Forget Buying Gold Directly: Wheaton Precious Metals Could Be the Better Play.

It's not quite a first-to-worst story, but after shining last year, gold has lost considerable luster in 2026. Thanks to a strong start to August, the SPDR Gold Shares and other gold ETFs backed by physical holdings of the commodity are sporting modest year-to-date gains.

If not for that recent strength, gold and related stocks and ETFs would likely be saddled with losses in 2026. Well, not all gold equities. Confirming it is, in fact, a viable alternative to directly owning bullion or a comparable exchange-traded fund (ETF), Wheaton Precious Metals (NYSE: WPM) is up 13.4% this year.

Wheaton Precious Metals is outpacing gold and may be a safer bet than traditional miners. Image source: Getty Images

Given that gold stocks are often described as under-owned, perhaps chronically so, Wheaton may not be a household name to a broad swath of investors. However, the stock is worth examining, particularly for investors seeking a unique avenue for gold exposure.

Understanding Wheaton's "magic"

Broadly speaking, gold-aware investors are familiar with commodity futures, direct holdings of gold (bars, coins, jewelry, etc.), ETFs, and mining stocks. Wheaton Precious Metals doesn't check those boxes, and that's OK.

Classified as a materials stock, Wheaton doesn't get its hands dirty by directly mining bullion. Rather, the company runs a streaming model. No, not the Netflix-type streaming. In Wheaton's case, streaming means the company is leveraged to a mine's potential. The company purchases a percentage of the mine's output in exchange for an upfront payment and a second payment upon delivery of the metals. That defrays costs for pure-play miners, and that's meaningful because gold mining is a cost-intensive gambit.

As highlighted by the fact that Wheaton's shares have more than tripled over the past three years, outperforming gold over that span, investors reap the rewards of that business model, too. It's easy to see why. Wheaton's costs are essentially etched in stone once a mining agreement is reached, helping it deliver one of the best operating margins in the industry.

Those benefits pan out on the top and bottom lines. In the first half of 2026, Wheaton posted record earnings, revenue, and operating cash flow, and ended the second quarter with $100 million in cash on hand.

Maybe a Goldilocks gold play

Investors who want to amplify returns during gold bull markets often turn to mining equities, which is a valid idea, but not a risk-free affair. Gold mining equities often overshoot the commodity in both directions, confirming a double-edged sword scenario.

Wheaton Precious Metals is in the middle of the precious metals performance spectrum. Historically, the stock has outpaced gold and silver while providing long-term investors with a less bumpy ride than owning traditional mining stocks.

One more point to consider: Wheaton is forecasting a 50% jump in production in gold-equivalent ounces (GEO) by 2030, indicating that if the yellow metal rebounds in earnest and regains its long-term bull market footing, this stock can extend its winning ways.

Todd Shriber has positions in Netflix. The Motley Fool has positions in and recommends Netflix. The Motley Fool has a disclosure policy.