Offset Market Volatility With a Shiny Investment

Looking to offset market volatility with a shiny investment you can hold for the long-term? Here’s a precious option to consider.

| More on:
Nickel ore is mined from the ground.

Source: Getty Images

Volatility has gripped the market for much of 2022, leading to an overall retreat in recent weeks. In fact, the market is down well over 11% year-to-date. While this has exposed investors to some discounted options to consider, it’s also elevated the appeal of some defensive options. Specifically, to offset market volatility with a shiny investment or two.

Something shiny and new

During times of volatility, investors have flocked to precious metals since the dawn of investing. The perceived safety of precious metals lies at the heart of this phenomenon.

One investment that all investors looking to offset market volatility should consider is Wheaton Precious Metals (TSX:WPM)(NYSE:WPM)

Wheaton is not a traditional mining stock, but rather, a precious metals streamer. For those that are unfamiliar with this distinction, streamers are a lower-risk option to consider.

The streaming business model is lucrative and lower risk

Specifically, streamers provide the upfront financing to traditional miners to setup the mine and begin operations. In exchange for that initial investment, streamers are allowed to purchase some of the metals produced by the mine at a significant discount.

To illustrate that discount, the current market price for an ounce of gold and silver is near US$1,670 and US$19 respectively. The discounted price that Wheaton pays for an ounce of gold can be as low as US$400 per ounce. For silver, that price can drop as low as US$4.50.

Once Wheaton has purchased those precious metals, it can then sell some or all of them at the current market rate. This makes the company’s streaming model both lucrative and a lower-risk option when compared with its traditional mining peers.

More importantly, this means that Wheaton can quickly move on to other mines, leaving the day-to-day running of the mine to the traditional miner. Additionally, the arms-length business approach allows Wheaton to deal with a variety of miners all at once. In fact, the company has agreements in place with 24 different miners.

That’s part of the reason why Wheaton has active operations in 21 mines across two continents. The company also has a further 14 mines in various stages of development.

The lucrative business model, in conjunction with strong precious metal prices and ample production, has boosted Wheaton during earnings season.

In the most recent quarter, the company reported $300 million in revenue and $206 million in operating cash flow. This translated into a cash balance of $449 million and no debt.

In terms of profitability, Wheaton earned $149 million, or $0.33 per share in the most recent quarter.

Should you offset market volatility with a shiny investment like Wheaton?

Wheaton is an intriguing investment that should be on the radar of every investor. Apart from its lower-risk operation, the company also provides a dividend.

The current dividend is based on the cash generated over the prior four quarters. Today’s yield works out to a respectable 1.93%. That may not be high enough to lure income-seeking investors, but it’s a payout that is well-covered.

In my opinion, Wheaton is an intriguing option to diversify your long-term portfolio. The stock, like much of the market, is also down significantly this year, making it an opportune time to buy.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Demetris Afxentiou has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

More on Metals and Mining Stocks

Concept of multiple streams of income
Stocks for Beginners

Lock Up This 9.2% Dividend Yield From a Top Royalty Stock

Royalty stocks have a strong advantage when it comes to creating passive income for investors. But this one has the…

Read more »

Safety helmets and gloves hang from a rack on a mining site.
Metals and Mining Stocks

Is First Quantum Minerals Stock a Good Buy Right Now?

First Quantum is a TSX stock that trades 61% below all-time highs. However, the mining stock still trades at a…

Read more »

nugget gold
Metals and Mining Stocks

The Best Gold Stock to Invest $1,000 in Right Now

Here are two of the best Canadian gold stocks that can yield some eye-popping returns in the long run.

Read more »

nugget gold
Stocks for Beginners

The Ultimate Mining Stock to Buy With $1,000 Right Now

This mining stock just saw a drop, but don't let that keep you from diving in. This miner is due…

Read more »

A plant grows from coins.
Metals and Mining Stocks

Canadian Mining Stocks: Buy, Sell, or Hold?

Explore 2025’s top Canadian mining stocks – gold, uranium, and base metals offer big potential in a dynamic, commodity-driven market.

Read more »

farmer holds box of leafy greens
Metals and Mining Stocks

3 Reasons to Buy Nutrien Stock Like There’s No Tomorrow

Nutrien stock has lost 34% of its value just this year alone and looks incredibly cheap today. Yet, secular trends…

Read more »

Canada national flag waving in wind on clear day
Tech Stocks

Trump Trade: Canadian Stocks to Watch

With Trump returning to the presidency, there are some sectors that could boom in Canada, and others to watch. But…

Read more »

Super sized rock trucks take a load of platinum rich rock into the crusher.
Metals and Mining Stocks

Invest $7,000 in This Dividend Stock for $672 in Passive Income

High yield can be an essential requirement when you need to start even a modestly sized passive income with a…

Read more »