Is Silver Just Another Speculative Bubble?: iShares Silver Trust (SLV), Silver Wheaton Corp. (USA) (SLW)

Here are two great ways to play silver’s fall:

Silver Wheaton Corp. (USA) (NYSE:SLW) – A silver streaming company, Silver Wheaton provides financing to small miners in exchange for a share in metal production over the life of the mine. The company, like many involved in the silver business, has spent virtually all of its free cash flows on continued reinvestment into new mining contracts. The business is essentially built on ever-rising silver prices, as with each new mine it finances, the company exposes itself to more higher-cost operations. Any drop in silver prices is magnified by the company’s operating leverage.
Global X Silver Miners ETF – This fund tracks 33 different silver miners that are engaged in the exploration and production of silver. Top holdings include well-known industry players like Hecla Mining Company (NYSE:HL), Pan American Silver Corp. (USA) (NASDAQ:PAAS), and the aforementioned Silver Wheaton. All three companies have spent significantly on capex in the last two years to further develop income streams based on dangerous assumptions of today’s exceptionally high silver prices. A broad play on the silver mining industry, this ETF focuses investors on the capital intensive business of pure mining, making it more strongly correlated to a long-term decline in spot silver prices.

Foolish investors who time the mean reversion correctly stand to profit handsomely when silver goes from being “in” to undeniably “out” with investors.

The article Is Silver Just Another Speculative Bubble? originally appeared on Fool.com and is written by Jordan Wathen.

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