Global X Silver Miners ETF SIL topped the list of best-performing ETFs in July, gaining 32.6%. Being a leveraged play, metal miners tend to experience more gains than their bullion cousins in a rising metal market.
The twin tailwinds of rebounding industrial and manufacturing demand, and resurgence of safe-haven demand due to surging COVID-19 cases led to the rally in silver price. In particular, a spike in manufacturing activity in China after the outbreak of coronavirus and faster-than-expected Chinese economic growth in the second quarter compelled investors to flock to silver.
Notably, silver is used in a wide range of industrial applications. About half of the metal’s total demand comes from industrial applications, while 30% comes from jewelry/silverware/coins and medal manufacturers.
The metals’ rally was also powered by lower interest rates and a wave of stimulus to cushion the virus-hit economies. Central banks across the globe have injected trillions of dollars into the economy with exceptionally low interest rates that has put pressure on the U.S. dollar and boosted dollar-priced commodities. The commodity got an extra boost on an increase in investment demand and reports of supply shortage amid increased industrial demand (read: Silver ETFs That Topped Last Week).
A weak dollar coupled with hopes of fresh economic stimulus measures from central banks and simmering U.S.-China tensions will further drive growth in the white metal. Silver is often regarded as a store of wealth and an alternative to risky assets. Apart from these, the global push for green energy, growing demand in areas like 5G, and new sources of demand for sensors used in IoT and OLED lighting will continue to boost silver demand. Silver is largely used for manufacturing of solar panels and electronics.
Let’s take a closer look at the fundamentals of SIL.
SIL in Focus
This product provides investors access to a broad range of silver mining companies by tracking the Solactive Global Silver Miners Total Return Index. It holds 27 stocks in its basket with double-digit concentration on the top three firms. Canadian firms take the largest share at 52.5%, while Cyprus and Mexico take the remainder. The fund has managed assets worth $1.1 billion and trades in a good volume of about 661,000 shares a day. It charges 66 bps in annual fees (see: all the Materials ETFs here).
Though most of the stocks in the fund’s portfolio delivered strong returns, a few were up more than 50% in July. Below we have highlighted the five best-performing stocks in the ETF with their respective positions in the fund’s basket:
Best Performing Stocks of SILJ
Endeavour Silver Corporation EXK: This small-cap silver mining company is focused on the growth of its silver production, reserves and resources in Mexico. It jumped about 91.2% in July. Endeavour Silver currently has a Zacks Rank #3 (Hold) and VGM Score of D. The stock makes up for 1.4% share (read: Why Silver ETFs are Outshining Gold).
Hecla Mining Company HL: This company is a leading low-cost U.S. silver producer with operating mines in Alaska and Idaho, and is a growing gold producer with an operating mine in Quebec, Canada. The stock occupies the fourth position in the basket with 6% share and soared 68.8% this month. It carries a Zacks Rank #3.
Coeur Mining Inc. CDE: This company operates as a primary silver and gold producer with precious metals mines in the Americas. The stock has gained 66% in July. It currently carries a Zacks Rank #1 (Strong Buy) and has a VGM Score of C. Coeur Mining accounts for 3.9% allocation. You can see the complete list of today’s Zacks #1 Rank stocks here.
Great Panther Silver Limited GPL: This company is engaged in the production of silver in Mexico. The stock rallied 63.5% in July and makes up for 0.6% in SIL portfolio. It has a Zacks Rank #3 and VGM Score of A.
Fresnillo PLC FNLPF: This silver and gold mining and exploration company produces lead and zinc concentrates, silver precipitates, gold and silver dore bars and leases mining equipment. The stock has delivered incredible returns of 57.9% this month. The stock has a Zacks Rank #2 and VGM Score of C. Fresnillo occupies the sixth position and makes up 5% of SIL.
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