Silver Wheaton (TSE:SLW)

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Re: Silver Wheaton (TSE:SLW)

Postby Pixel8r » Mon Jan 16, 2012 10:59 am

How Does Silver Wheaton Boost Its Returns?

By Dan Dzombak, The Motley Fool Posted | 2:08PM 01/14/12

As investors, we need to understand how our companies truly make their money. A neat trick developed for just that purpose -- the DuPont Formula -- can help us do so.

So in this series we let the DuPont do the work. Let's see what the formula can tell us about Silver Wheaton (NYS: SLW) and a few of its peers.
The DuPont Formula can give you a better grasp on exactly where your company is producing its profit, and where it might have a competitive advantage. Named after the company where it was pioneered, the formula breaks down return on equity into three components:

Return on equity = net margin x asset turnover x leverage ratio

What makes each of these components important?

  • High net margins show that a company can get customers to pay more for its products. Luxury-goods companies provide a great example here.
  • High asset turnover indicates that a company needs to invest less of its capital, since it uses its assets more efficiently to generate sales. Service industries, for instance, often lack big capital investments.
  • Finally, the leverage ratio shows how much the company is relying on liabilities to create its profits.
Generally, the higher these numbers, the better. That said, too much debt can sink a company, so beware of companies with very high leverage ratios.

So what does DuPont say about these four companies?

CompanyReturn on EquityNet MarginAsset TurnoverLeverage Ratio
Silver Wheaton26.9%88.1%0.271.14
Yamana Gold (NYS: AUY)7.9%26.6%0.211.42
Agnico-Eagle Mines (NYS: AEM)3.3%6.7%0.331.51
Goldcorp (NYS: GG)9.4%29.8%0.201.38

Silver Wheaton's return on equity is head and shoulders above its industry peers. It manages to do so largely because of its high net margins, which are nearly 3 times as high as the next highest in that category. Its asset turnover, on the other hand, is comparable with its industry peers, and it has the lowest leverage ratio of the listed companies...

See full article from DailyFinance: http://srph.it/xfYREo
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Re: Silver Wheaton (TSE:SLW)

Postby greed is good » Wed Jan 18, 2012 1:58 pm

I really want to buy this but I'm excellent at talking myself out of things

Positives:
Profits from a rise in the price of Silver
A way of having a bet on sterling falling v CAD
OK in UK ISA
Pays a dividend doesn't charge storage
No VAT like when buying physical

Negatives:
Silver could drop.
Sterling could rise v CAD
Where is the next deal coming from? Won't producers now be less likely to stream and feel ripped off at $4?
If they do more deals, now the price is higher, it increases their average buying price so it's more of a gamble on the silver price
I didn't get in earlier!

Any views on it from here for those already not in?
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Re: Silver Wheaton (TSE:SLW)

Postby Pixel8r » Wed Jan 18, 2012 2:16 pm

greed is good wrote:I really want to buy this but I'm excellent at talking myself out of things

Positives:
Profits from a rise in the price of Silver
A way of having a bet on sterling falling v CAD
OK in UK ISA
Pays a dividend doesn't charge storage
No VAT like when buying physical

Negatives:
Silver could drop.
Sterling could rise v CAD
Where is the next deal coming from? Won't producers now be less likely to stream and feel ripped off at $4?
If they do more deals, now the price is higher, it increases their average buying price so it's more of a gamble on the silver price
I didn't get in earlier!

Any views on it from here for those already not in?

Extra Positives that you haven't considered.

  • They have massive growth already baked in the cake, due to mines funded but not on stream yet.
  • They are leveraged to the price rise in silver - They paid $4 when the silver price was $8 = 100% profit, silver price goes up 100% to $16, they make $12 profit so 300% rise in profits for them.
  • They are shielded from rising mining costs due to inflation.
  • Silver is mainly mined as a by product from mining other metals, providing a reason for miners to stream to provide initial funding to build mine.

I see SLW as a no brainer, I first bought at around $4 but have been adding to them ever since, have bought some at $32. Think they will be over $100 within a year or two. I see the dividends yield rising as well as silver increases.
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Re: Silver Wheaton (TSE:SLW)

Postby greed is good » Wed Jan 18, 2012 3:53 pm

Pixel8r wrote:
Extra Positives that you haven't considered.

