Commodities are essential items and can act as a safeguard against inflation in a diversified investment portfolio during challenging economic periods.
What are commodity stocks?
Commodities are primary goods like oil, wheat, or cattle. Commodity stocks are shares of companies working in these sectors such as oil refineries, wheat producers, or meat processing firms. Commodity stocks reflect essential consumer needs like food and energy, making them potentially beneficial for investment portfolios.
7 best-performing commodity stocks
Here is a list of seven top-performing commodity stocks from Fidelity’s Global Commodity Stock Fund (FFGCX). This fund provides exposure to various commodity-based industries such as energy, metals, and agriculture, including both domestic and international stocks.
Types of commodity stocks
There are several types of commodities available with examples like:
– Petroleo Brasileiro S.A. Petrobras ADR
– Canadian Natural Resources Ltd.
The main benefits of commodity stocks are hedging against inflation, diversifying portfolios, and possible dividend payouts. They provide a hedge against inflation as their prices rise with commodity values. Commodity stocks offer diversification as commodities are present across various sectors, ensuring consumer spending continuity. While some pay dividends, not all commodity stocks do. It’s wise to focus on companies with a history of consistent dividends and strong financial fundamentals for commodities exposure.
Commodity stock risks
One drawback of commodity stocks is their vulnerability to political and climate events, leading to volatility. Extreme weather risks crops and livestock, while global affairs affect oil prices. Individual stocks pose specific risks tied to the company’s performance. Commodity exchange-traded funds (ETFs) allow investing in multiple commodity stocks simultaneously, reducing risks while enhancing diversification.
Commodities play a vital role in most people’s lives as essential goods. During challenging economic periods, they can act as a shield against inflation in a diversified investment portfolio.
Let’s delve into commodity stocks to uncover their significance. Commodity stocks are representations of fundamental goods such as oil, wheat, or cattle, through companies like oil refineries, wheat producers, or meat-processing entities. These stocks offer exposure to essential items like food and energy, making them valuable additions to an investment strategy.
Exploring the top-performing commodity stocks from Fidelity’s Global Commodity Stock Fund (FFGCX) provides insight into various industries like energy, metals, and agriculture. This fund may encompass both international and domestic stocks, presenting a well-rounded approach to commodities investing.
Types of commodity stocks are diverse, ranging from agricultural produce to energy resources, offering investors a plethora of options to diversify their portfolios.
Additionally, the benefits of investing in commodity stocks include hedging against inflation, diversifying your investment repertoire, and the prospect of earning dividends.
However, with the advantages come risks. Commodity stocks are susceptible to political and climate-related events, leading to potential volatility. Individual commodity stocks, in particular, carry inherent risks associated with specific companies. On the flip side, commodity exchange-traded funds (ETFs) mitigate these risks by enabling investors to spread their investments across various commodity stocks, reducing risk exposure and enhancing diversification.
Understanding commodity stock dynamics and navigating the risks and rewards associated with them can be pivotal in establishing a robust investment strategy.
Title: 7 Best-Performing Commodity Stocks for Smart Investors – NerdWallet
Introduction
In the world of investing, commodity stocks have always been seen as a solid option for those looking to diversify their portfolio and potentially earn substantial returns. With the commodity market constantly fluctuating, it can be challenging to identify which stocks are worth investing in. To help you navigate this complex industry, NerdWallet has compiled a list of the 7 best-performing commodity stocks that are currently making waves in the market. By carefully analyzing each stock’s performance, trends, and industry outlook, we have curated a list that caters to both seasoned investors and beginners looking to make smart investment decisions. Without further ado, let’s dive into the world of commodity stocks and explore the top picks for 2021.
1. Exxon Mobil Corporation (XOM)
Exxon Mobil Corporation, one of the largest publicly traded oil and gas companies in the world, has proven to be a solid investment choice for those looking to capitalize on the recovery of the energy sector. Despite facing challenges in the past year due to the pandemic-induced downturn in oil prices, Exxon Mobil has shown resilience and adaptability in navigating through the crisis. With a strong balance sheet and a strategic focus on sustainable energy initiatives, Exxon Mobil is well-positioned to capitalize on the increasing demand for clean energy solutions. Investors looking for a stable and long-term investment in the commodity sector should consider adding Exxon Mobil to their portfolio.
