We find ourselves barely a month away from Britain’s scheduled exit from the European Union on October 31. Parliament remains horribly paralysed while Brussels’ lawmakers still refuse to renegotiate the controversial Withdrawal Agreement. The future remains uncertain.
Despite the Benn-Burt Act, which the Commons passed this month — legislation designed to take an economically-destructive no-deal Brexit off the table — prime minister Johnson remains determined to pull the UK out of the continental trading club on the above date come what may.
Could Downing Street have found a legal loophole by which to circumnavigate the Benn-Burt Act? Or can we expect more parliamentary gymnastics that could see a hard Brexit happen in the next few weeks? The answer will, of course, become clearer in the fullness of time. What is clear and undisputed, however, is that we as investors need to protect ourselves for such an eventuality. And one such way to do this is to gain access to precious metals.
Silver surfer
Gold’s charge above $1,500 per ounce has dominated the headlines of late, along with predictions that bullion’s about to barge to fresh record peaks of around $2,000. But gold isn’t the only game in town, though. Another way to play the rush to store-of-value assets is by getting exposure to silver.
Many market commentators certainly believe the dual-role metal — which is charging back towards the three-year highs of $19.30 per ounce hit earlier in September — is primed to keep swelling. Indeed, brokers over at UBS have been upgrading their forecasts of late and they now expect prices to test the $20 marker within the next three months.
Growth, dividends AND value
But rather than buy silver itself (or a metal-backed financial instrument such as an ETF) I reckon snapping up silver producers like Hochschild Mining (LSE: HOC) is a better bet. Whereas investment in the former allows you to benefit from rises in the value of the commodity, shares like the one mentioned, offer this, as well as the added bonus of dividends. This particular mining play for example offers yields of 1.5% and 1.7% for 2019 and 2020, respectively.
In fact, it could be argued Hochschild’s one of the hottest buys across all of London’s precious metals producers, as output across its South American assets booms (first-half output of 19.9m silver equivalent ounces, and 245,325 gold equivalent ounces, was the second highest on record).
Booming production and commodity prices means City analysts expect earnings to swell 122% at Hochschild in 2019 and for them to rise an extra 56% next year. And these projections mean that, at current prices, the miner deals on a bargain-basement, sub-1 price-to-earnings growth (PEG) ratio of 0.2. Hochschild’s already gained 42% in value in 2019 and this low rating alone gives it plenty of licence to keep on booming as we approach the October’s official Brexit date, and probably beyond too.