  • They have massive growth already baked in the cake, due to mines funded but not on stream yet.
    >>>How much of that is priced in now though for a new buyer?
  • They are leveraged to the price rise in silver - They paid $4 when the silver price was $8 = 100% profit, silver price goes up 100% to $16, they make $12 profit so 300% rise in profits for them.
    >>>I did say they profit from a rise in the silver price and mentioned $4 but admittedly I didn't mention the $8. If they did a deal now when the silver price is $30 what price do you think they would have to pay?
  • They are shielded from rising mining costs due to inflation.
    >>>This one and the one above is what makes me wonder where the next deal is coming from. When was their most recent new streaming deal?
  • Silver is mainly mined as a by product from mining other metals, providing a reason for miners to stream to provide initial funding to build mine.
>>>Could this mean that a recession would be bad if demand for such as copper fell?

I see SLW as a no brainer, I first bought at around $4 but have been adding to them ever since, have bought some at $32. Think they will be over $100 within a year or two. Just see the dividends yield rising as well as silver increases.
>>>Not quite, you have mentioned you sold some early on. So you must have had some doubts then if not now? Obviously your purchases now have the benefit of a lower cost average with some being so much cheaper. I would definitely buy your position if I could!

See above>>>

You mention the positives I missed. What are the extra negatives?
What do you think about CAD v GBP?
If you were forced to pick one, would it be SLW or allocated silver?
There is always talk of Greece defaulting - if it did do you see SLW dropping? Do you think now is a good time to buy or as a new buyer would you wait a little longer having missed the recent dip?
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Re: Silver Wheaton (TSE:SLW)

Postby Pixel8r » Wed Jan 18, 2012 5:23 pm

greed is good wrote:See above>>>

You mention the positives I missed. What are the extra negatives?
What do you think about CAD v GBP?
If you were forced to pick one, would it be SLW or allocated silver?
There is always talk of Greece defaulting - if it did do you see SLW dropping? Do you think now is a good time to buy or as a new buyer would you wait a little longer having missed the recent dip?

I can't see that any negatives on SLW other than difficultly signing new mines up as the price goes higher, but as I said they already have massive forward increasing production in the bag.

I don't really think about fiat currency fluctuations, basically I see all fiat currencies in a race to the bottom. I do think that commodity currencies will fair better than most though, so CAD should hold up better than most. But when it comes down to it the CAD value doesn't really affect SLW as their earnings are in silver ounces which they sell into US dollars currently. All they do is report earnings in CAD.

What I like to do when buying into a stock is scale in. It is hard to read what the short term dynamics will be but I am pretty sure whatever happens that silver will be going up longterm. If I was wanting to buy into SLW for the first time I would probably just monitor the silver price and buy while silver is cheap as it seems to effect the SLW price the most. Currently I think SLW are a buy and if I had some spare cash would be adding to my holding currently.

All the above is in my own opinion and suits my own risk profile and outlook, do your own DD and decide what suits you best. :thumbup:
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Re: Silver Wheaton (TSE:SLW)

Postby greed is good » Wed Jan 18, 2012 7:31 pm

Pixel8r wrote:
I don't really think about fiat currency fluctuations, basically I see all fiat currencies in a race to the bottom. I do think that commodity currencies will fair better than most though, so CAD should hold up better than most. But when it comes down to it the CAD value doesn't really affect SLW as their earnings are in silver ounces which they sell into US dollars currently. All they do is report earnings in CAD.

What I like to do when buying into a stock is scale in. It is hard to read what the short term dynamics will be but I am pretty sure whatever happens that silver will be going up longterm. If I was wanting to buy into SLW for the first time I would probably just monitor the silver price and buy while silver is cheap as it seems to effect the SLW price the most. Currently I think SLW are a buy and if I had some spare cash would be adding to my holding currently.

All the above is in my own opinion and suits my own risk profile and outlook, do your own DD and decide what suits you best. :thumbup:


The CAD value is very important to anyone buying through a UK ISA.

In 2008 the £1 was $1.86 now it's $1.56 so with the 2% buy/sell currency charges IF that unwound the other way you need the share price to rise 20% just to cover it.

Put another way in 2008 ignoring the currency charges £10k bought $18,600 bought 5068 SLW shares at $3.67 instead of 4,250 using the $1.56 now. That's an extra 818 shares that are now worth $31.60 each, so $25,850 extra. If converted back to sterling now an extra £16,570.

Buying now at $31.60 & $1.56 you only get 492 shares for £10k!
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Re: Silver Wheaton (TSE:SLW)

Postby Pixel8r » Thu Jan 19, 2012 8:23 am

greed is good wrote:The CAD value is very important to anyone buying through a UK ISA.

