Sprott Asset Management’s Top Five Stock Picks

Sprott Asset Management, managed by the infamous precious metals bull Eric Sprott, is an investment advisory firm with an estimated $9.7 billion in assets under management. Sprott’s fund has investments in a wide array of asset classes, and has about 8% of his capital invested in US equities, as noted by his $762 million 13F portfolio. Among Sprott’s portfolio is a wide array of stocks in the basic materials sector, which comprises close to three-fourths of his total holdings. Here’s a peek at the fund’s 13F portfolio, but we’re going to take an in-depth look at its top five stock holdings, due to the fact that his 13F returned over 36% last quarter.

First Majestic Silver Corp (NYSE:AG)

First up on our list is First Majestic Silver Corp (NYSE:AG), which has returned 28.4% in 2012 thus far. With its headquarters in Canada, First Majestic explores for and produces silver in Mexico, focusing predominantly on four different mining sites. The largest mine in the company’s possession is its La Encantada site, which accounts for over half of the company’s total production.

Sprott currently owns over $64 million worth of First Majestic, good for 8.4% of his total 13F portfolio. A chief driver of the stock’s growth this calendar year is a record level of production, in addition to a rare, community-first approach to silver mining. The company has gone beyond country-specific environmental regulations multiple times throughout its history, most recently at its La Parrilla mine to eliminate groundwater pollution.

First Majestic’s third quarter was especially impressive, as the company reported more than 2 million ounces of silver were produced for the first time in its history; full financials are released early next month. Now, the company has underwhelmed in two straight quarters, but analysts are expecting stagnant EPS growth in Q3, more or less, and shares of First Majestic currently trade at a modest P/E of 5.6X and a PEG ratio of 0.56.

Moving on to the rest of Sprott’s top five, the fund’s remaining picks are: Alexco Resource Corp. (NYSEAMEX:AXU), Fortuna Silver Mines Inc. (NYSE:FSM), Coeur d’Alene Mines Corporation (NYSE:CDE), and  Allied Nevada Gold Corp. (NYSEAMEX:ANV). Now, this group has been a rather middling investment since the start of the year, but each – excluding Alexco – has been up over 40% in the past three months.

Alexco and Coeur d’Alene mine an array of minerals, while Fortuna sticks to silver and Allied Nevada explores and produces gold only. As its name suggests, Allied Nevada’s operations are centered in Nevada, while Alexco has solid reach in the Yukon, Fortuna in Peru and Mexico, and Coeur d’Alene in the Americas and Australia. Out of this bunch, Coeur d’Alene (81.5%) has generated the most impressive annual revenue growth post-recession, and Fortuna (64.2%) isn’t far behind.

Interestingly, First Majestic (89.8%) has experienced an even hastier top line expansion, but still trades at a measly sales multiple of 0.24. This is below the likes of high-growth peers Coeur d’Alene (2.5X) and Fortuna (4.2X), in addition to Alexco (2.6X) and Allied Nevada (20.7X). In comparison to its own historical averages, First Majestic also trades at a discount.

We mention the stock’s sub-1.0 PEG a few paragraphs above, but to compare, only Coeur d’Alene is at a similar undervaluation, despite expecting EPS growth over the next five years nearly six times that of First Majestic. Early analyst estimates predict that First Majestic will experience solid earnings appreciation of 10% a year over the next half-decade on the back of its aforementioned production gains. Coeur d’Alene has a forecast that is significantly more bullish, as its breadth of operations allows it to have greater earnings potential, but slightly less efficient operations, as First Majestic trumps Coeur in terms of operating and net margins quite significantly.

Out of Sprott’s top five stocks listed here, we like Coeur d’Alene and First Majestic the most, due to their earnings undervaluations and superior growth post-recession. Other money managers invested in the stocks we’ve discussed include David Dreman, Cliff Asness, Jim Simons, and Chuck Royce. For a complete listing of the hedge fund industry’s sentiment toward these stocks, continue reading here.

Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

The 10 Most Peaceful Countries in the World

5 Big Reasons Communism Failed

The 15 Most Famous Carl Icahn Quotes

10 Scary Animals that are Actually Harmless

The 8 Most Famous Singer-Actors in Entertainment

The 10 Longest Wars of All Time

The 13 Worst Looking Foods that Taste Great

The 6 Most Gruesome Injuries Suffered During a Sports Match

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!