5 Best Commodity Investments Now

Consider these copper, steel, oil, agriculture and gold plays

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5 Best Commodity Investments Now

Exxon Mobil

You can find oil stocks with bigger yields. But there’s no bigger oil stock than Exxon Mobil (NYSE:XOM), and its breadth of operations not only provides stability but also your best shot at tapping into a surge in crude oil.

Plainly put, though oil is down from its high of $112 in the last year, there’s nowhere for energy prices to go but up in the long-term. Even with the global economy ailing, international demand is flat or up slightly based on full-year 2012 projections. Any strength from a stimulus in China or a breakout elsewhere will tip the scales clearly toward the demand side.

And while you wait, depend on XOM stock with a reasonable valuation (P/E of around 11 on fiscal 2013 earnings), great management (25% return on equity that trumps every other oil major) and a bedrock dividend history that includes 49 years of consecutive dividend increases. The headline yield of 2.6% doesn’t burn down the house, but that will surely increase over time.

MOO Agribusiness ETF

One of the easiest demographic investments you can make is on agriculture. The world population is going to keep growing, and those are more mouths to feed. Thus, while I like a number of agricultural stocks including Deere (NYSE:DE) and Potash (NYSE:POT), the Market Vectors Agribusiness ETF (NYSE:MOO) is perhaps your best bet to get a diversified play on the entire sector.

The fund has a 0.53% expense ratio, but that’s reasonable for diversification on the sector it gives you. Top components include Potash and Deere as well as seed giant Monsanto (NYSE:MON) and pesticide blue chip Syngenta (NYSE:SYT). There are fewer better ways to spread your money around the agricultural sector right now than this focused agricultural ETF.

And since the unexpected can and will happen — as this year’s drought will attest — a little diversity can help smooth out any performance as opposed to a purer agricultural commodity play that may whipsaw you around.

The fund also yields a nice 2.6% dividend based on the last four distributions, though the payouts are a bit volatile.

GLD Gold Trust

What would a commodity list be without gold and the SPDR Gold Trust ETF (NYSE:GLD)? I, for one, do not buy the nonsense about gold as a store of value or some kind of bedrock currency for the apocalypse. But I do, however, place credence in the idea of gold as a speculative investment — one that can make you money or lose you money depending on the timing of your buy.

Summertime has given us a bottom in gold prices as the market has rallied. It’s just 5% off its low of October 2011. Considering the growing uncertainty in Washington over federal spending, it may be time to play a buying surge in gold once more after this pullback.

There doesn’t seem to be an immediate rush back into the sector, but on the other hand the downside also seems to be very limited. Most charts show support at or around $1,570 — a hair above the 52-week low of $1,543 and just a short way down from here.

If and when stocks take a tumble as the S&P hovers around levels not seen since the pre-crisis days of 2008, you can expect some of that cash to go into gold and boost this pure-play gold ETF.

Jeff Reeves is the editor of InvestorPlace.com and the author of “The Frugal Investor’s Guide to Finding Great Stocks.” Write him at editor@investorplace.com or follow him on Twitter via @JeffReevesIP. As of this writing, he owned a long position in Alcoa but no other stock named here.


Article printed from InvestorPlace Media, http://investorplace.com/2012/08/5-best-commodity-investments-now/.

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