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Buy Energy, Commodities, Money Managers Say

Stocks in this article: XOM SYT BG BAC C CAT EMR

Materials

Not only has crude spiked higher, but gold has continued to hit record highs due to the so-called flight to quality. Since the uprising in Egypt began on Jan. 25, gold prices have rallied from $1,320 an ounce to a high of $1,440.10 on March 2.

But oil and gold aren't the only commodities on the rise. Silver, cotton and other commodities have surged on inflation fears. For instance, the iPath Dow Jones-UBS Cotton Subindex ETN (BAL) is up more than 45% this year.

"Thankfully for ETFs and ETNs, we were able to take advantage of food inflation," Mahn says of his firm's success. "What's at the core of a lot of the unrest right now was the fact that there is high unemployment and citizens are starving because food prices are so high. We invest in certain ETFs that would benefit from rising food prices."

While the money managers are steadfast in their assertion that the market is not in freefall, Mahn notes that the threat of inflation is "very real" and investors should do their best to get ahead of the curve.

"For those, including the Federal Reserve, who say that inflation isn't something to be concerned with as of yet, it is something very near and dear to most Americans and citizens around the world," Mahn says. "Investors need to stay ahead of that curve and shouldn't wait for the Fed to raise interest rates to deal with inflation for them."

Mahn says his firm has put money in metal-based commodities, such as gold, copper, steel and silver, which he says fuel the development of the international world. The money is still flowing into gold, but Mahn argues that "silver may be something worthy of consideration since it has more industrialized uses."

Pavlik, meanwhile, turns to agriculture and commodity stocks as a way to play concerns over inflation. "I'd position myself in the materials sector because of the higher costs that people are worried about," he says.

Sygenta (SYT) and Bunge (BG) are Pavlik's top picks for the agriculture space as they have flown under the radar as Deere (DE) has gotten more attention from investors.

"I'm looking for other opportunities," Pavlik says. "We've been early on with Bunge. They're not often discussed and are overlooked by the retail investor. There's nothing wrong with other agriculture names, but some have made a big move already."

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