Miners Drive Global Commodity Stock Fund
Emerging-market demand, supply constraints and inflation are among the reasons often cited in favor of commodities, but it didn't hurt that many companies have seen their stocks rebound very sharply off their lows.
One advantage to investing in companies that produce commodities, rather than the commodities themselves, is the benefit from leverage. For instance, if oil costs $80 per barrel and it goes to $100, you would gain 25 percent investing in oil. A company that produces oil at a cost of $60 a barrel would see its profit on each barrel rise from $20 to $40, a gain of 100 percent.
It doesn't work out that easily in real life, however, because the price of the commodity must increase faster than expenses. Farmers use fertilizers, miners need drills and oil producers need pipes, in addition to the energy that all three consume. Besides higher material and energy costs, there's also the risk of higher wages.The best time to own commodity-producing companies is when the demand for commodities causes them to rise faster than overall inflation. Many commodity bulls believe that greater demand from emerging markets, especially China and India, will drive prices higher with or without inflation. For those who expect higher commodity prices due to devalued currency, however, it's best to stick with the commodity itself. Back in June, when I first analyzed FFGCX, it had just launched and there wasn't much performance history or even a list of its holdings. We knew that it would be managed by Joe Wickwire, who also manages Fidelity Select Gold (FSAGX), and that it would track the MSCI All Country World Commodity Producers Sector Capped Index.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV