In the video below, Motley Fool contributor Dan Caplinger discusses the current investment opportunity Silver Wheaton is giving investors as a result of the recent pullbacks seen in the silver market.
The problems associated with bullion exchange-traded funds and silver miners are highlighted. Over time, Dan has found that these investment products carry additional risks due to holding expenses and skyrocketing mining costs. These risks as of late have caused a disconnection between the returns of these products and the returns of underlying silver.
The benefits of Silver Wheaton's unique position as a silver streamer are looked at in depth. The company provides financing to silver miners in exchange for the right to buy silver bullion at below market prices. As a result, Silver Wheaton avoids the risks associated with mining yet maintains exposure to price appreciation. As silver prices trade at low levels, more silver miners need financing to support their operations. Silver Wheaton will in turn have strong negotiating power which will allow the company to put in place new streaming agreements, which also should produce profits well into the future.