Commodity prices have pulled back recently, but demand will grow as government stimulus projects commence around the world.
Charl Malan, Senior Metals & Mining Analyst on the Van Eck Global Hard Assets fund which is rated 5-stars by Morningstar and up 24.96% this year, said now is a good time to invest in commodities because of “unprecedented monetary and fiscal stimulus in the United States, China and Europe.”
He said a significant portion of China’s stimulus will go towards infrastructure.
Malan said Randgold Resources, a top holding in the fund, has an “excellent management team and an incredibly good growth production profile.” He said the company has a strong balance and is self-funding growth right now.
Freeport-McMoran Copper & Gold’s management should be awarded for their foresight in cutting production in 2008, Malan said. Its Tenke Fungurume mine in the Democratic Republic of Congo is a strong asset with an “incredibly rich quality of deposits.”
Derek Rollingson, Director of Research at ICON Advisors whose ICON Energy fund rated 5-stars by Morningstar and up 5.19% in 2009, said there are “tremendous opportunities in oil and gas drilling.”
He said it is good to have exposure to commodities because of “fears of a devaluing U.S. dollar.” Rollingson likes Consol Energy , a holding in the ICENX fund, because of its value. He said investors receive “$1.30 in value for every $1 invested.”
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Drillers such as Atwood Oceanics and Diamond Offshore Drilling are also part of the fund. He said drillers are up 96% since the March 9th low on a simple average basis and there is “still room for growth.”
Andrew Lees, portfolio manager of the 4-star Morningstar rated Aim Energy Fund which is up 19.29% year-to-date, said oil is trading at “an appropriate range” right now. Lees said with no major projects underway, oil inventory “will be tight” when global consumption returns.
Lees said he prefers companies that are positioned to take advantage of the oil recovery. Occidental Petroleum, a holding in the Aim Energy fund, is “one of the best return generators.” He said their cost cutting efforts will show on the bottom line with better earnings.
Southwestern Energy , a top holding in the Aim Energy fund, has cut its operating budget while improving returns per well, Lees said.
He recently increased his stake in Weatherford International . Lees said the company’s strategy “to diversify from the U.S. is paying off.” Weatherford International has been winning contacts in Mexico and establishing great relationships in the country.