Baron Rothschild, an 18th century British nobleman and member of the legendary Rothschild banking family, is credited with saying, “The time to buy is when there’s blood in the streets.”
He should know better than anybody else.
Rothschild made a fortune buying in the panic that followed the Battle of Waterloo against Napoleon.
But that’s only half of the story…
The original quote is believed to be: “Buy when there’s blood in the streets, even if the blood is your own.“
This is contrarian investing at its heart — the strongly-held belief that the worse things seem in the market, the better the opportunities are for profit.
Most people only want winners in their portfolio.
But as Warren Buffett warned, “You pay a very high price in the stock market for a cheery consensus.”
In other words, if everyone agrees with your investment decision, it’s probably not a good one.
I will admit it’s a hard maxim to follow.
It goes against human nature, against your natural instincts.
I mean, it’s counterintuitive to run into a burning house not knowing if you’ll come out alive.
And just because I’ve been in the business spanning three decades now doesn’t mean there aren’t still times when I have to force myself to act against my emotional impulses, when I have to make fear my friend.
This is one of those times.
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.
There are rumors that barter and, ahem, gold and silver are the primary and preferred mode of payment in Greece.
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Hear that, Uncle Warren? Demand for physical gold and silver remain high.
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).
Pan American is the second-largest primary silver mining company in the world with seven operating silver mines in Peru, Mexico, Argentina, and Bolivia.
Pan American also owns the Navidad silver deposit, one of the largest undeveloped silver deposits in the world, and is the operator of the La Preciosa silver project.
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.
Profitably yours,
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.
