I read quite a bit on commodity trends, and from what I can ascertain there is great promise in a number of industries that are emerging from the recession. Oil, natural gas, coal, gas pipeline, iron ore, timber, fertilizer, copper, industrial metals, precious metals, tobacco and dry bulk shipping day rates are all part of the global commodity story that gives rise to the ability to invest alongside these powerful trends. This is where investors have a fighting chance to keep ahead of current interest rates and inflation, while owning a hedge against the risk of currency devaluation.
Sometimes it pays to get familiar with an area of investing that is not traditional or easily understood. The commodity markets are volatile and that spooks a lot of people. It’s easy to pull the trigger on 500 shares of McDonald’s (MCD). We all know that long-term fundamental story and that the stock steadily trades higher with the expansion of emerging markets. Half the battle of being successful in owning commodity-based investments is buying them at the right price. These stocks tend to move fast — in both directions.
What seems obvious to me, though, is that the more I read about the long-term economic progress made in countries like China, India, Brazil and numerous other emerging markets, the more convinced I become that the commodity boom is actually in a long-term secular (multi-year) bull market.
One of the best strategies to leverage income from bullish trends like these is using covered calls. And in the commodities space,U.S. Steel (X) has my attention due to renewed strength in domestic construction, the auto industry and the European economy. The stock has cleared its 200-day moving average and is, in my view, poised to rally to $23-$24 over the next couple of months.
Recommendation: For every 100 shares of X you own or purchase at market, sell one X Nov. $23 Call (X131116C00023000) at $0.60 or more per contract.
Bryan Perry is the editor of Cash Machine, a newsletter focused on high-yield income investing with the goal of maintaining a blended total yield of 10% across two portfolios. Bryan is also the editor of Extreme Income,which uses the power of historically cheap money to create a leveraged “baby hedge fund” strategy that paves the way to massive profits and 4x greater income.
Now is the perfect time to join Bryan Perry’s breakthrough income investing service, Cash Machine Trader, and discover how selling covered-call options can help you manufacture ‘top-up dividends’ of up to 30% per year.