In 2008 the £1 was $1.86 now it's $1.56 so with the 2% buy/sell currency charges IF that unwound the other way you need the share price to rise 20% just to cover it.

Put another way in 2008 ignoring the currency charges £10k bought $18,600 bought 5068 SLW shares at $3.67 instead of 4,250 using the $1.56 now. That's an extra 818 shares that are now worth $31.60 each, so $25,850 extra. If converted back to sterling now an extra £16,570.

Buying now at $31.60 & $1.56 you only get 492 shares for £10k!

I obviously realise the dynamics of currency changes in buying stocks in foreign currencies, there really is no need to explain them. As I said above all fiat currencies are in a race to the bottom, I feel that commodity currencies like the Canadian Dollar will fair better than most. I am not concerned about trying to work out the short-term fluctuations in the currency market, if I was I would trade the forex market, I concern myself more with the macro picture. 95% of my shares are ones listed on the TSE so if we do get a gain in GBP over CAD I get hit just the same as anyone buying in now

I invest in shares in a balanced way, meaning that I have only a percentage of my assets in them. I also make sure that I have at least a position in ten different ones at anyone time, as that spreads the risk. If you only have cash to either buy physical silver or buy positions in one or two different companies shares I would recommend that you stick to buying bullion.
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Re: Silver Wheaton (TSE:SLW)

Postby greed is good » Thu Jan 19, 2012 10:16 am

Don't start getting umpty or you might chase your posters away. :lol:

I only mentioned the currency effect because you only mentioned it in relation to SLW earnings. We weren't doing PMs and not everyone reading might have thought of it. There was an "expert" on moneyweek where he was tipping Japanese stocks and never once mentioned the Yen effect.

Diversification isn't my strongpoint. I think of holding 10 or 20 shares as 10 or 20 chances to pick at least one bad one and ruin the returns. I realise that is probably a major failing that could bite me one day.

I've got years of ISA money rolled up and the big advantage SLW has over bullion for me is the tax status.
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Re: Silver Wheaton (TSE:SLW)

Postby Pixel8r » Thu Jan 19, 2012 10:27 am

greed is good wrote:Don't start getting umpty or you might chase your posters away. :lol:

Sorry am a bit ratty at the moment having just split with my longterm partner, just trying to pass on some of my experience.

If you can only do one share SLW is a not bad choice as they are diversified internally in that they receive revenue from lots of different mines, making them a lot safer than individual miners.
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Re: Silver Wheaton (TSE:SLW)

Postby greed is good » Thu Jan 19, 2012 8:23 pm

Sorry to hear of your family issues if it's upsetting you.

I remember a mate at work in a similar situation who started singing this song all the time after his split. Of course six months later he was back with her. I hope he had got the tune out of his head.

http://www.youtube.com/watch?v=Cl4FO9SQevU
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Re: Silver Wheaton (TSE:SLW)

Postby greed is good » Mon Jan 23, 2012 7:41 pm

A site here that's hours of endless fun. Apologies if it's old news and already been mentioned but the 24k site search didn't find trefis

It's values a company share price. Better still it's interactive with a list of the company assets. You can click each asset then increase the price or amount shipped and see the effect they think it will have on the share price.

Silver Wheaton https://www.trefis.com/company#/SLW/n-2 ... p&from=rhs


slwtrefis.jpg
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Re: Silver Wheaton (TSE:SLW)

Postby Pixel8r » Wed Jan 25, 2012 8:58 pm

I am wondering if you took the plunge GiG, SLW +7.5% today :)
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Re: Silver Wheaton (TSE:SLW)

Postby greed is good » Thu Jan 26, 2012 12:41 am

Pixel8r wrote:I am wondering if you took the plunge GiG, SLW +7.5% today :)


Yes I did. Thank you for your sterling efforts. It was strange as it seemed SLW was dragging Silver up. SLW was a dollar over a model that had seemed quite good.
SLW = (Silver - 3.5) * 1.116
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Re: Silver Wheaton (TSE:SLW)

Postby greed is good » Sat Jan 28, 2012 11:34 am

 ! Pixel8r wrote:
I have edited this post as it was basically a cut and paste of an entire article.

GiG please read this thread (Tips for posting on 24Knews.com), I don't like whole articles just being cut and pasted on to here, it is a against copyright laws and I don't want 24k being closed down for copyright infringement. It is fine to link articles and quote a part of it.


