In this article, we will be taking a look at the 12 best commodity stocks to buy according to hedge funds. To skip our detailed analysis of the commodity sector, you can go directly to see the 5 Best Commodity Stocks to Buy According to Hedge Funds.
Latest Commodity Price Changes
According to data published by the World Bank, as of March 2, 2023, energy prices have declined by 7.3% between February and March. Coal and natural gas took the lead in this decline, with the former declining by 34.8% and the latter falling by 27.2% over the same period. However, when it comes to price changes for non-energy commodities over this period, it was seen that there were minimal price changes. Food and beverage prices actually rose by 1% and 5.2%, respectively, while raw materials prices eased by 0.9%. Through all these price fluctuations, commodity stocks such as Exxon Mobil Corporation (NYSE:XOM), Barrick Gold Corporation (NYSE:GOLD), and Chevron Corporation (NYSE:CVX) have gone through immense turbulence. Regardless, with commodity prices for some commodities still on the rise, these stocks remain well-placed to benefit in 2023.
Such optimism surrounding the commodity sector is supported by the outlook for this sector in 2023. According to a Goldman Sachs report published in December 2022, commodities proved to be the best-performing asset class in 2022 despite price declines. By December, commodities had generated 20% returns, for instance. 2022 was the second year where commodities managed to perform this well since they generated returns of 42% in 2021 as well. Based on these trends, alongside European improvements in energy efficiency and slowing Fed rate hikes in the US, Goldman Sachs analysts expect the commodity sector to return 43% in 2023 as well.
A Need for Greater Investment in Commodities
With price fluctuations where commodity prices often spike higher and the supply of commodities often not able to meet demand, a need to increase investment in the commodity sector has been identified by experts at Goldman Sachs. Higher commodity prices signal their scarcity, while the fact that commodities have been outperforming other asset classes signifies that investors should direct more capital into this sector. Greater capital is the only thing that can help raise the supply of commodities and rebalance the physical economy. The commodity sector has issued calls for capital in the past as well – first in the 1970s, then in the 2000s, and now in the 2020s. This indicates the importance of continued investment in this sector, leading us to compile a list of the best commodity stocks to buy today.
Photo by Francisco Fernandes on Unsplash
Let’s now take a look at the 12 best commodity stocks to buy according to hedge funds.
Our Methodology
Using Insider Monkey’s hedge fund data for the fourth quarter, when 943 hedge funds were tracked, we picked commodity stocks that were popular among elite hedge funds as of the end of 2022.
Best Commodity Stocks To Buy According to Hedge Funds
12. Wheaton Precious Metals Corp. (NYSE:WPM)
Number of Hedge Fund Holders: 28
Wheaton Precious Metals Corp. (NYSE:WPM) is a materials company that primarily sells precious metals in Canada, Europe, and South America. The company is based in Vancouver, Canada. It deals in gold, silver, palladium, and cobalt deposits.
John Sclodnick, an analyst at National Bank, holds an Outperform rating on Wheaton Precious Metals Corp. (NYSE:WPM) shares as of March 13.
The company operates about 20 mines and 12 development projects throughout the Americas. In the fourth quarter, Wheaton Precious Metals Corp. (NYSE:WPM) generated revenues of $236.1 million, and an adjusted income of $103.7 million, or $0.23 per share. According to TipRanks, analysts on Wall Street rate Wheaton Precious Metals Corp. (NYSE:WPM) as a Strong Buy, with nine Buy ratings and one Hold rating.
First Eagle Investment Management was the largest shareholder in Wheaton Precious Metals Corp. (NYSE:WPM) at the end of the fourth quarter, holding 20.2 million shares. In total, 28 hedge funds were long the stock, with a total stake value of $672 million.
Wheaton Precious Metals Corp. (NYSE:WPM), like Exxon Mobil Corporation (NYSE:XOM), Barrick Gold Corporation (NYSE:GOLD), and Chevron Corporation (NYSE:CVX), is a commodity stock that is highly popular among elite hedge funds today.
