Federal Reserve Chairman Jerome Powell was a bit of a party nut last week when he told the world to expect ‘a bit of pain’ as the central bank tries to fight the coronavirus crisis. ‘inflation. The shares sold off sharply following his remarks at the annual economic symposium in Jackson Hole, Wyo., and have continued to struggle ever since. Astute investors, however, can use this as an opportunity to buy the best falling commodity stocks.
Powell’s remarks reflected the delicate balance the Fed must strike. Go too far by raising the benchmark interest rate and the economy could quickly decelerate. But don’t push it far enough and inflation could crush US households.
However, basic resources like food and energy never go out of style. While risks abound across all market segments this year, commodity stocks present an intriguing bet due to their relevance. Below are some of the best commodities stocks to consider.
ADM | Archer-Daniels-Midland | $87.88 |
BG | Bunge | $99.19 |
ALB | Albemarle | $267.96 |
NDV | Devon Energy | $70.62 |
LNG | Energy Cheniere | $160.18 |
BPM | Wheaton Precious Metals | $30.50 |
DNN | Denison Mines | $1.41 |
Archer-Daniels-Midland (SMA)
Humans must eat. This reality reinforces the arguments in favor of Archer-Daniels-Midland (NYSE:ADM) being one of the best commodities stocks to buy. A multinational food processing and commodities trading company, ADM represents a good investment in these troubled times.
The company symbolizes resilience and reliability, posting 49 consecutive years of dividend increases. With myriad organizations struggling in an environment of rising borrowing costs, this balance sheet provides much-needed insurance.
Basically, Archer-Daniels offers products and solutions throughout the food value chain. From ingredients to supplements to beverages, the company does it all. It also includes an animal nutrition division, serving the companion animal, poultry and horse industries.
As you can imagine, investors gave ADM a premium for its safe haven profile. The shares are up 32% since the start of the year. However, they are down about 3% since Powell spoke and are 11% below their all-time high, reached in April.
Bunge (BG)
Food and agribusiness company Bunge (NYSE:BG) gained relevance due to Russia’s invasion of Ukraine, which led to major disruptions in the supply chains of several resources, including foodstuffs.
With Ukraine being one of the world’s leading grain exporters, prices of food items like wheat have jumped significantly. The situation is unlikely to be resolved anytime soon, as Ukraine has recently launched its long-awaited counter-offensive.
Wheat and Specialty Ingredients is one of Bunge’s core business units. As supplies look poised for another slump, investors may want to stock up on BG stocks. Shares are up around 8% for the year, but have fallen 5% in recent days and are 23% below their 52-week high.
Albemarle (ALB)
As analysts like to say these days, electric vehicles are the future. Naturally, such sentiment has prompted investors to seek out public companies that can dominate the electric vehicle industry for years to come. However, predicting consumer sentiment is tricky business. An electric vehicle company hot today could file for bankruptcy in a few years.
Infrastructure-related companies like Albemarle (NYSE:ALB) take a lot of the guesswork out of the equation. Rather than trying to figure out which brands will win and lose, Albemarle provides what all electric vehicles need: lithium for the batteries. Therefore, ALB easily qualifies as one of the best commodity stocks to buy.
Although shares are up 15% so far in 2022, investors shouldn’t expect to get rich on ALB. Infrastructure games just aren’t as exciting as individual consumer brands. However, with shares down 10% from their high of 52 hit last week, investors may want to add ALB to their portfolio now at a discount.
Devon Energy (DVN)
As an independent oil and gas exploration and production company, Devon Energy (NYSE:NDV) has outperformed this year, up 66%. Russia’s invasion of Ukraine has dealt a severe blow to global energy supplies and prompted the United States and other Western allies to impose sanctions. As a result, energy prices have skyrocketed.
This context has benefited Devon, with the company benefiting from a significant improvement in its profitability. In the second quarter, its operating margin was almost 46%, compared to 12.4% in the year-ago quarter.
DVN does not offer the biggest discount among commodity stocks. Shares are up 66% since the start of the year. However, in recent days they have fallen 6% from their highs as investors weighed the impact of rising interest rates. And they are 11% below their all-time high, reached in early June. This could therefore still be an interesting opportunity for speculators.
Cheniere Energy (LNG)
While Europe in particular is suffering from the energy disruption caused by the Russian-Ukrainian conflict, Energy Cheniere (NYSEAMERICAN:LNG) approached the plate. Specializing in liquefied natural gas (or LNG, just like its ticker), Cheniere will likely be one of the most relevant commodities stocks to buy for years to come.
Cheniere delivered over 70% of its export cargoes to Europe in the first half of this year. The company exported 316 LNG shipments, compared to 272 in the first half of 2021.
