7 Top Commodity Stocks and ETFs
This week, the Federal Reserve managed to hold interest rates steady yet again … but we all know this can’t last forever. Inflation fears are starting to creep up on the American economy and are boosting prices across the board. Commodities such as gold, timber, crude oil, steel and corn are seeing huge price appreciation and should continue to see upward movement in the months ahead.
Now is the time to make sure that your portfolio is properly positioned to benefit from this commodity surge later this year. Metal & mining stocks, agricultural stocks and energy stocks are just some of the areas where high commodity prices will provide bigger profits. There are also a number of commodity ETFs that are good buys right now.
Here are 7 different InvestorPlace experts with their own favorite commodity plays to buy now. From swing trading to buy-and-hold to emerging markets, these experts have every investing strategy covered with their commodity stocks to buy.
Best Swing Trade Commodity Stock – Rayonier (RYN)
Picked by: Jon Markman, editor of Trader’s Advantage
Strategy: Swing trading to cash in on current trends
Though classified by some as a real estate investment trust because of its mammoth land holdings, Rayonier (RYN) specializes in growing and managing timber across its 2.6 million acres in the United States and New Zealand. Timber is a strange and unique commodity. Like oil and gas, extraction can be put off until prices rise. But unlike those two, the inventory actually grows in the meantime — becoming more valuable as trees thicken.
So a company has to be able to capitalize on this optionality by having a multitude of ways of selling it into various channels at different points in the economic cycle. Analysts report that Rayonier’s timber properties — mostly in Florida, Georgia and Washington — have for this and other reasons been much more productive and efficient than those of competitors.
Best China Commodity Stock – China Integrated Energy (CBEH)
Picked by: Robert Hsu, editor of China Strategy
Strategy: The hottest Asian stocks
China Integrated Energy (CBEH) is a leading Chinese private sector oil company. Its earnings are growing at 35% a year, and the stock is dirt-cheap, trading at only eight times this year’s earnings (as of a few weeks ago). Since 2005, the company has grown at an average rate of 50% annually, and today the company is perfectly positioned to benefit from the increasing demand for both petroleum products and biodiesel.
CBEH operates 12 retail gas stations in Xi’an, a city with a population of 8 million. This business is stable with a strong cash flow due to Chinese drivers’ tendency to purchase gas with cash. Gas stations account for 13% to 15% of the company’s sales and revenue.
Best Buy and Hold Commodity Stock – OxyPete (OXY)
Picked by: Richard Band, editor of Profitable Investing
Strategy: Low-risk retirement investing that beats the market
Occidental Petroleum (OXY), or OxyPete to many investors, is a superb large-cap energy company that is seeing big growth unmatched by other industry giants. OXY saw a 206% reserve-replacement ratio for 2009, and halved its operational costs. Those are tremendous moves for a company with a market capitalization of over $70 billion!
Occidental Petroleum earnings just came out on April 29, and nearly tripled its EPS from a year ago, up from $0.45 to $1.31. OXY earnings also showed revenues came in at $4.77 billion. Analysts had estimated EPS of $1.35 on revenue of $4.8 billion.
Best Dividend Paying Commodity ETF – ING Natural Resources ETF (IRR)
Picked by: Bryan Perry, editor of Cash Machine
Strategy: High-income dividend investing
Actually, my favorite dividend play for commodity stocks isn’t a stock at all — it’s an ETF. Specifically, it’s the ING Natural Resources ETF (IRR). Energy prices are back on the rise, fueled by growing optimism of a global economy bottom and led by China’s remarkable economy where GDP growth is back above 7%. This ETF has big potential in this environment. IRR focuses on providing a total return through a combination of current income, capital gains and capital appreciation. To do this, it invests at least 80% of its assets in equity securities or derivatives of natural resources companies.
A portion of IRR, 20% or so, is dedicated to securities in emerging market countries. Top holdings include Exxon Mobil (XOM) with 11.7% of assets, Chevron (CVX) at 8.2% and Schlumberger (SLB) at 5.1%.
- Best Cheap Commodity Stock – Paragon Shipping (PRGN)
Picked by: Nancy Zambell, editor of Buried Treasures Under $10
Strategy: Fundamentally strong yet undervalued companies
Though not strictly a commodity stock, Paragon Shipping, Inc. (PRGN) is well positioned to benefit from the commodity boom since it ships dry bulk cargoes around the world. The company owns and operates a fleet of seven Panamax dry bulk carriers, three Handymax dry bulk carriers and two Supramax dry bulk carriers with a capacity of approximately 765,137 dwt. That means anyone shipping metals, grain, timber or a host of other commodities will be booking space on PRGN vessels. Despite the recent enlargement of its fleet, the company’s revenue days under time charter will be 100% for 2010 — meaning it’s not wasting space on those big ships, but putting them to work. That’s great news for shareholders and a bullish sign for Paragon.
Best Small Cap Commodity Stock – Yongye International (YONG)
Picked by: Louis Navellier, editor of Emerging Growth.
Strategy: Small cap growth stocks
Yongye International (YONG) is predominately in the fertilizer businesses, but this is a key commodity stock since it serves the agriculture industry. Yongye sells its products through corporate direct sales and distributor network sales in China, as well as through its network of 2,000 brand stores. YONG expects 2010 annual sales to be between $160 million and $165 million, representing an increase of between 63% and 68% compared with last year’s revenue of $98.1 million. This new revenue guidance is up from the previously issued guidance estimate of $147 million or a 50% increase compared with 2009 sales. This booming agricultural stock is sure to cash in on the commodity boom in China right now.
Best Defensive Commodity ETF – SPDR Gold ETF (GLD)
Picked by: Richard Young, editor of Intelligence Report
Strategy: The best bedrock investments for protection and profits
I own jumbo positions in gold through the SPDR Gold Shares ETF (GLD), and I buy both as a mucho expensive insurance policy. I do not invest in this fund to make a killing in the short term, since I am much more of a “big picture” investor, but there’s no denying gold has been on a tear in the last 12 months and has some room left to run.
Gold should continue to soar due to budget and deficit problems here in the U.S. Remember, gold mining shares and numismatic coins are not a substitute for bullion, but the SPDR Gold ETF is much more manageable than a safe full of gold bars if you’re looking to protect yourself. I like a 10% position for savvy, conservative investors of modest means as both a defensive play against inflation and a long-term profit builder.