Author Topic: Investing in Commodities  (Read 3226 times)

Viking

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Investing in Commodities
« on: January 09, 2018, 11:43:26 PM »
Gundlach, in his conference call Tuesday, identified ‘commodities’ as a top investment idea for 2018. He said that late in the economic cycle commodities tend to significantly outperform equity market averages.

So how does an investor get exposure to ‘commodities’? Is there an ETF or a fund that serves as a proxy? I am not looking to play oil or agriculture or metals... rather I am looking for something that captures the price change in the underlying commodity prices and aggregates everything together (i.e. I am not trying to pick the sector winners).


MrB

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Re: Investing in Commodities
« Reply #1 on: January 10, 2018, 12:56:22 AM »
Jim Rogers used to have a passive Commodities fund. Probably still going.

petec

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Re: Investing in Commodities
« Reply #2 on: January 10, 2018, 01:00:57 AM »
I think you could achieve that via an etf or a basket of them but by and large they hold options, rather than the physical underlying, and you'd need to be comfortable with that. Google throws up a number of lists e.g. this one: http://etfdb.com/type/commodity/all/

Alternatively/additionally you could own equity etfs with commodity exposure. I have a small position in copx, for example, and there are lots of oil/gold/silver equity etfs.

You might be interested in the work these guys do and especially in the chart at the top of this piece: http://www.gorozen.com/static/assets/pdf/ql/GRAQuarterlyLetter2Q2017.pdf

Jeremy Grantham has strong views that EM is the only remaining cheap asset class (second half of this piece: https://www.gmo.com/docs/default-source/public-commentary/gmo-quarterly-letter.pdf?sfvrsn=50). Since EM is correlated to commodities to some extent, an EM index might give you two ways to win. E.g. Latin America is a big commodity exporter so a) there are commodity stocks in the Latam index and b) Latam economic growth and especially its currencies tend to be correlated to commodity prices.


SafetyinNumbers

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Re: Investing in Commodities
« Reply #3 on: January 10, 2018, 10:01:29 AM »
It seems like the price action in a lot of commodities has already been very good and a lot of equities associated with those commodities have lagged. I find this to be the case in microcaps in particular where many names trade at less than 3x cash flow.
Top 5 positions: ELF GCM.NT/GCM.WT.B TII.V PIF AZP.PR.A

kab60

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Re: Investing in Commodities
« Reply #4 on: January 10, 2018, 10:33:39 AM »
It seems like the price action in a lot of commodities has already been very good and a lot of equities associated with those commodities have lagged. I find this to be the case in microcaps in particular where many names trade at less than 3x cash flow.
Any particular names?

SafetyinNumbers

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Re: Investing in Commodities
« Reply #5 on: January 10, 2018, 01:14:05 PM »
It seems like the price action in a lot of commodities has already been very good and a lot of equities associated with those commodities have lagged. I find this to be the case in microcaps in particular where many names trade at less than 3x cash flow.
Any particular names?

Based on 2018E and not all have analyst coverage but GCM.TO (gold), ASND.TO (zinc), JAG.TO (gold), and PPR.TO (oil). PPR also has a few other catalysts with respect to Quebec shale assets which currently have zero booked reserves.
Top 5 positions: ELF GCM.NT/GCM.WT.B TII.V PIF AZP.PR.A

TwoCitiesCapital

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Re: Investing in Commodities
« Reply #6 on: January 10, 2018, 08:23:11 PM »
I'd mention Nzuri copper (NZC) which trades on the ASX. Gives exposure to copper (a Tesla consumes 5-7x as much copper as a conventional car) and cobalt (not enough cobalt in the world for more than 35% EV penetration), both benefiting from EV boom. Arguably the highest grades, lowest cash costs/t, lowest capital intensity/t in the world for Nzuri. Jurisdiction is Congo which is a risk but the geology and the team are just exceptional. 90%+ shareholding tightly held with a PE controlling the majority of it. A proper full stage, fair payability driven NPV is many multiples of the current EV. Project IRRs are ridiculously high. A Chinese entity just bought a minor stake here. Advanced stage of development: 12-18 months away from first production (unlike most other projects which are years away). Some exploration upside as well with drilling results due shortly (sits a few Kms from the Kamoa Kakula discovery, the copper find of the century, led by the maverick resource billionaire Robert Friedland).

http://nzuricopper.com.au/wp-content/uploads/2017/12/171130-Resource-Rising-Stars-December-2017-Final-1.pdf

My knowledge of commodities is very little - but according to Dazel, who seems to have some experience with it, the Chinese are the dumb-money and you want to run when you see them. Comment was fairly recent in the Altius thread.

No thought on NZC myself - just thought it would be worth mentioning as the contra-side of the argument.

james22

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Re: Investing in Commodities
« Reply #7 on: January 11, 2018, 12:46:21 AM »
...the article considered whether investors could swap exposure to the S&P GSCI commodities futures index for similar exposure to commodity-like stocks. Noting that the S&P GSCI was composed 70 percent of energy exposure and 14 percent metals, Israelsen wondered if you could combine an energy sector fund and a precious metals sector fund and achieve the same type of returns.

http://www.hardassetsinvestor.com/images/stories/links/israelsen_july2007_quasi_commodities.pdf

Short answer: yes.
BRK, BAM l SV, EM l Fannie Mae, Freddie Mac l Stable Value, Cash Value

SafetyinNumbers

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Re: Investing in Commodities
« Reply #8 on: January 11, 2018, 05:10:05 AM »
It seems like the price action in a lot of commodities has already been very good and a lot of equities associated with those commodities have lagged. I find this to be the case in microcaps in particular where many names trade at less than 3x cash flow.
Any particular names?

Based on 2018E and not all have analyst coverage but GCM.TO (gold), ASND.TO (zinc), JAG.TO (gold), and PPR.TO (oil). PPR also has a few other catalysts with respect to Quebec shale assets which currently have zero booked reserves.

ASND.TO just put out 2018 guidance this morning. The company has a market cap of US$45m and their guidance is EBITDA of US$32-40m and FCF of US$14-20m. I’m not sure what the right multiple is but it seems too low right now or even up 50% from here.

https://web.tmxmoney.com/article.php?newsid=6899444052652449&qm_symbol=ASND

Top 5 positions: ELF GCM.NT/GCM.WT.B TII.V PIF AZP.PR.A

james22

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Re: Investing in Commodities
« Reply #9 on: April 16, 2019, 08:10:17 PM »
Vanguard announced a couple weeks ago they'll be launching their CCF fund in June.

https://pressroom.vanguard.com/news/Press-Release-VG-Announces-Plans-to-Launch-Commodities-Fund-04-04-19.html

I've carved out 5% waiting for it.
BRK, BAM l SV, EM l Fannie Mae, Freddie Mac l Stable Value, Cash Value