In the future, Cheniere will probably play the role of Europe’s savior. Again, with Ukrainian forces launching a counter-offensive, the conflict is unlikely to end any time soon. Also, with the harsh winter season approaching for Europe, the region does not have many viable alternatives.
LNG is up 59% so far this year, but stocks have slipped 7% from their all-time high reached a week ago, possibly in reaction to the Fed’s commitment to a hawkish monetary policy. That might be an overreaction, though, as Cheniere’s core product is too important to ignore.
Wheaton Precious Metals (WPM)
Wheaton Precious Metals (NYSE:BPM) is actually one of the most disappointing commodities stocks of 2022, with stocks down 28% for the year and more than 10% in August. But, for risk-tolerant speculators, the WPM may be worth a look.
Wheaton specializes in gold and silver mining, which theoretically should rise during inflationary cycles. Basically, in turbulent times, precious metals tend to attract buyers looking for safe havens. Of course, buying physical gold and silver is tedious. Therefore, mining companies present a more convenient option.
As a streaming company, Wheaton provides seed funding to mining companies in exchange for producing metals on specified terms. Thus, the company facilitates far greater price predictability than is possible for direct mining companies.
Also, with so much going on in the world, the precious metals sector might not be deflated indefinitely. Therefore, WPM is worth keeping on your radar.
Denison Mines (DNN)
These days, the political narrative when it comes to commodity stocks focuses on sustainability. Certainly, green energy solutions like wind and solar have improved considerably. Unfortunately, no matter how much they improve, these sources will forever remain intermittent. The wind does not blow forever and the sun eventually gives way to nightfall.
As a result, wind and solar have the lowest capacity factor among all energy sources. In contrast, nuclear power has the highest capacity factor at 92.5%. In other words, each year, nuclear installations operate at maximum power nearly 93% of the time. Combined with its incredible energy density, nuclear is invariably a vital cog in the resource supply chain.
If you really have the stomach for speculation, you might want to consider Denison Mines (NYSEAMERICAN:DNN). Specializing in uranium exploration and development, Denison may not get much attention from environmentalists, but this penny stock could still hold huge potential.
DNN is up about 3% year-to-date and sits 34% below its 52-week high.
As of the date of publication, Josh Enomoto had no position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.
Federal Reserve Chairman Jerome Powell was a bit of a party nut last week when he told the world to expect ‘a bit of pain’ as the central bank tries to fight the coronavirus crisis. ‘inflation. The shares sold off sharply following his remarks at the annual economic symposium in Jackson Hole, Wyo., and have continued to struggle ever since. Astute investors, however, can use this as an opportunity to buy the best falling commodity stocks.
Powell’s remarks reflected the delicate balance the Fed must strike. Go too far by raising the benchmark interest rate and the economy could quickly decelerate. But don’t push it far enough and inflation could crush US households.
However, basic resources like food and energy never go out of style. While risks abound across all market segments this year, commodity stocks present an intriguing bet due to their relevance. Below are some of the best commodities stocks to consider.
ADM | Archer-Daniels-Midland | $87.88 |
BG | Bunge | $99.19 |
ALB | Albemarle | $267.96 |
NDV | Devon Energy | $70.62 |
LNG | Energy Cheniere | $160.18 |
BPM | Wheaton Precious Metals | $30.50 |
DNN | Denison Mines | $1.41 |
Archer-Daniels-Midland (SMA)
Humans must eat. This reality reinforces the arguments in favor of Archer-Daniels-Midland (NYSE:ADM) being one of the best commodities stocks to buy. A multinational food processing and commodities trading company, ADM represents a good investment in these troubled times.
The company symbolizes resilience and reliability, posting 49 consecutive years of dividend increases. With myriad organizations struggling in an environment of rising borrowing costs, this balance sheet provides much-needed insurance.
Basically, Archer-Daniels offers products and solutions throughout the food value chain. From ingredients to supplements to beverages, the company does it all. It also includes an animal nutrition division, serving the companion animal, poultry and horse industries.
As you can imagine, investors gave ADM a premium for its safe haven profile. The shares are up 32% since the start of the year. However, they are down about 3% since Powell spoke and are 11% below their all-time high, reached in April.
Bunge (BG)
Food and agribusiness company Bunge (NYSE:BG) gained relevance due to Russia’s invasion of Ukraine, which led to major disruptions in the supply chains of several resources, including foodstuffs.
With Ukraine being one of the world’s leading grain exporters, prices of food items like wheat have jumped significantly. The situation is unlikely to be resolved anytime soon, as Ukraine has recently launched its long-awaited counter-offensive.
