Harvard Endowment Director Says to Buy Natural Resources

Jane Mendillo of Harvard Management Company, which manages Harvard University’s $32 billion endowment, told the gathering of investors at the Delivering Alpha Conference last week that she looks at an increasing world population, and a wealthier middle class in developing countries, and believes that the demand for natural resources such as timber, food, and water will increase in the long term. Therefore, she is bullish on companies that do business in related industries, calling natural resources “our favorite area.” We investigated her investment thesis and came up with a list of stocks we think she and similar-minded investors would like:

Jane Mendillo

Plum Creek Timber (NYSE:PCL): Plum Creek Timber operates as a real estate investment trust that owns and manages forest land. Timber is a natural resource whose price might be expected to rise with global demand for construction, including residential, commercial, and industrial construction. Plum Creek Timber’s stock price has risen a few percent over the last five years (crossing into the black this year, when it has risen 8%), and the company pays shareholders a 4.2% dividend yield. First Eagle Investment Management owned 7.6 million shares of Plum Creek Timber at the end of March as part of a diversified portfolio after growing its position last summer (see other stocks from First Eagle).

BP Plc (NYSE:BP): Save for El Paso, which was in the process of being acquired at the time, BP leads the ten most popular energy stocks among hedge funds as of the end of March. Fifty five hedge funds, including renowned value investor Seth Klarman’s Baupost Group, had the stock in their portfolio. While BP has had public relations difficulties over the past few years, it is a leading oil exploration and production company which stands to benefit from Mendillo’s favorite trends. It is also trading at five times trailing earnings and paying a 4.6% dividend yield, making it a value stock as well as one whose earnings will rise if oil prices rally on long-term global development.

Potash Corp of Saskatchewan (NYSE:POT): Potash sells a variety of fertilizers, which benefits from higher agricultural demand. The company is vertically integrated, performing every step from mining the raw potash (a crucial ingredient) to selling the finished fertilizer. Potash Corp of Saskatchewan is up over 70% in the last five years and now boasts a $39 billion market cap, with a trailing P/E of 14. Adage Capital Management owns 5.7 million shares after increasing its stake since last September (find out what other stocks Adage likes). As it happens, Adage is co-managed by two alumni of Harvard Management; the endowment has a minority interest in the fund and has invested $1.8 billion.

Watts Water Technologies (NYSE:WTS): Water is the trickiest aspect of Mendillo’s thesis to invest in. There are many water utilities in the U.S., but these companies are not exposed to the upside of global development. Soft drink companies produce bottled water, but that does not seem to fit either. We would suggest that investors look at Watts Water Technologies, a $4 billion market cap company which provides water pumps and flow systems worldwide. The company’s strong expected growth brings its forward P/E under 13, it pays a 2.2% dividend yield, and it is also a favorite stock of Doug Silverman’s Senator Investment Group, which initiated a 1.5 million share position in the first quarter of 2012 (see Senator’s other stock picks).

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Best States To Practice Medicine

The 10 Best States to Have a Business

The 12 Most Expensive Apple (AAPL) Apps in the Market

The 10 Richest Billionaires in the World

10 Biggest Kickstarter Failures

The 10 Best Places to Work At

The Top 10 of Google Inc (GOOGL)’s Most Expensive Acquisitions

13 Best Cities to Visit in South America

10 Most Expensive Works of Art of All Time

The 10 Richest Banks in the World

The 10 Best-Paying Jobs in America (2014)

7 Most Expensive Foods in the World

The World’s Top 10 Earning Authors

Five Wicked and Very Expensive Items (and Other “Stuff”) Sold on eBay

10 Biggest Celebrity Bankruptcies

The Top 10 Highest Paid CEOs in 2014

The 10 Most Expensive Real Estate Cities in America

10 Most Expensive States To Live In America

The 10 Best Airlines in the World

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!