Key Points
Wheaton Precious Metals (NYSE: WPM) was hardly a golden stock in June. Although the company operates under something of an offbeat business model in the precious metals mining industry, it’s nevertheless subject to movements in the prices of such goods. Which, to put it mildly, were generally decreasing that month. This dampened enthusiasm for Wheaton’s equity, and it fell by nearly 14%.
All that glittered
Every investor nurses a secret hope that a rally in their chosen asset or asset class will last forever. For a few months late in 2025 and early this year, it seemed that might just be the case with gold, silver, and other valuable minerals.
Alas, no. The war between the U.S. and Iran rocked the global economy, not least by sharply driving up prices for fertilizer inputs and crude oil. That put inflationary pressure on the global economy, and here in the U.S., speculation grew that the Federal Reserve (Fed) would raise interest rates to tame inflation.
By and large, higher interest rates mean higher payouts on interest-bearing assets, making them that much more attractive to investors. Investible materials like gold, silver, and other precious metals yield no income, so their popularity tends to decline.
Wheaton has been a precious metals play favored by folks who like its differentiated and (to my mind, anyway) creative business strategy. The company owns no mines of its own, as per the standard and tradition of the mining industry. Rather, under the “streaming model,” which has gained traction in recent years, the company buys a percentage of the goods mined by third-party operators.
Wheaton says on its web portal that the No. 1 benefit to its strategy “is cost predictability, which translates into direct leverage to potential increases in precious metal prices.“
“Wheaton’s ongoing operating costs are set at the time a stream is entered into at a predetermined delivery payment, allowing Wheaton to deliver among the highest cash operating margins in the mining industry,” it added.
The trend sure isn’t a friend
While that’s an innovative approach, it doesn’t eliminate the risk of exposure to falling prices. Although Wheaton’s June swoon was less dramatic than those of other precious metals companies (such as Hycroft Mining, which lost more that 29% of its value over the month), it was still a prime target for a tumble.
The major takeaway here, then, is that no matter how such a company approaches its business, prices matter, at times above nearly every other factor. Looking at the current geopolitical situation and, more narrowly, at the persistence of inflation in this country (and therefore the potential for rate hikes), I don’t see those prices recovering substantially anytime soon. So I’d avoid Wheaton stock these days.
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Eric Volkman 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.
