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Two Silver Stocks Outperforming S&P 500

NEW YORK ( TheStreet) -- Silver prices have gained 7% during the past three months. This compares to a 3.5% drop in S&P 500 index. This up move in silver prices has had a positive impact on silver miners.

Two such silver stocks,

Silver Wheaton (SLW - Get Report) and Pan American Silver (PAAS - Get Report), have outperformed both the S&P 500 and the precious metal during the last three months.

Both Silver Wheaton and Pan American Silver have gained 23.6% and 12.9%, respectively, during the past three months.

We hold a bullish view on the outlook of silver prices and the growth prospects of these companies. With the ongoing uncertainty in Europe, coupled with a lack of direction in the equity markets, we reckon that investors will look to park their money in safe havens like silver.

This trend has been reflected in the exchange-traded funds, which have witnessed an uptick in activity. During the last three months, silver holdings in iShares Silver Trust (SLV), the largest ETF backed by silver, have declined by 2%, to 9,258 metric tonnes. Meanwhile, the ETF has gained 6% during this period.

According to GFMS, London-based metals consultancy, both industrial and investment demand would witness a double-digit growth this year, boding well for silver prices. The consultancy said that total investment in silver was up by 184% year-over-year to 136.9 million ounces during 2009.

Industrial demand, which declined 20.5% year-over-year during 2009, is also expected to improve, as there has been very little restocking done by companies, despite a recovery in the global economy.

Silver Wheaton

Shifting focus to the stocks, Silver Wheaton derives more than 95% of its revenue from the sale of silver. The company reported its results for the first quarter ended March 2010 on May 12.

Net income more than doubled to 13 cents per share from 6 cents per share a year ago. Revenue soared in excess of 100% to $85.9 million, driven by a 40.2% increase in total silver ounces sold to 4.4 million. Moreover, average cash cost remained flat at $3.97, while average realized price surged 45% to $17.27.
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