Silver is trading close to his many years of high; At the time of this writing, one oz of this metal cost about $ 27. The last year was characterized by high volatility of markets, which led to a rice of gold (a generally accepted asset of the "quiet harbor"). Soon silver joined the rally, and the focus of investors turned out to be both metal and mining companies.
Nevertheless, recently silver uses even great attention of investors than gold. The reason was the so-called "short compression", i.e. the situation in which sellers are forced to close short positions, redeeming the base asset (for example, shares or ETF).
If the price of the base asset is growing very aggressively, the sellers are forced to close the transactions, and the position coverage only enhances the upward movement, thereby causing a short-term splash of volatility.
For examples, it is not necessary to go far. Most recently, Gamestop shares (NYSE: GME) and AMC Entertainment (NYSE: AMC) took off to the new heights in just a few sessions, and many analysts associate this rally with the Reddit community that launched a short compression. However, the rally was not limited to the shares of these two companies.
One of the objects of short compression has become silver. As traders came out of AMC and GME papers and bought silver, the price of metal grew. A jump from 25 to 30 dollars led him to the maximum of the last eight years.
Silver price splash led to a similar rump of FRESNILO stock (OTC: FNLPF) and Hochschild Mining (LON: HOCM) (OTC: HCHDF). Both companies are engaged in silver and gold.
Recently, we reviewed FRESNILLO, which is part of the FTSE 100 index. In 2020, it became one of the leaders of the main Benchmarck of Great Britain. Over the past year, FRES shares rose by about 57%, but since the beginning of the year they rolled about 8%.
Today we will introduce you to Hochschild Mining, which is part of the FTSE 250, and estimate its attractiveness for investors.
Hochschild Mining.
Hocm headquarters is located in London, and mining companies in Peru, Chile and Argentina. Hochschild works in this industry for about a hundred years. Her debut in the stock market took place in 2006.
Over the past 12 months, HOCM shares rose by about 45%. However, since the beginning of the year, they seen about 1.7% and on February 11, closed at 221 Pens (3 dollars for American stocks). Dividend yield of papers is about 1.3%.
The main part of the revenue group generates due to silver, but it also produces and sells gold. According to the interim financial statement published in August, the revenue was $ 232 million, and profit before tax - $ 6.5 million. Cash and their equivalents are estimated at $ 162.1 million. Management emphasized the stable nature of the financial balance of the company.
The November outbreak of COVID-19 forced the company to suspend the work of San Jose's mine in Argentina. According to the latest data, other mines remain in the ranks.
Forward coefficients P / E and P / S for hocm shares are 13.23 and 2.32, respectively, and on this background we consider the paper attractive. The next quarterly report Hochschild will be published on February 17, and we will wait a little and analyze the indicators before clicking the "Buy" button.
Summarize
We believe that silver rally is based not only at the sudden interest of private investors. The growing demand from the industrial sector and the role of metal as a savings tool is a reliable foundation for growth.
The technological sector is very dependent on silver, which is a component of most products, such as smartphones and computers. Metal is used in the medical industry, in the production of jet engines and solar panels. We believe that "green" initiatives can provide additional support for silver. And do not forget about jewelry. In fact, jewelers and investors provide 50% of total silver demand.
A short compression will not necessarily ponder the metal to the new maxima, but the pulse is definitely ascending. Long-term investors can use drawdowns to buy either silver themselves, or shares of mining companies. However, short-term traders should be remembered by the prospects for increased volatility.
If you are not ready to invest in specific papers, it is worth paying attention to stock exchange funds, such as:
- Aberdeen Standard Physical Silver Shares ETF (NYSE: SIVR) (+ 3.0% since the beginning of the year);
- ETFMG Prime Junior Silver Miners ETF (NYSE: SILJ) (-2.0% since the beginning of the year);
- Global X Silver Miners ETF (NYSE: SIL) (-1.9% since the beginning of the year);
- INVESCO DB SILVER FUND (NYSE: DBS) (+ 2.1% since the beginning of the year):
- Ishares MSCI Global Silver and Metals Miners ETF (NYSE: SLVP) (-2.7% since the beginning of the year):
- ISHARES SILVER TRUST (NYSE: SLV) (+ 2.9% since the beginning of the year).
Note: The assets presented in this article may not be available to investors in some regions. In this case, consult an accredited broker or financial consultant to help choose a similar tool. The article is exceptionally introductory. Before accepting investment solutions, be sure to conduct an additional analysis.
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