Wheat and Specialty Ingredients is one of Bunge’s core business units. As supplies look poised for another slump, investors may want to stock up on BG stocks. Shares are up around 8% for the year, but have fallen 5% in recent days and are 23% below their 52-week high.
Albemarle (ALB)
As analysts like to say these days, electric vehicles are the future. Naturally, such sentiment has prompted investors to seek out public companies that can dominate the electric vehicle industry for years to come. However, predicting consumer sentiment is tricky business. An electric vehicle company hot today could file for bankruptcy in a few years.
Infrastructure-related companies like Albemarle (NYSE:ALB) take a lot of the guesswork out of the equation. Rather than trying to figure out which brands will win and lose, Albemarle provides what all electric vehicles need: lithium for the batteries. Therefore, ALB easily qualifies as one of the best commodity stocks to buy.
Although shares are up 15% so far in 2022, investors shouldn’t expect to get rich on ALB. Infrastructure games just aren’t as exciting as individual consumer brands. However, with shares down 10% from their high of 52 hit last week, investors may want to add ALB to their portfolio now at a discount.
Devon Energy (DVN)
As an independent oil and gas exploration and production company, Devon Energy (NYSE:NDV) has outperformed this year, up 66%. Russia’s invasion of Ukraine has dealt a severe blow to global energy supplies and prompted the United States and other Western allies to impose sanctions. As a result, energy prices have skyrocketed.
This context has benefited Devon, with the company benefiting from a significant improvement in its profitability. In the second quarter, its operating margin was almost 46%, compared to 12.4% in the year-ago quarter.
DVN does not offer the biggest discount among commodity stocks. Shares are up 66% since the start of the year. However, in recent days they have fallen 6% from their highs as investors weighed the impact of rising interest rates. And they are 11% below their all-time high, reached in early June. This could therefore still be an interesting opportunity for speculators.
Cheniere Energy (LNG)
While Europe in particular is suffering from the energy disruption caused by the Russian-Ukrainian conflict, Energy Cheniere (NYSEAMERICAN:LNG) approached the plate. Specializing in liquefied natural gas (or LNG, just like its ticker), Cheniere will likely be one of the most relevant commodities stocks to buy for years to come.
Cheniere delivered over 70% of its export cargoes to Europe in the first half of this year. The company exported 316 LNG shipments, compared to 272 in the first half of 2021.
In the future, Cheniere will probably play the role of Europe’s savior. Again, with Ukrainian forces launching a counter-offensive, the conflict is unlikely to end any time soon. Also, with the harsh winter season approaching for Europe, the region does not have many viable alternatives.
LNG is up 59% so far this year, but stocks have slipped 7% from their all-time high reached a week ago, possibly in reaction to the Fed’s commitment to a hawkish monetary policy. That might be an overreaction, though, as Cheniere’s core product is too important to ignore.
Wheaton Precious Metals (WPM)
Wheaton Precious Metals (NYSE:BPM) is actually one of the most disappointing commodities stocks of 2022, with stocks down 28% for the year and more than 10% in August. But, for risk-tolerant speculators, the WPM may be worth a look.
Wheaton specializes in gold and silver mining, which theoretically should rise during inflationary cycles. Basically, in turbulent times, precious metals tend to attract buyers looking for safe havens. Of course, buying physical gold and silver is tedious. Therefore, mining companies present a more convenient option.
As a streaming company, Wheaton provides seed funding to mining companies in exchange for producing metals on specified terms. Thus, the company facilitates far greater price predictability than is possible for direct mining companies.
Also, with so much going on in the world, the precious metals sector might not be deflated indefinitely. Therefore, WPM is worth keeping on your radar.
Denison Mines (DNN)
These days, the political narrative when it comes to commodity stocks focuses on sustainability. Certainly, green energy solutions like wind and solar have improved considerably. Unfortunately, no matter how much they improve, these sources will forever remain intermittent. The wind does not blow forever and the sun eventually gives way to nightfall.
As a result, wind and solar have the lowest capacity factor among all energy sources. In contrast, nuclear power has the highest capacity factor at 92.5%. In other words, each year, nuclear installations operate at maximum power nearly 93% of the time. Combined with its incredible energy density, nuclear is invariably a vital cog in the resource supply chain.
If you really have the stomach for speculation, you might want to consider Denison Mines (NYSEAMERICAN:DNN). Specializing in uranium exploration and development, Denison may not get much attention from environmentalists, but this penny stock could still hold huge potential.
DNN is up about 3% year-to-date and sits 34% below its 52-week high.
As of the date of publication, Josh Enomoto had no position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com Publication guidelines.