The answer may surprise you...
It's silver.
According to the U.K. bank Lloyds TSB, silver has risen 572% since 2002. In comparison, the next largest commodity increase is gold, which is up 428% during the same period.
Silver's appeal is
two-fold. First, it's seen as an investment safe-haven. Second, the
precious metal is an excellent electrical conductor. As a result, silver
is increasingly being used in industrial applications, such as
electrical components for circuit parts and medical devices.According to the U.K. bank Lloyds TSB, silver has risen 572% since 2002. In comparison, the next largest commodity increase is gold, which is up 428% during the same period.
In the recently completed third-quarter, silver rose 25% an ounce. European and U.S. stimulus measures helped boost the precious metal and traders fled to it for safety from potentially vulnerable currencies.
One particularly attractive looking silver company is a Canadian midcap silver miner, Endeavour Silver (NYSE: EXK). Since it began publicly trading in 2004, the company has increased its silver reserves and production every year. It also mines a small but growing amount of gold.
Currently, EXK has three producing silver mines in Mexico -- one of the more politically stable countries for silver mining in the world. It purchased its third mine in April, a move that doubled the company's proven and probable silver reserves. It also caused its gold reserves to rocket 477%, to 390,000 ounces.
Moving forward, management plans to enhance mining operations, expand exploration and reduce costs. With strong potential for increased production, Endeavour's fundamental and technical outlook is bullish.
As the chart shows, the stock was in a major uptrend from August 2010 until September 2011.
In late September 2011, shares retreated from a multi-year high of $13.10, to a low of $7.55 in late spring. The break of the major uptrend line also saw the beginning formation of a major downtrend line, which lasted almost a year. On the positive side, shares established a solid wall of support in the low-to-mid-$7 range.
In late August 2012, the stock bullishly broke the major downtrend line. Shares continued to climb, reaching a peak of $10.73, before retreating.
The stock is currently trading around $8.85, presenting a potential buying opportunity. Shares have, so far, managed to stay above the broken downtrend line, forming a minor uptrend. At current levels, the stock has plenty of room to run before hitting resistance, around the $12.75 range, representing almost 45% potential gains from current levels.
The bullish technical outlook is supported by strong fundamentals. Third-quarter revenue jumped 34% from the comparable year-ago period, to $51.9 million. Higher metal production and the sale of some of the company's bullion inventory contributed to the gain. For the full 2012 year, analysts' project increased silver production will push revenue up 82.4% to $230.9 million, from $126.6 million in the year-ago period.
For the third quarter, silver production increased 33% from the year-ago period, to 1.1 million ounces, and gold production increased 139% to 11,700 ounces.
With greater production, full-year earnings projections are strong. Analysts expect full-year 2012 earnings to surge 209% to $0.68 per share, from $0.22 per share last year.
The company also has a strong balance sheet, with $131.6 million in cash and no long-term debt. This cash gives Endeavour the financial freedom to continue exploring and to acquire new properties.
In addition to purchasing the stock, you can earn extra income by writing covered calls. The May 2013 $12.50 strike price options are currently trading around $0.45. By writing the options, you reduce the cost basis of the trade to the mid-$8 range, as well as increase the profit potential by essentially getting paid an instant 5% "dividend."
Risks to consider: Silver is volatile and correlates with the overall "risk on" trade. An implosion in Europe, which would turn investors cautious, could mean a retreat in silver demand and silver stocks. However, Endeavour is increasing reserves and production and should be able to weather the storm.
I
believe many outstanding buying opportunities exist among undervalued
Canadian stocks. Canada's banks were not allowed to sell risky loans,
its housing market remains solid, its economic growth continues to
climb, and its debt remains low. 
The
GOLD/CRUDE OIL ratio is looking somewhat extended in the short term and
may need to drop back...after all it has risen by almost 20 per cent
over the past two months. The daily chart above shows that the ratio
would need to drop through 19.40 to violate its uptrend and if it takes
out 18.85 it should go lower still...on the other hand if instead it
should beat 20.18 it could keep rising. The ratio is somewaht overbought
short term being at 99.7 ...the forecast is for a high November 9 and
then a decline until January 10. Just a point of interest...right now
gold buys 19.65 barrels of oil and the 10 year average is a llittle
above 12 barrels.
