Whole Foods Is Worth a Whole Lot More

One of my favorite investors once remarked, "You pay an expensive price for a cheery consensus." Indeed. When is the last time you found bargain investments among today's popular investment groups? It rarely ever happens. The commodities sector is case in point. While I believe the long-term outlook for commodities is strong, that doesn't mean I would go out and quickly invest in the industry.

Anyone with a pulse knows that oil prices have soared and pushed up the prices of gasoline, diesel fuel and heating oil. Largely hidden from view, however, have been steep and continuing price increases across a basket of commodities. Coal sold for about $30 a ton during 2003, and hit $139 in 2008 before slipping back a bit, tripling in 12 months.

Copper went from 82 cents a pound in July 2003 to $3.72 by the end of last month, an increase of 350% over five years. The price of steel has climbed from under $240 a ton for hot-rolled steel in 2003 to $1,125 a ton last month, a fourfold rise in five years.

Grain prices are no exception. U.S. corn prices jumped from $3.01 a bushel in July 2007 to $5.37 one year later. Wheat doubled from $3.05 a bushel to $6.02 over the past two years.

The old adage, "what has risen shall fall and what has fallen shall again rise" rings very true in investing. Blindly investing in commodities today can lead to some very quick and painful results. Just look at a few oil companies' equity prices over the past few weeks as oil has fallen from $147 to $113 a barrel. They have fallen just as quickly. Believe it or not, some of the best opportunities today lie outside the commodities and in areas where many investors frown upon.

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At the time of publication, Gad had no positions in the stocks mentioned, although positions may change at any time.

Sham Gad is the managing partner of the Gad Partners Fund, a value-centric investment partnership modeled after the original 1950s' Buffett Partnerships. Previously, Gad was a writer for The Motley Fool and a securities analyst for UAS Asset Management, a small, value-focused fund in New York City.

Gad also runs a value investing blog inspired by the teachings of Benjamin Graham and Warren Buffett. Gad is working on a value investing book (title forthcoming) to be published by John Wiley and Sons in the summer of 2009. Reach Gad at [e-mail].