Billionaire Ray Dalio Bought 463,000 Shares of Silver Wheaton Corp
Instead of trusting their savings in the stock market, investors should be worried about a U.S. dollar collapse and begin storing their wealth in hard assets like gold and silver. At least, that is, according to billionaire investor Ray Dalio.
In recent quarters, Dalio has been warning investors to get out of fiat currencies. That’s probably why he has accumulated massive positions in mining companies like Goldcorp Inc., Barrick Gold Corporation, and Pan American Silver Corp. These metal producers are leveraged bets on higher gold prices and a hedge against inflation.
He also just picked up a new position. Buried inside a recent 13-F SEC filing, Dalio disclosed a huge stake in another precious metals miner. And if he’s right, the upside for early investors could be enormous. Let me explain.
The Best Silver Stock You’ve Never Heard Of
Ray Dalio is one of the best stock pickers around.
In 1975, he founded Bridgewater Associates. Over the next four decades, Dalio went on to generate double-digit compounded returns for his investors, turning his Connecticut-based firm into one of the largest hedge funds in the world.
For this reason, I always pay close attention to what stocks Dalio is buying. And right now, he’s making some interesting bets in the mining industry.
In a recent 13-F SEC filing, Dalio disclosed a 463,000 share position in precious metals giant Silver Wheaton Corp. (NYSE:SLW). What makes this company interesting is that it doesn’t actually own or operate any mines at all. Instead, you could think of Silver Wheaton like the banker of the mining industry. (Source: Bridgewater Associates 13-F Filing, last accessed July 5, 2015.)
Here’s how it works. Silver Wheaton fronts resource firms with the cash they need to complete a new project. In exchange, the company receives a percentage of the mine’s production once the project is up and operational. Even better, Silver Wheaton can often purchase this production at a steep discount to market prices, securing a dependable source of gold and silver for decades to come.
Also Read: Gold Prices: What Ray Dalio Has to Say
This business model allows the company to crank out oversized profit margins. In the case of Silver Wheaton, the firm pays $4.14 on average per silver equivalent ounce. It can then turn around and sell this production for $16.00 per ounce at today’s spot silver price. (Source: Silver Wheaton Investor Presentation Slide 21, last accessed July 5, 2015.)
Needless to say, this is a lot more lucrative than your traditional mining stock. Operating a mine for a profit is tough. You can watch your investment get wiped out if a company runs into a labor strike, socialist government, or an expensive engineering problem.
In contrast, Silver Wheaton can generate higher profits without that risk. For this reason, the stock has returned over 500% over the past decade, easily beating the rest of the resource industry.
Those returns are likely to continue. Last year, the company’s producing streams generated 43.6 million silver equivalent ounces. By 2019, that figure is projected to grow over 40%, increasing to 51.4 million silver equivalent ounces per year. (Source: Silver Wheaton Investor Presentation Slide 15, last accessed July 5, 2015.)
At those rates, Silver Wheaton is going to be gushing cash flow. Most of those profits will likely be paid out to shareholders as dividends or reinvested back into the business to earn even more silver royalties.
If You’re Not Watching This Silver Stock Now, You’ll Hate Yourself Later
A quick word of warning: Wall Street is beginning to catch on to this opportunity.
Last quarter, a number of billionaire investors, including Ken Griffin, Cliff Asness, and Murray Stahl, initiated or increased their stakes in the streaming metals company. And in March, Morgan Stanley issued its first report on the firm.
Now I have to ask you: what would make the smartest investors in the world take notice of a company like this? I’d say it could only be one thing: they see a giant rally ahead.