In this article, we discuss the 11 best commodity stocks to buy now.
Commodities are often split into broad categories like hard and soft commodities. Natural resources are included in hard commodities such as gold, rubber, and oil, whereas soft commodities are agricultural products or livestock — such as corn, wheat, coffee, sugar, soybeans, and pork. Over the past few months, supply chain issues and the Russian invasion of Ukraine have resulted in an increase in commodity prices. A recent World Bank report underlines that there has been a significant increase in agricultural commodity prices.
According to the report, this had led to intensifying food insecurity and extreme poverty in many developing economies. Inflationary pressures are also complicating the situation. The shrinking value of currencies of developing economies is driving up food and fuel prices, further deepening the food and energy crises in these areas. Due to currency depreciations, almost 60% of oil-importing emerging-market and developing economies saw an increase in domestic-currency oil prices during February 2022, per the bank.
The World Bank report also claims that nearly 90% of economies observed a larger increase in wheat prices in local-currency terms compared to the rise in US dollars. A report shared by IMF in October 2022 says that commodity prices rose 19.1% between February and August 2022. Energy natural gas has increased up to 129.2%, as Russia cut gas supplies to Europe. Base metal prices declined by 19.3%, and precious metal prices fell by 6.0%, while those of agricultural commodities fell by 5.4%.
Pablo Saavedra, the World Bank’s Vice President for Equitable Growth, Finance, and Institutions, says that despite the fact that many commodity prices have retreated from their peaks, they are still high compared to their average level over the past five years. Ayhan Kose, Director of the World Bank’s Prospects Group and EFI Chief Economist, says that the combination of elevated commodity prices and persistent currency depreciation directly relates to higher inflation in many countries.
He also added that in developing economies policymakers are unable to manage the most pronounced global inflation cycle in decades. They need to calibrate monetary and fiscal policies and get ready for a period of even higher volatility in global financial and commodity markets, the expert noted. Some of the top stocks to keep in mind considering these macro conditions include Chevron Corporation (NYSE:CVX), Gilead Sciences, Inc. (NASDAQ:GILD), and Philip Morris International Inc. (NYSE:PM).
Our Methodology
The companies that operate in the commodities sector were selected for the list. Special importance was assigned to outlining the basic business fundamentals and analyst ratings for each firm to provide readers with some context so they can make more informed investment choices. Data from around 900 elite hedge funds tracked by Insider Monkey in the third quarter of 2022 was used to identify the number of hedge funds that hold stakes in each firm.
Photo by Francisco Fernandes on Unsplash
Best Commodity Stocks To Buy Now
11. Cheniere Energy, Inc. (NYSE:LNG)
Number of Hedge Fund Holders: 70
Cheniere Energy, Inc. (NYSE:LNG) is an energy infrastructure company that primarily engages in liquefied natural gas (LNG) related businesses in the United States. On November 15, Cheniere Energy posted earnings for the third quarter of 2022, reporting losses per share of $9.54. The revenue over the period was $8.85 billion, up 176.6% compared to the revenue over the same period last year and beating market estimates by $890 million.
On October 12, analyst Marc Solecitto maintained an Overweight rating on Cheniere Energy, Inc. stock and raised the price target to $200 from $186, noting that sequential improvements in international netbacks in the third quarter would drive upside to consensus third quarter and fiscal 2022 EBITDA estimates.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Steadfast Capital Management is a leading shareholder in Cheniere Energy, Inc. with 2.3 million shares worth more than $379.8 million.
At the end of the third quarter of 2022, 70 hedge funds in the database of Insider Monkey held stakes worth $2.2 billion in Cheniere Energy, Inc., compared to 65 in the preceding quarter worth $3.3 billion.
Just like Chevron Corporation, Gilead Sciences, Inc., and Philip Morris International Inc., Cheniere Energy, Inc. is one of the stocks feeling the heat of an economic slowdown.
In its Q2 2022 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Cheniere Energy, Inc. was one of them. Here is what the fund said:
“Also in the U.S., Cheniere Energy, Inc. performed well. Cheniere is an energy infrastructure company that owns and operates U.S. liquefied natural gas export facilities along the U.S. Gulf Coast. Shares benefited from the continued tightness in global LNG markets as a result of Russia/Ukraine tensions as well as a well-received capital allocation announcement and Cheniere’s revising guidance above expectations.”
