NEW YORK ( TheStreet) -- Our top silver stock pick for months, Silver Wheaton (SLW - Get Report), has been the top gainer and Silver Standard Resources (SSRI - Get Report) has been the top loser among the silver stocks, year to date.
Based on our outlook, buying Silver Wheaton and shorting Silver Standard Resources will likely generate more gains on a risk-adjusted basis than investing in any of the silver stocks. For 2010, Silver Standard is estimated to report a loss of 3 cents per share, in comparison to the earnings of 64 cents per share for Silver Wheaton, according to analysts polled by Bloomberg.
Silver Wheaton's production is expected to increase 35% this year following the acquisition of Barrick Gold's (ABX - Get Report) silver mines and Silverstone Resources this past year. The silver miner expects to increase annual production at a CAGR of 23.7% until 2013, positioning itself among the world's top silver producers. The miner's production costs will continue to be below the industry average, benefiting from the 13 silver purchase agreements that allow the purchase of production at a low fixed cost.
Investors remain cautious about Silver Standard, even after the appointment of a new president and CEO in the last week of May. Although the company has seen some improvements since the resignation of the former president and CEO in January, the stock continued its decline. The company transitioned from a development company to a producing company this year. Robust second-quarter results and the reiteration of full-year guidance will be critical in rebuilding some of the confidence that has been lost. Hence, short positions in the stock must be verified on the announcement of results.In addition, investors will remain cautious on the company's start-up operations experience and capability of delivering on the Pirquitas mine. Also, the company's profitability from Australia operations will decline on the country's "super" profit tax, which will impact overall profits of the company. According to TheStreet Ratings, the stock is graded "D" (Sell), in comparison to the "B" (Buy) for Silver Wheaton.