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 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

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!