1 TSX Silver Stock that is very cheap and ready to rally

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silver plated

Written by Joey Frenette at The Motley Fool Canada

Silver and gold stocks have retreated a few steps over the past few trading sessions. With the money that has recently slipped, high-level miners have lost their chance. As you may know, miners tend to magnify the movements made by the underlying commodities they are mining. As silver looks to let go of the gains seen in recent months, now may be the time to play the part of the riptide.

After plunging another 2.3% on Monday, silver is now trading at around $23.69 an ounce. While it’s really hard to value precious metals, I think many investors who are light on such hedges may want to give them a second look, not just for short-term rebound potential, but for a hedge against higher inflation and weakening economic growth.

Cheap precious metal stocks could be a downside buy

Indeed, Russia’s invasion of Ukraine and soaring inflation provided some support for struggling precious metals. Still, given the risks, I don’t think silver or gold are as high as they could be. could Bitcoin and other crypto assets to blame? It’s hard to say.

Bitcoin may be new-age gold. But it’s been trading like a tech stock lately, and a more volatile one at that! During days that experience extreme swings, Bitcoin may as well be a high-multiple speculative stock! While I don’t want to criticize Bitcoin investors, I personally think its limited trading history makes it unworthy of the millennial gold title. That said, investors may wish to diversify the asset to reduce the long-term correlation of their portfolio.

In terms of correlation reduction, however, silver looks intriguing. I like to think of it as gold on steroids, given its many applications beyond jewelry and tableware. In terms of investing in silver, it’s hard to pass up the best miners for those bullish on precious metals. That said, those looking for stability can also consider physical bullion or coins. However, those who choose to go the physical route may not be happy with the meager earning potential compared to their miners.

First Majestic Silver: an excellent stock of silver for the long term

A company like Majestic First Silver (TSX:FR)(NYSE:AG), I believe, adds a lot to the table for investors who can get in at a reasonable price. Recently, the silver miner recorded a convincing 59% increase in production. Approximately 7.2 million silver equivalent ounces were mined during the first quarter. This is a significant ramp-up in production. As silver continues to pull back, I think investors can have a compelling entry point into First Majestic as investors gradually forget about the strong first quarter.

Shares of FR fell nearly 5% on Monday and are now down 21% from the monthly high of nearly $18 per share. It’s a rapid decline, and it’s on the back of recent weakness in silver (and gold) prices. Now at nearly 40% off its all-time high, I think those with no exposure to silver or gold may have an intriguing entry point on their hands. The stock slid too fast, too hard. While it’s hard to gauge what the next big money move will be, I think it’s hard to pass up a well-run operator like First Majestic. It’s a top notch miner, and it deserves a premium multiple.

In any case, such a stock of silver is more of a long-term hedge than a short-term trade. There are benefits to owning silver as part of a diversified portfolio. That said, I wouldn’t look to overweight a position in the name, even if you’re worried about a bear market, rising inflation, and possibly a bear market.

The 1 post TSX Silver Stock That’s Dirt Cheap and Ready to Rally appeared first on The Motley Fool Canada.

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Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool owns and recommends Bitcoin.

2022


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