We recently compiled a list of the 10 Best Long-term Penny Stocks to Buy Now. In this article, we are going to take a look at where Silvercorp Metals Inc. (NYSE:SVM) stands against the other long-term penny stocks.
Analysis of the Current Market Environment
A market analysis discussion was held on July 8 with a CNBC panel comprising Carson Group chief market strategist, Ryan Detrick, and Wealth Enhancement Group SVP, Nicole Webb. Both panelists believe that we are in a bullish market and the trend is expected to continue. Webb expressed optimism about the market’s potential to churn higher, even during the current overbought environment. She expects continued defensiveness and earnings growth from mega-cap tech companies. Webb is hopeful for a shift towards rate normalization rather than abrupt cuts.
Ryan Detrick shared bullish sentiments, basing his outlook on the improving inflation data. He pointed out that 34% of the core Personal Consumption Expenditures (PCE) components are experiencing deflation, with notable declines in used car prices and grocery store prices. He expects the Fed to cut rates in September and November, and he believes that these cuts will be in response to declining inflation rather than a sign of economic weakness.
When the CNBC interviewer noted the significant gains leading tech companies contributed and questioned the reliance on these firms for sustained market growth, Nicole Webb acknowledged the complexity of these market themes. However, she maintained a positive outlook and expects broader market earnings growth in the second half of the year. She mentioned favorable conditions for rate cuts and ongoing advancements in AI-driven productivity and cost-cutting as supportive factors for the bull market.
Penny Stocks: Opportunities and Risks in the Current Market Environment
The current market conditions as discussed above present a mixed bag for penny stocks. On one hand, the overall bullish sentiment and expected rate cuts could provide a favorable environment. Lower interest rates typically reduce borrowing costs and can lead to increased investment in riskier assets, including penny stocks. Additionally, a strong economy and rising market indices may boost investor confidence, which could potentially drive more speculative investments into lower-priced stocks.
However, there are also significant challenges. The reliance on mega-cap tech companies for market gains suggests that investors are favoring well-established, financially stable firms over riskier, smaller companies. This preference for safety and quality can limit the flow of capital into penny stocks. Furthermore, the high valuations and earnings expectations for larger firms mean that any market corrections or shifts in sentiment could disproportionately impact smaller, more volatile stocks. This would especially be true if we take Morgan Stanley’s Mike Wilson’s comments into account. In a Bloomberg TV interview on July 8, he said that there is a high chance of a 10% correction between now and the US election and added that the third quarter of the current year is going to be “choppy.”
Overall, while some positive macroeconomic trends could benefit penny stocks, investors need to be cautious. The market’s current emphasis on stability and proven performance may not bode well for these highly speculative investments. Thorough research and a clear understanding of the risks should be on top priority for those considering penny stocks in this environment.
Our Methodology
For this article, we identified around 20 fundamentally strong penny stocks (trading below $5 on July 18) from several financial media websites and sources. We only chose the stocks that have been profitable for at least over a year, showed signs of earnings growth, and have significant future growth prospects. We narrowed down our list to 10 stocks most widely held by institutional investors. The stocks are listed in ascending order of their hedge fund sentiment.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A modern mining truck, winding its way through a large open pit mining operation.
Silvercorp Metals Inc. (NYSE:SVM)
Share Price as of July 18: $3.68
Number of Hedge Fund Holders: 13
Silvercorp Metals Inc. (NYSE:SVM) is a Canada-based company that acquires, explores, develops, and mines mineral properties for silver, gold, lead, and zinc metals. The company currently has an interest in mines in the Henan Province, Guangdong Province, and Hunan Province in China and is moving to establish its footprint in Ecuador through an acquisition of Adventus Mining Corp. In the first quarter, 13 hedge funds held positions in Silvercorp Metals (NYSE:SVM) worth $27.7 million. As of March 31, Two Sigma Advisors is the most prominent shareholder in the company and has a position worth $5.107 million.
Silvercorp Metals (NYSE:SVM) has recently made moves toward adding to its operational portfolio through a strategic acquisition. The company has announced plans to acquire Adventus Mining Corp. in a deal valued at approximately $150 million, structured entirely with shares. The transaction is expected to be finalized in the third quarter of 2024 and furthers the company’s goal to expand its footprint in the mining sector.
A big part of this acquisition is Adventus’ flagship asset, El Domo, an advanced copper-gold project located in Ecuador, which is already fully permitted. This acquisition promises significant benefits for Silvercorp, including geographic diversification into a new and promising mining jurisdiction. Moreover, El Domo’s advanced stage and permit status means that the project is well-positioned for immediate advancement toward production.
In addition to geographic diversification, Silvercorp Metals (NYSE:SVM) stands to gain substantial metal diversification. The acquisition will grow Silvercorp’s production capabilities in key metals such as silver, lead, zinc, and now copper and gold, further strengthening its position as a diversified metals producer. Adding El Domo enhances the company’s production growth in the short term and provides strategic flexibility with the Condor project, currently in the Preliminary Economic Assessment (PEA) stage.
From a resource perspective, the acquisition significantly improves Silvercorp’s (NYSE:SVM) precious metals exposure. The combined resources of El Domo and Condor will increase the company’s silver-equivalent ounces to 473 million, a substantial increase from the current 217 million ounces. On a copper-equivalent basis, the addition of El Domo and Condor’s contributions will increase the company’s resources to 667 million tonnes, up from 361 million tonnes.
Silvercorp’s (NYSE:SVM) management expects that this acquisition will not only increase scale but also enhance the company’s growth profile. The strategic alignment of these assets positions Silvercorp (NYSE:SVM) as a significant player in the green metals sector. It is one of the best long-term penny stocks to buy now and is positioned well to take advantage of the global demand for diversified metal resources.
Overall SVM ranks 5th on our list of the best long-term penny stocks to buy. You can visit 10 Best Long-term Penny Stocks to Buy Now to see the other long-term penny stocks that are on hedge funds’ radar. While we acknowledge the potential of SVM as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SVM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