10. Kenon Holdings Ltd. (NYSE:KEN)
Number of Hedge Fund Holders: 4
Kenon Holdings Ltd. (NYSE:KEN) operates as an owner, developer, and operator of power generation facilities in Israel, the United States, and internationally. On June 21, Kenon Holdings announced that its Board of Directors has approved a capital reduction distribution in an aggregate amount of approximately $552 million, or $10.25 per share.
Among the hedge funds being tracked by Insider Monkey, Washington-based firm Arrowstreet Capital is a leading shareholder in Kenon Holdings Ltd. with 142,896 shares worth more than $4.9 million.
At the end of the third quarter of 2022, 4 hedge funds in the database of Insider Monkey held stakes worth $8 million in Kenon Holdings Ltd., compared to 3 in the preceding quarter worth $6.5 million.
9. Intrepid Potash, Inc. (NYSE:IPI)
Number of Hedge Fund Holders: 8
Intrepid Potash, Inc. (NYSE:IPI) engages in the extraction and production of potash in the United States and internationally. On November 2, Intrepid Potash posted earnings for the third quarter of 2022, reporting earnings per share of $0.97. The revenue over the period was $74.8 million, up 26.5% compared to the revenue over the same period last year.
At the end of the third quarter of 2022, 8 hedge funds in the database of Insider Monkey held stakes worth $26.5 million in Intrepid Potash, Inc., compared to 10 in the preceding quarter worth $34.8 million.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Two Sigma Advisors is a leading shareholder in Intrepid Potash, Inc. with 224,410 shares worth more than $8.8 million.
8. Denison Mines Corp. (NYSE:DNN)
Number of Hedge Fund Holders: 12
Denison Mines Corp. (NYSE:DNN) engages in the acquisition, exploration, development, extraction, processing, selling off, and investing of uranium properties in Canada. The shares have benefited from the German extension to the life of three nuclear power plants in the past few months, as well as from the increase in demand for uranium as supply chain issues force countries around the world to turn towards uranium instead of coal and oil to solve their energy issues.
Among the hedge funds being tracked by Insider Monkey, London-based investment firm Sprott Asset Management is a leading shareholder in Denison Mines Corp. with 3.3 million shares worth more than $3.8 million.
At the end of the third quarter of 2022, 12 hedge funds in the database of Insider Monkey held stakes worth $18 million in Denison Mines Corp., the same as in the preceding quarter worth $21 million.
7. Wheaton Precious Metals Corp. (NYSE:WPM)
Number of Hedge Fund Holders: 25
Wheaton Precious Metals Corp. (NYSE:WPM) is a metal streaming company that primarily sells precious metals in Canada and internationally. On November 14, Wheaton Precious Metals inclusively financed the updated resource estimate of Aris Mining. Wheaton made upfront $53 million and will make another $122 million during construction to purchase metals at a reduced price.
On October 19, analyst Ingrid Rico maintained a Buy rating on Wheaton Precious Metals Corp. stock and lowered the price target to C$64 from C$66.50.
At the end of the third quarter of 2022, 25 hedge funds in the database of Insider Monkey held stakes worth $564.4 million in Wheaton Precious Metals Corp., compared to 27 in the previous quarter worth $360.9 million.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm First Eagle Investment Management is a leading shareholder in Wheaton Precious Metals Corp. with 19 million shares worth more than $627 million.
6. United States Steel Corporation (NYSE:X)
Number of Hedge Fund Holders: 29
United States Steel Corporation (NYSE:X) produces and sells flat-rolled and tubular steel products primarily in North America and Europe. On November 8, United States Steel revealed that it reached a tentative deal with the United Steelworkers on a new four-year contract covering 11 thousand employees. This deal includes a 5% base wage increase annually for four years, equal to 21.55% compounded and a $4 thousand essential worker appreciation bonus.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Soroban Capital Partners is a leading shareholder in United States Steel Corporation with 11 million shares worth more than $199 million.
At the end of the third quarter of 2022, 29 hedge funds in the database of Insider Monkey held stakes worth $724 million in United States Steel Corporation, compared to 30 in the previous quarter worth $617 million.
