One group of real assets that have not been of much interest to investors in recent years are commodities — especially raw materials, suggests Jim Powell, editor of Global Changes & Opportunities Report.
With Covid-19 apparently on the way out — and with the outlook improving for global economic growth — commodity prices are again rising.
Although another “super cycle” such as we saw in 2008 is unlikely, another bull cycle for commodities appears to be starting. It should be especially profitable because most commodity cycles last several years.
Oil prices have been on a roll in recent months and are now above $60 a barrel. Copper hit an eight-year high. Iron rose 85% over the past year. Our tech metals — nickel, silver, cobalt, platinum and palladium — have also been appreciating.
A broad index of all commodity prices is up 17% since November. That’s a significant change for a sector that has been moribund for nearly a decade. Commodities are back — and investors should participate in their recoveries.
Freeport McMoRan (FCX) is the world’s leading producer of copper — and is my top commodity recommendation. Copper is an essential metal that’s used extensively in everything from the largest buildings to miniaturized electronics.
The list of uses also includes solar panels, wind turbines, electric cars, and other new technologies that are being adopted rapidly throughout the world.
In the US alone, the demand for copper is expected to soar as the Texas freeze and other blackouts showed that our antiquated power grid must finally be updated. More power plants will also be needed to regularly recharge millions of new electric cars.
The bottom line is that over the next several years, demand for copper is expected to greatly outpace the supply — and its price should soar.
We will be double dippers with Freeport McMoRan. I first recommended the stock in August 2017 when it was selling for $12.05. Despite its strong performance, I think more profits are coming from FCX as the global demand for copper ramps up again.
BHP Group (BHP)
Another rebounding commodity supplier is BHP Group (formerly BHP Billiton) — the most diversified industrial metal, raw material, and energy investment on the planet. With commodity prices finally recovering from their Covid-19 plunges, I think BHP’s gains will continue.
BHP is a major producer of aluminum, copper, lead, zinc, silver, nickel, titanium, manganese, and other metals used in electronics and industry.
In addition, the company owns 40% of the world’s known uranium supply. If I am correct in thinking that green energy (primarily solar and wind) will need to be backed up by stand-by nuclear plants, BHP’s uranium should be worth far more than gold.
Thanks to its broad base of valuable raw materials, BHP has the added attraction of providing investors with a hedge against inflation and a falling dollar.
BHP’s upward move is already getting underway. The company just declared a record dividend — which should be the start of a trend. In our resource hungry world, I think BHP will deliver excellent long-term profits.
