Wheaton Precious Metals (WPM,
$28.36): “Back To
Gold We Go”
By: Alec Feygin, AIM Student at
Marquette University
Disclosure:
The AIM Equity Fund currently holds this position. This article was written by
myself, and it expresses my own opinions. I am not receiving compensation for
it and I have no business relationship with any company whose stock is
mentioned in this article.
Summary:
- Wheaton Precious Metals, Corp. (NYSE: WPM) is a mining company which generates its revenue primarily from the sale of precious metals. The three main precious metals are: Gold, Silver, and Palladium.
- Wheaton currently has streaming agreements covering 19 operating mines and 9 development state projects.
- Wheaton’s portfolio has over 30 years of mine life based on reserves.
- Top rated among ESG analysts and Is the first streaming company to join UN Global Compact. UN Global compact is the largest sustainability initiative in the world.
- Wheaton offers the highest dividend yield amongst streamers.
Key
Points:
Wheaton
Precious Metals considers itself a “High Margin Precious Metals Company”. WPM
is a streaming company which means that it invests in mining operations upfront
and gets a fixed percentage of the output of a mine at a predetermined price.
WPM partners with many different mining companies including the two largest:
Newmont Goldcorp and Barrick. The streaming market is growing and is currently at
about $21 billion, and WPM makes up 45% of the total market. There are many
advantages of the streaming model for both miners and WPMs shareholders. One noteworthy
advantage is that we provide support to our partners, but they keep all operational
control. This way both companies can benefit by using the expertise of the
other without having to spend any extra money. Gold prices have steadily been
increasing since 2016. We know that these prices are influenced by geopolitical
factors as well as how much gold supply is out there. WPM is set to benefit
tremendously from this increase in gold prices because most of our assets are
going to gold production.
What
has the stock done lately?
The
company’s stock price has been flat in the last month. It is currently trading
at $26.28 with an average price target of $34.40. The company missed its
earnings last quarter and will have its next earnings call on November 18th.
Past
Year Performance:
Wheaton’s
stock has had an amazing 2019, it is currently up 29% YTD. With the uncertainty
in the world caused by the U.S-China trade war, many investors have fled to
Gold as a safe haven. This has increased both the value of the companies in the
sector and the price of gold. I believe that the stock still has room to grow
but the next earnings call will shed a lot of light on its continuing
operations throughout the world.
Source:
FactSet
My
Takeaway:
The
increase in the price of gold is a big positive for shareholders of WPM. Since
most of the assets that WPM has are long term gold mines, they are set to
benefit from this trend in gold prices for the foreseeable future. I believe
that WPM has positioned itself as winner in this space for the foreseeable
future and therefore I recommend that the aim profile holds on to its position
in WPM.
Source:
FactSet