Along with Chevron Corporation, Gilead Sciences, Inc., and Philip Morris International Inc., United States Steel Corporation is one of the stocks feeling the heat of an economic slowdown.
5. Cleveland-Cliffs Inc. (NYSE:CLF)
Number of Hedge Fund Holders: 37
Cleveland-Cliffs Inc. (NYSE:CLF) operates as a flat-rolled steel producer in North America. On October 25, Cleveland-Cliffs posted earnings for the third quarter of 2022, reporting earnings per share of $0.29, missing market estimates by $0.17. The revenue over the period was $5.65 billion, down 5.8% compared to the revenue over the same period last year and missing market estimates by $140 million.
On October 26, B. Riley analyst Lucas Pipes maintained a Buy rating on Cleveland-Cliffs Inc. stock and lowered the price target to $26 from $32, noting that the company continues to battle higher input costs in 2022, weighed against a declining steel price environment.
At the end of the third quarter of 2022, 37 hedge funds in the database of Insider Monkey held stakes worth $475.3 million in Cleveland-Cliffs Inc., compared to 29 in the preceding quarter worth $451 million.
4. Archer-Daniels-Midland Company (NYSE:ADM)
Number of Hedge Fund Holders: 37
Archer-Daniels-Midland Company (NYSE:ADM) procures, transports, stores, processes, and merchandises agricultural commodities, products, and ingredients in the United States, Switzerland, Cayman Islands, Brazil, Mexico, the United Kingdom, and internationally. On November 28, reports indicated that Nestle, Associated British Foods, Mondelez and Archer-Daniels-Midland Company ranked £20 billion in profits in the space of a year after raising average food prices. Four of the multinationals have signaled that consumers should expect further price rises, except for Archer Daniels.
On October 26, Baird analyst Ben Kallo maintained an Outperform rating on Archer-Daniels-Midland Company stock and raised the price target to $98 from $94, noting that the company’s management continues to add value to shareholders through share repurchases and strategic M&A, setting up a strong long-term outlook.
Among the hedge funds being tracked by Insider Monkey, Glen Allen-based investment firm Markel Gayner Asset Management is a leading shareholder in Archer-Daniels-Midland Company with 1.5 million shares worth more than $117.7 million.
In its Q1 2022 investor letter, Diamond Hill Capital, an asset management firm, highlighted a few stocks and Archer-Daniels-Midland Company was one of them. Here is what the fund said:
“Archer-Daniels-Midland Company is a leading agricultural processor that also operates a global nutrition business focused on the development of ingredients and flavors for food and beverages, supplements and more. The company’s recent operating results have benefited (unfortunately) from the war in Ukraine as grain prices and agricultural markets globally experienced strong price increases. ADM is positioned well to benefit from the volatility due to its stable North American agricultural base.”
3. Bunge Limited (NYSE:BG)
Number of Hedge Fund Holders: 48
Bunge Limited (NYSE:BG) operates as an agribusiness and food company worldwide. On November 22, Bunge unveiled that it has signed a strategic partnership with France’s BZ Group. Bunge has acquired 49% of the business and the Beuzelin family remains the majority shareholder of BZ group with 51% shares.
On October 24, BofA maintained a Buy rating on Bunge Limited stock and lowered the price target to $130 from $138, noting that the agricultural cycle outlook remains quite strong amid the very tight crop supply/demand balance in the US and internationally.
At the end of the third quarter of 2022, 48 hedge funds in the database of Insider Monkey held stakes worth $763 million in Bunge Limited, compared to 48 in the previous quarter worth $729 million.
In its Q1 2022 investor letter, Old West Investment Management, an asset management firm, highlighted a few stocks and Bunge Limited was one of them. Here is what the fund said:
“Bunge (pronounced BUN-GEE) Ltd is one of the biggest agribusinesses and food companies in the world. Four worldwide companies dominate the sector, the others being Archer-Daniels-Midland Cargill and Dreyfuss. One of our favorite ways to screen for new ideas is following insider buying. When I saw Form 4 filed by new Bunge CEO Greg Heckman, his purchase of $9 million of BG stock intrigued me. My initial thought was the company gave him the stock as a signing bonus. I contacted BG Investor Relations and asked whether it was a signing bonus or did Heckman write a check for $9 million. IR assured me it was his own hard-earned money that he invested in the company he was about to run.