11. Rio Tinto Group (NYSE:RIO)
Number of Hedge Fund Holders: 29
Rio Tinto Group (NYSE:RIO) is a diversified metals and mining company based in London, United Kingdom. The company is engaged in exploring, mining, and processing mineral resources across the globe. It operates through its Iron Ore, Aluminum, Copper, and Minerals segments.
On March 13, CLSA analysts upgraded shares of Rio Tinto Group (NYSE:RIO) from Underperform to Outperform.
Rio Tinto Group (NYSE:RIO) is an attractive dividend stock, with a yield of 7.59% as of March 26. In the fourth quarter of 2022, the company increased its iron ore output by 6% year-over-year to 89.5 Mt, while its iron ore shipments increased by 4% year-over-year as well. Wall Street analysts have placed an average price target of $98.99 on Rio Tinto Group (NYSE:RIO) shares which were trading at $64.67 on March 26. This gives the stock an upside potential of 53.07%.
Our hedge fund data shows 29 funds long Rio Tinto Group (NYSE:RIO) in the fourth quarter. Their total stake value was $2.6 billion.
10. Barrick Gold Corporation (NYSE:GOLD)
Number of Hedge Fund Holders: 40
Barrick Gold Corporation (NYSE:GOLD) is a company engaged in the exploration, mine development, production, and sale of gold and copper properties. The company is based in Toronto, Canada. It owns interests in producing gold mines located in Argentina, Canada, Côte d’Ivoire, the Democratic Republic of Congo, the Dominican Republic, Mali, Tanzania, and the US.
An Overweight rating was reiterated on Barrick Gold Corporation (NYSE:GOLD) shares on January 30 by Matthew Murphy at Barclays.
First Eagle Investment Management was the largest shareholder in Barrick Gold Corporation (NYSE:GOLD) at the end of the fourth quarter, holding 42.3 million shares. There were 40 hedge funds long the stock in total. Their total stake value was $721 million.
Old West Management, an investment management company, mentioned Barrick Gold Corporation (NYSE:GOLD) in its fourth-quarter 2022 investor letter. Here’s what the firm said:
“Barrick Gold Corporation (NYSE:GOLD) is the second largest gold miner in the world, with operations in the U.S., Canada, Africa, South America and more. Barrick is also a major copper producer. Former Goldman Sachs executive John Thornton took control of the company in 2012 and quickly realized he wanted someone with a mining background to run the company. Mark Bristow, at that time CEO of Randgold, was considered one of the best gold mining executives in the world. Thornton wanted Bristow so badly Barrick bought Randgold in 2018. Bristow who is South African, had extensive experience operating mines throughout Africa, and in fact would fly his own single engine plane to visit mines. He has his PhD in Geology, and he has flourished running Barrick the past five years.
Barrick is estimated to have $1.6 billion of net income this year on $11.5 billion of revenue. Net Income has been growing 15% per year. The stock trades at $19.00 per share which is 16 times forward earnings, and the stock has a 3.15% dividend yield. Barrick has a fortress balance sheet with $5.7 billion in cash and $5 billion of long term debt, which is only one time EBITDA”
9. Cleveland-Cliffs Inc. (NYSE:CLF)
Number of Hedge Fund Holders: 40
Cleveland-Cliffs Inc. (NYSE:CLF) is a steel company based in Cleveland, Ohio.
Lucas Pipes, an analyst at B. Riley, holds a Buy rating on Cleveland-Cliffs Inc. (NYSE:CLF) shares as of February 15.
Cleveland-Cliffs Inc. (NYSE:CLF) is the largest producer of flat-rolled steel and iron pellets in North America, making the company a major supplier for the auto industry. According to Goldman Sachs’ Steel & Iron Ore chartbook, the US auto industry is recovering quickly in 2023, meaning demand for steel is set to rise. Suppliers such as Cleveland-Cliffs Inc. (NYSE:CLF) are set to benefit from this rising demand in 2023. Analysts on Wall Street have thus placed an average price target of $22.21 on the shares, which were trading at $17.43 on March 26. This gives the stock an upside potential of 27.4%.
Cleveland-Cliffs Inc. (NYSE:CLF) was found among the 13F holdings of 40 hedge funds in the fourth quarter, with a total stake value of $542 million.
