The ownership of a physical form of precious metal such as platinum and gold will provide an investor with a one to one correlation with commodity price movements. However, owning the commodity in this form presents challenges in terms of storage and liquidity. Platinum mining stocks are a more feasible alternative for some investors and they can be quite a worthwhile investment.
An individual who is interested in investing in platinum stocks should assess several factors prior to making an investment. The company should have a record of consistent profitability, a low beta, low debt ratios, and a low price-to-earnings ratio. The production costs per ounce should be low because this will allow the company to weather platinum market downturns.
The precious metals industry tends to attract fraudulent enterprises so an investor should thoroughly investigate any new mining company that claims to have hit the big one. Mines that have a good production history are much safer bets, especially in an unstable economy. That is not to say that there are not any legitimate new mining companies out there, but buyer beware.
Another factor that should be considered is the government perspective regarding property rights. The investor should find out where the company’s mines are located and assess the political climate within the country. The labor relations within the company should also be investigated to make sure that there is not a tendency to strike. If a union exists, the environment may be very militant considering the hazardous nature of mining work.
All of these factors should be taken into consideration when selecting a platinum mining stock. The investor needs to be thoroughly educated on the company and its holdings before purchasing any shares. The research and investigation done at this stage will pay off in terms of the selection of stock in a reputable platinum mining company.