Heckman was a long-time executive at Conagra Foods who sensed an opportunity at BG. One of his first moves as CEO was to move the company’s HQ from New York to St. Louis, right in the middle of America’s breadbasket. BG had been plagued for years with poor decisions by underperforming management. Heckman’s decision to move to St. Louis was indicative of a no-nonsense style and he would commence cutting expenses and selling non-core assets…read more
2. Albemarle Corporation (NYSE:ALB)
Number of Hedge Fund Holders: 49
Albemarle Corporation (NYSE:ALB) develops, manufactures, and markets engineered specialty chemicals worldwide. On November 20, Albemarle said that it has planned to spend up to $540 million to expand and modernize its bromine facilities in Magnolia, Arkansas. This project will run through 2027. The company’s third-quarter sales of bromine products were up 28% from the year-earlier period.
On November 8, RBC Capital analyst Arun Viswanathan maintained an Outperform rating on Albemarle Corporation stock and raised the price target to $380 from $371, noting that the advisory remains favorable on the firm due to a tight lithium supply-demand, although there was caution on the potential for large price swings in the lithium spot market.
At the end of the third quarter of 2022, 49 hedge funds in the database of Insider Monkey held stakes worth $621.5 million in Albemarle Corporation, compared to 39 in the preceding quarter worth $600.6 million.
In its Q3 2022 investor letter, Carillon Tower Advisers, an asset management firm, highlighted a few stocks and Albemarle Corporation was one of them. Here is what the fund said:
“Albemarle Corporation is a global specialty chemicals company with leading positions in lithium, bromine, and refining catalysts. The company’s shares outperformed meaningfully in the quarter, driven largely by robust demand for lithium used to manufacture electric vehicle batteries. Albemarle is well-positioned for the accelerating adoption of electric vehicles and could benefit from the Inflation Reduction Act.”
1. Devon Energy Corporation (NYSE:DVN)
Number of Hedge Fund Holders: 51
Devon Energy Corporation (NYSE:DVN) is an independent energy company that primarily engages in the exploration, development, and production of oil, natural gas, and natural gas liquids. On September 5, Devon Energy declared that it has entered into a liquefied natural gas export partnership with LNG export infrastructure development company, Delfin Midstream. The partnership includes an executed Heads of Agreement for long-term liquefaction capacity.
On November 22, Citi analyst Scott Gruber maintained a Buy rating on Devon Energy Corporation stock and lowered the price target to $78 from $80, noting that the company posted encouraging third-quarter results.
At the end of the third quarter of 2022, 51 hedge funds in the database of Insider Monkey held stakes worth $1.5 billion in Devon Energy Corporation, compared to 57 in the previous quarter worth $1.5 billion.
In its Q2 2022 investor letter, GoodHeaven Capital Management, an asset management firm, highlighted a few stocks and Devon Energy Corporation was one of them. Here is what the fund said:
“Our biggest dollar gainer within this period was Devon Energy Corporation, a position which emanated from a takeover in early 2021 of our long-time holding WPX Energy. We are sitting on a material (unrealized) gain from our cost and are now receiving material dividends thanks to Devon’s thoughtful fixed/variable dividend policy. Energy is now a hot sector for investors but we have had material exposure for a long time. We remember a bit too well $40 oil, NEGATIVELY PRICED front-month oil contract, and what it’s like to own a company with leverage and negative free cash flow during such periods. Our desire to have our biggest portfolio exposures be high-return, growing, reasonably predictable and moderately levered companies lead us to reduce our Devon exposure in the past. When the recent facts and circumstances for the industry changed and appeared supportive of healthy oil prices, we decided to maintain a sizable holding and more recently added to the position. At Devon’s Q1 dividend rate, which is most variable in nature, the shares now yield approximately 10% and our yield on our average cost is materially higher. In addition, we maintain additional energy exposure through our long-term (and successful) holding in Hess Midstream and less directly through TerraVest and Berkshire Hathaway’s energy investments.”
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This article is originally published at Insider Monkey.
