Something is happening in the gold and silver mining sector.
While the broader markets (Dow, NASDAQ, and S&P 500) drop on fears of a European Union meltdown, shares of gold and silver miners have rallied hard and fast since mid-May.
Take a look…
Yamana Gold (NYSE: AUY) is up 26% since May 16:
Newmont Mining (NYSE: NEM) also hit its low on May 16 at $43.23 a share.
Since then, the gold giant has bounced 19% to over $51 a share:
Silver Wheaton (NYSE: SLW) is up 17% since May 16…
Endeavor Silver (NYSE: EXK) has had the biggest bounce of them all at 31% since May 16:
And it’s not just retail and institutional investors that have had an appetite for gold and silver stocks in the past month. Insiders have been, too.
According to Canadian Insider, insider buying of Canadian stocks has skyrocketed — indicating many insiders believe so strongly that these stocks are undervalued, they’re willing to buy in one of the most nerve-racking markets in recent memory.
Back on May 14, I recommended you pick up shares of Pan American Silver (PAAS).
Two days after my article ran, Pan American Silver reached its annual low — just like rest of the precious metals market.
This might’ve been the best timing I’ve ever called as a trader.
I didn’t have a crystal ball; I think I was just plain lucky.
However, I did follow two simple rules: 1) Buy exceptional value; and 2) Buy when everybody is selling.
Here’s what I wrote that day:
Right now, investors are running scared.
As you read this, the European Union is literally preparing for Greece’s exit from the euro.
If that happens, the Greeks will return back to the drachma. Nobody knows what that really means, or what the outcome will be.
Greece could be the first domino to fall.
The speculation is that Spain is next, where the unemployment rate is a bowel-shaking 25%. After Spain, maybe Italy falls…
If these nations go down, the EU will fall apart.
So there’s a lot of uncertainty in the market. And the market hates uncertainty.
That’s when investors turn to gold and silver.
So I can say with confidence gold and silver stocks will be higher a year from now.
However, gold and silver stocks are sitting a multi-month lows — and herein lies our opportunity.
Large cap silver stocks are at the cheapest valuations I’ve seen in years.
And they don’t come any cheaper than Pan American Silver (NASDAQ: PAAS).
In this light, you can buy world-class assets at extremely distressed levels.
Here are the company’s vitals:
Pan American Silver trades at a market cap of $1.6 billion on trailing twelve-month revenue of $855 million.
Its cash position is $451 million. Its P/E multiple is 4.8 on earnings per share of $3.31.
Plus the company has been growing its revenue like a weed mainlining Miracle-Gro.
Take a look:
Year Revenue
2005 $122
2006 $255
2007 $301
2008 $339
2009 $455
2010 $632
2011 $855
At these valuations, I believe PAAS is a screaming buy for contrarian investors.
I wasn’t the only one who thought Pan American was a screaming buy…
In the past month, insiders have purchased over 300,000 shares of Pan American Silver in the open market, while the company itself has bought back a little more than 140,000 shares.
Since my recommendation, Pan American is up 11% — and it’s rallied 19% since May 16!
But I think this move is just getting started. And it won’t be just big caps with big names that participate in this bull run…
You see, as I stated earlier, insiders have been buying distressed precious metals shares hand over fist.
And why not?
Many of these stocks were trading at cash, and in some instances, below cash! So the fundamental risk was nearly non-existent.
As a result, the junior mining sector is also starting to rally as investors plunge into this market at rock-bottom prices.
This is the time to get on board.
Remember the old market saying, “A rising tide lifts all ships.”
The original bull on America,
Brian Hicks
Check us out on YouTube!Brian is a founding member and President of Angel Publishing. He writes about general investment strategies for Wealth Daily and Energy & Capital. For more on Brian, take a look at his editor’s page.