8. Archer Daniels Midland Company (NYSE:ADM)
Number of Hedge Fund Holders: 40
Archer Daniels Midland Company (NYSE:ADM) is an agricultural products and services company based in Chicago, Illinois. The company procures, transports, stores, processes, and merchandises agricultural commodities, products, and ingredients. It operates primarily in the US, Switzerland, the Cayman Islands, Brazil, Mexico, Canada, and the United Kingdom.
Stifel’s Vincent Anderson holds a Buy rating on Archer Daniels Midland Company (NYSE:ADM) shares as of January 3.
In 2022, unexpected food inflation pushed annual revenues for Archer Daniels Midland Company (NYSE:ADM) to all-time highs of $101.5 billion, compared to $85.2 billion in 2021 and $64.4 billion in 2020. In the fourth quarter, the company also generated $1.93 in EPS, beating estimates by $0.28. According to TipRanks, Wall Street analysts see Archer Daniels Midland Company (NYSE:ADM) shares as a Moderate Buy and have placed an average price target of $102.5 on the shares. Considering the shares were trading at $76.61 on March 26, this price target gives the stock an upside potential of 33.79%.
Archer Daniels Midland Company (NYSE:ADM) had 40 hedge funds long its stock in the fourth quarter, with a total stake value of $701 million. Markel Gayner Asset Management was the largest shareholder in the company, holding 1.5 million shares.
7. Albemarle Corporation (NYSE:ALB)
Number of Hedge Fund Holders: 46
Albemarle Corporation (NYSE:ALB) is a specialty chemicals company based in Charlotte, North Carolina. The company develops, manufactures, and markets engineered specialty chemicals across the globe. It operates through its Lithium, Bromine, and Catalysts segments.
On March 16, analysts David Begleiter and Corinne Blanchard at Deutsche Bank reiterated a Buy rating on Albemarle Corporation (NYSE:ALB) shares.
Out of the 943 hedge funds tracked by Insider Monkey in the fourth quarter, 46 hedge funds were long Albemarle Corporation (NYSE:ALB). Their total stake value was $587 million.
6. The Mosaic Company (NYSE:MOS)
Number of Hedge Fund Holders: 47
The Mosaic Company (NYSE:MOS) is a fertilizers and agricultural chemicals company based in Tampa, Florida. The company produces and markets concentrated phosphate and potash crop nutrients in North America and internationally.
Steve Byrne, an analyst at BofA, holds a Buy rating on The Mosaic Company (NYSE:MOS) shares as of February 27.
Wall Street analysts have placed an average price target of $52 on The Mosaic Company (NYSE:MOS) shares, which were trading at $42.39 on March 26. This gives the stock an upside potential of 22.67%. The company also has a dividend yield of 1.89% as of March 22. Having raised its dividend for the past four years, The Mosaic Company (NYSE:MOS) is steadily becoming a reliable and safe income investment choice for investors today.
Soroban Capital Partners was the largest shareholder in The Mosaic Company (NYSE:MOS) at the end of the fourth quarter, holding 6.8 million shares. In total, 47 hedge funds were long the stock, with a total stake value of $953 million.
Ariel Investments, an investment management company, mentioned The Mosaic Company (NYSE:MOS) in its fourth-quarter 2022 investor letter. Here’s what the firm said:
“Producer and marketer of crop nutrients, The Mosaic Company (NYSE:MOS) also traded down on weaker than expected earnings. Volumes of both potash and phosphate missed consensus expectations, prices came in below and costs were higher than expected. Hurricane Ian also negatively impacted production. As a result, management lowered its outlook for weaker than expected pricing and volume. Meanwhile, MOS is paying down debt and continues to return significant capital to shareholders through buybacks. Given management’s disciplined approach towards capital allocation, we continue to believe the company is well positioned from a risk/reward standpoint.”
The Mosaic Company (NYSE:MOS), like Exxon Mobil Corporation (NYSE:XOM), Barrick Gold Corporation (NYSE:GOLD), and Chevron Corporation (NYSE:CVX), is a commodity stock offering high profitability to investors in 2023.
Click to continue reading and see the 5 Best Commodity Stocks To Buy According to Hedge Funds.
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12 Best Commodity Stocks To Buy According to Hedge Funds