Calculating A Proper Valuation For Silver Wheaton

With Silver Wheaton (SLW) trading at the bottom end of its 52 week range, I decided to take a closer look into the company to see if it is an attractive opportunity for investors. Here are six points I looked at while researching SLW:

Valuation: SLW's trailing 5 year valuation metrics do not have a clear bias as one is above the 5 year average and the other one is below. SLW's current P/B ratio is 4.3 and it has averaged 3.7 over the past 5 years with a low of 1.8 and high of 6.4. SLW's current P/S ratio is 15.7 and it has averaged 18.8 over the past 5 years with a high of 31.1 and low of 9.8. SLW's current P/E ratio is 20.5 and it has traded in a range between 20 and 40 over the past year.

Price Target: The consensus price target for the analysts who follow SLW is $48. That is upside of about 55% from where the stock is currently at. This suggests that SLW is significantly undervalued at these levels...
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Re: Silver Wheaton (TSE:SLW)

Postby Pixel8r » Thu Feb 23, 2012 9:15 am

Silver Wheaton CEO Randy Smallwood−Investor Demand for Silver Exploding; Gold/Silver Ratio Favors Silver

Silver Wheaton dividend likely to triple by the fourth quarter 2012

Jim is pleased to welcome back Silver Wheaton CEO Randy Smallwood this week. Randy believes that investor demand is the key to the silver story, and the gold/silver ratio will shift to favor silver. In terms of Silver Wheaton, Randy expects growth in silver production to advance by 70% and the dividend payout to triple by the fourth quarter of this year.

Randy Smallwood holds a geological engineering degree from the University of British Columbia, and is one of the founding members of Silver Wheaton. In 2007, he joined Silver Wheaton full time as Executive Vice President of Corporate Development, primarily focusing on growing the company through the evaluation and acquisition of silver stream opportunities. In January 2010 he was appointed President, and in April 2011 he was appointed Silver Wheaton's Chief Executive Office.


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Re: Silver Wheaton (TSE:SLW)

Postby Pixel8r » Thu Feb 23, 2012 9:27 am

Here's a chart I use when trying to time more buys into SLW, buying at anytime when this ratio is under 1 means your are getting more silver for below spot. I still think SLW is a no brainer, fixed prices, guaranteed growth & dividends linked to the price of silver as Randy explains in the interview above.

Here's a link to an updated version - http://stockcharts.com/h-sc/ui?s=SLW.TO ... 5622465766
Image
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Re: Silver Wheaton (TSE:SLW)

Postby greed is good » Thu Feb 23, 2012 5:41 pm

It seems to be getting ridiculous now. Over $4 above the silver price.
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Re: Silver Wheaton (TSE:SLW)

Postby Pixel8r » Thu Feb 23, 2012 11:44 pm

greed is good wrote:It seems to be getting ridiculous now. Over $4 above the silver price.

I don't think you have seen anything yet, wouldn't be surprised to see $100 next year.
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Re: Silver Wheaton (TSE:SLW)

Postby greed is good » Fri Feb 24, 2012 3:13 pm

I know your chart shows larger gaps between SLW and Silver but I haven't been watching it as long as you (unfortunately!) so it seems huge to me - could that be partly due to option expiry?

I noticed one day last week or the week before on the day that the USA announced some potential new rules about corporation tax SLW disconnected against Silver the other way and went lower. I have read one analyst say that they channel the money through the Cayman Islands and if they had less favourable tax terms it would reduce profits a lot. Though the following day it corrected back up presumably when the panic was over?
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Re: Silver Wheaton (TSE:SLW)

Postby Pixel8r » Fri Feb 24, 2012 4:32 pm

greed is good wrote:I know your chart shows larger gaps between SLW and Silver but I haven't been watching it as long as you (unfortunately!) so it seems huge to me - could that be partly due to option expiry?

I noticed one day last week or the week before on the day that the USA announced some potential new rules about corporation tax SLW disconnected against Silver the other way and went lower. I have read one analyst say that they channel the money through the Cayman Islands and if they had less favourable tax terms it would reduce profits a lot. Though the following day it corrected back up presumably when the panic was over?

I fully expect taxes to rise on miners as time goes on, but the thing that excites me about companies like SLW is the fact that they are so under priced really in comparison to the metals.

When you think about it they actually benefit far more from the price of silver going up than a straight 1 to 1, so really when silver increases they should go up at a higher rate.
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