicle components, solar panels, and jewelry) that can fuel long-term demand. And while silver prices may be more choppy, the precious metal’s recent nearly 22% plunge seems overdone, given that inflation is still hot when the economy could be at risk of a bad spell. fall.
The Case for Buying Falling Silver Stocks
Silver has been seen by some investors as an intriguing hedge against inflation. With rates on the rise, it’s hard to say when inflation will finally come down. Either way, major Canadian silver mining stocks could be worth revisiting for those looking to hedge their bets against what could be a tough year that could see things turn more stagflationary.
Although silver bars and ETFs are a less volatile way to play directly on the price of silver, I favor well-managed silver miners. Undoubtedly, miners tend to be more hectic, but if you can get in at the right price, there’s also a lot more money to be had.
Majestic First Silver
Consider Majestic First Silver (TSX:FR)(NYSE:AG), a $2.72 billion silver miner with operations in Mexico and the United States amplified the pain felt by silver. At around $10 per share, the stock is starting to get too cheap for its own good, as it appears to be hitting the ground with a long-term support level. At the time of writing, the shares are trading at 3.4 times sales and 16 times cash flow.
More recently, the company reached an agreement to sell its La Guitarra mine in the Mexican region in a deal worth just under $45 million. The deal will see First Majestic own nearly half of the outstanding shares of the acquired Sierra Madre business.
The big announcement came just weeks after the company posted a slim loss of $0.02 per share compared to expectations that called for an EPS gain of $0.08. Although First Majestic has its hands full as the price of silver still looks to be falling, I think FR stock has a huge upside once silver has a chance to warm up again. For those who think the US Federal Reserve and Bank of Canada will have a hard time putting the inflation genie back in the bottle, gambling seems like a great alternative asset to hedge your bets at this point.
At the end of the line
While silver isn’t guaranteed to rise in the face of higher inflation (it’s been pretty disappointing so far), First Majestic strikes me as one of the best traders in the space. It has the stewardship to navigate through the good times and the bad.