Written by: Robert and Russell Markham

Plenty of articles have been written on Gold. Silver tends to be less spoken of, at least in the Australia blog and the weekly Essays. Some recent BackTesting of our top Silver stocks has produced some impressive results worth mentioning this week.

First up, all the key work has been done for you. We have a Sliver WatchList in VectorVest. To access this WatchList, click on the Viewers tab and then click on WatchList Viewer and select the Commodities group. From there you can select the Silver WatchList. We are currently tracking 24 stocks in total. Not all of these stocks will be pure Silver players, but they will have some exposure to Silver and therefore have been included in this WatchList.

If you right click on the WatchList Average line (at the bottom of the WatchList) you get the option to select: View WatchList Average Graph. The graph paints an interesting picture! Take a look at the Earnings (EPS) for all the Silver stocks. If EPS is not on your graph, change your Graph Layouts to be the VectorVest Simple Layout (per the right of your screen). If you set the graph back 5 years (click on the 5y button at the bottom right of your screen). Notice how EPS across these 24 Silver Stocks has been tracking higher and higher over the last 5 years.

Despite the rising earnings over the last 5 years, the overall price has had a slight downward bias, but has been regaining ground rapidly since later 2021. There is only so long that rising earnings will allow for a sideways/downwards price pattern. The rising set of earnings in the Silver stocks WatchList will bring about a rising average price on these Silver stocks. We concentrated on all 24 Silver stocks, but what about the top 3 VST Silver stocks? As of 17 January 2022, the top 3 Silver stocks are: S32.AX, OZL.AX, SFR.AX. These 3 stocks are up over 46% collectively since 4 January 2021!

This got us thinking in regard to a specialised type of portfolio to construct. A Silver portfolio would be exactly that – stocks associated with Silver. Some of the stocks may only have a small portion of their revenue attributed to Silver, but they are Silver stocks, nonetheless. As such, a Silver portfolio would be a very specific type of stock. We got to work and BackTested many tests. The results were most interesting!

The BackTesting that brought about the better results, settled on a 4 Silver stock portfolio (no more than 4 stocks at any time). It did not matter which way we changed the BackTesting settings…there was one stock that we just could not stop from making up a large portion of the results…that being OZL.AX. The run from 2013 where OZL.AX was just under $3 per share to the dizzying height of $28.39 per share (as of 17 January 2022) has resulted in this stock being part of our BackTests. That is the interesting part of BackTests, it brings out super performers that you may not currently have been aware of.

For this week, we have included a video on how we setup the Silver portfolio. The key findings in the BackTesting we did per the portfolio is as follows:

* Annulised returns since 02 January 2015 to 17 January 2022 have been over 17%, with the Compound Rate of Returns just under 12%.
* Max Drawdown since 2015 is just over 22%.
* The portfolio has averaged 16 trades a year.
* BHP.AX has been the next best performer in the portfolio.

Please CLICK HERE to see the video on how we put together the Silver portfolio. Silver may be less prominent than discussions on Gold, but there have been some impressive returns in stocks associated with Silver over the last 7 years.

VectorVest Inc (ARBN 654 498 218) is an Authorised Representative (No. 1294036) of Centra Wealth Pty Ltd (ABN 39 158 802 450) which holds an Australian Financial Services License (AFSL No. 422704). Please refer to our Financial Services Guide which provides you with information about us and services we can provide. Any advice is general in nature and has not considered your personal objectives, financial situations or needs. You should consider whether the advice is suitable for you and your personal circumstances. BackTest results and Model Portfolio performance and profit calculations are theoretical and calculated by VectorVest Inc and do not reflect actual investments in the companies mentioned. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. Actual results may be affected by known or unknown risks and uncertainties that cannot be reasonably included in a BackTest, and therefore these outcomes can differ materially from BackTested expectations. As a result, past performance should not be relied on as a guarantee for future results. The value of any investment and income derived from it can go up and down. It is important to remember that when investing in equities and derivatives it is possible to lose some or all of your investment.