2. BHP Group (BHP)
BHP, a leading global resources company, has been a standout performer in the commodity market, thanks to its diversified portfolio of assets across various commodities such as iron ore, copper, and coal. With a strong track record of delivering consistent returns to shareholders and a focus on innovation and sustainability, BHP is well-positioned to benefit from the ongoing global economic recovery. As the demand for raw materials continues to rise, BHP’s strong market position and solid financial performance make it an attractive option for investors seeking exposure to the commodity sector.
3. Wheaton Precious Metals Corp. (WPM)
Wheaton Precious Metals Corp., a premier streaming company specializing in precious metals, has been a top performer in the commodity market, driven by its unique business model and strong financial performance. By providing upfront financing to mining companies in exchange for the right to purchase a percentage of their future precious metal production at a fixed price, Wheaton Precious Metals is able to generate stable and predictable cash flows regardless of the market conditions. With a focus on low-cost operations and a strong balance sheet, Wheaton Precious Metals is well-positioned to benefit from the rising prices of precious metals such as gold and silver.
4. Barrick Gold Corporation (GOLD)
Barrick Gold Corporation, one of the largest gold mining companies in the world, has been a top performer in the commodity market, thanks to its strategic focus on high-quality assets and disciplined capital allocation. With a strong track record of generating strong cash flows and delivering value to shareholders, Barrick Gold is well-positioned to benefit from the bullish trend in gold prices. As a safe haven investment and a hedge against inflation, gold has been gaining popularity among investors seeking to diversify their portfolios and protect their wealth. With its solid financial performance and strong growth outlook, Barrick Gold is a top pick for investors looking to capitalize on the rising demand for gold.
5. Freeport-McMoRan Inc. (FCX)
Freeport-McMoRan Inc., a leading global mining company, has been a standout performer in the commodity market, driven by its diverse portfolio of assets and strong operational performance. With a focus on copper mining, Freeport-McMoRan is well-positioned to benefit from the increasing demand for copper in various industries such as renewable energy, electric vehicles, and infrastructure development. As a key player in the global copper market, Freeport-McMoRan’s strong market position and solid financial performance make it an attractive choice for investors seeking exposure to the commodity sector.
6. Nutrien Ltd. (NTR)
Nutrien Ltd., a leading provider of agricultural inputs and services, has been a top performer in the commodity market, thanks to its strategic focus on the global agriculture industry and strong financial performance. With a diverse portfolio of products such as fertilizers, chemicals, and seeds, Nutrien is well-positioned to benefit from the increasing demand for food and agricultural commodities. As the world population continues to grow, the need for sustainable food production and agricultural solutions is becoming more critical, making Nutrien a compelling investment option for investors looking to capitalize on the long-term growth prospects of the agriculture sector.
7. Royal Dutch Shell plc (RDS.A)
Royal Dutch Shell plc, one of the largest energy companies in the world, has been a top performer in the commodity market, driven by its strategic focus on clean energy solutions and sustainable business practices. With a strong track record of delivering value to shareholders and a commitment to reducing carbon emissions and promoting renewable energy, Royal Dutch Shell is well-positioned to capitalize on the transition to a low-carbon economy. As the demand for clean energy solutions continues to rise, Royal Dutch Shell’s innovative approach to energy production and distribution makes it an attractive option for investors seeking exposure to the commodity sector.
Conclusion
As the commodity market continues to evolve and adapt to changing economic conditions, it is essential for investors to stay informed and up-to-date on the latest trends and developments in the industry. By carefully analyzing the performance, trends, and outlook of the top-performing commodity stocks, investors can make well-informed decisions that align with their investment goals and risk tolerance. Whether you are a seasoned investor looking to diversify your portfolio or a beginner seeking to explore new investment opportunities, the 7 best-performing commodity stocks highlighted in this article offer a solid foundation for building a successful investment strategy. By leveraging the expertise and insights provided by NerdWallet, investors can navigate the complex world of commodity stocks with confidence and clarity, ultimately achieving their financial goals and securing their financial future.
