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) and Pan American Silver ( PAAS), 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.

Going forward, the company forecasts total production of 23.5 million silver equivalent ounces during 2010, representing a year-over-year increase of 35%. This number is expected to go up to 40 million by 2013.

On June 1, JPMorgan rated the stock an overweight with a price target of $23, implying a 20% upside over current levels.

Pan American Silver

Pan American Silver is engaged in silver mining with mines located in Peru, Mexico, Argentina and Bolivia. The company reported its first-quarter results on May 12.

Net earnings soared 125% year-over-year to 18 cents per share, while revenue jumped 88% to $132.4 million. Furthermore, silver production increased 13% to 5.5 million ounces, while cash costs declined to $4.35 per ounce, down 27% when compared to the first quarter of 2009.

The company has a healthy financial position reflected in cash and short-term investments of $215.4 million and zero debt. This allowed the company to pay it's first-ever dividend of $0.025 per share in March.

Going forward, the company remains confident that it will achieve its silver production target of 23.4 million ounces. Furthermore, Pan American is also mulling the increase of capital expenditure from $50.9 million to $69.7 million as it ramps up activities at various projects.

On May 31, BMO Capital Markets rated the stock an outperform with a price target of $34.50, implying a 35% upside over current levels.

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