Silver is a having moment.
Since bottoming in March, when Covid’s early spread in America had investors in freak-out mode, gold’s largely unloved step-sibling is up some 97%. Which certainly helps explain Pan American Silver (PAAS) – up more than 220% in that same period, marking it as one of the top momentum stock on the Street these days.
But here’s the thing: If we truly are on the cusp of a new silver bull market, then Pan American Silver’s best days might still lie ahead.
Since the 1970s, silver has lived through two significant bull markets: going into a 1980 peak, and then into a 2011 peak. A long-term silver chart below shows the setup that lead to each peak. Examining it, one might argue that now, for the third time in half a century, silver’s chart pattern once again is setting up for a major push higher. Take a look:
Silver has a history of bottoming, hitting a new a high, falling, then testing new highs and lows … before breaking out – explosively – to the upside. As our chart shows, there’s a sound, technical argument to be made that we’re now in the early stages of silver’s next explosive phase.
How will history ultimately fill in those question marks? Anyone’s guess, really. This time around, however, the US dollar is seriously troubled in ways like never before. It’s not just that the pandemic is crushing the economy, it’s that the pandemic is crushing the economy at a moment when Uncle Sam’s debt load it already exorbitantly high, and when the Fed no longer has a revolver full of bullet but a Daisy air rifle with a couple of BBs left. Even Goldman Sachs is wringing its white-gloved hands and fretting that the greenback might just be dead man walking and at risk of losing its reserve currency status. If that were to happen … yikes. Gold and silver would touch heights 99% of Wall Street would currently laugh at.
But let’s assume such a gray swan doesn’t land, and we use the last two bull markets as indications of what silver is, potentially, capable of. That would see silver prices somewhere between $125 and $165 per ounce. With silver at $24 and change right now, those seem like crazy prices, indeed.
Then again … when silver was $4.13 back in late-2001, a price prediction near $50 for the metal seemed like the addled ravings of a street-corner lunatic.
At that same moment, who would have predicted Pan American Silver was about to take off on an epic bull run that would see the shares soar more than 1,600%?
Again, who knows where today’s question marks lead. I won’t even venture a guess. Let’s just call it “a lot higher from here” because, given the monetary and economic backdrop, PAAS certainly has all the right tailwinds filling its sails.
It also has growth characteristics that look appealing.
Year-over-year revenue growth was 54% last year, and that was at a moment when silver prices were bouncing around in the teens. Now they’re in the mid-$20s and almost assuredly heading higher. That should do wonders for Pan American Silver’s revenues for the foreseeable future, which will likely drive earnings sharply higher, given the asymmetrical relationship between profits and a cost structure that doesn’t change as silver prices rise.
That high revenue growth, and profit margins north of 8%, also means that PAAS earns a strong scalability score.
All of that combined would seem to indicate that this moment that silver is having could be the beginning of something much more explosive on the horizon.