This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

5 Investing Ideas As Commodities Tumble

Stocks in this article: BHP BP FCX JOY TCK

Chris Lau, Kapitall: A good time to look for value is when the markets are bouncing back from monthly lows but a sector is not participating in it. Such is the case for companies operating in the commodities market. The drop is not going unnoticed by analysts. Take Joy Global (JOY) as an example. The company was downgraded by Goldman Sachs. The investment firm turned negative on the company, citing weaker demand and lower equipment sales from shrinking mining equipment demand.

Is there an opportunity to invest in resource companies? Four stocks come to mind.

Japan and China lead resource stocks

From a macroeconomic level, gold prices are being hurt by Japan’s ongoing efforts to implement quantitative easing. Earlier this year, investors took a bullish position in the Nikkei index, while short selling the yen. The reversal of this position is now underway. Investors are all trying to unwind their long position in the Nikkei, while covering their short position in the Yen.

In China, slower growth is not helping commodities prices either. Raymond James recently downgraded Teck Resources (TCK). The firm expects lower growth in China and slower global growth to hurt coal prices, giving them  limited room to rise.

BHP Billiton (BHP) is cutting its capital expenditure to $15 billion annually for the next few years. The previous rate was supposed to be $22 billion in 2013. In 2014, the firm had expected to spend $18 billion. The sharp reduction in capital expenditure (capex) was done because BHP expects slow growth in China in the years ahead.

Upside from Dr. Copper

The negative trend in shares of Freeport McMoRan (FCX) continued, even though the firm recently closed its acquisition of Plains Exploration. Insider buying could support a bullish case for the company. James Flores, the Vice Chairman, bought more than 1 million shares. The company is also paying a special dividend of $1 for shareholders of record as of June 14, 2013. In the short term, shares could dip when the company trades ex-dividend.

Energy sector

In the energy sector, investors might want to look at BP, Inc. (BP), whose share pay a dividend of over 5%. Shares continue to be held back as the company pays $8 billion to victims of the Gulf of Mexico spill.

BP allocated nearly $3 billion for an oilfield in Iraq. At least 300 oil wells will be drilled over the next 5 years.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,672.60 -141.38 -0.79%
S&P 500 2,051.82 -11.33 -0.55%
NASDAQ 4,757.8790 +7.4820 0.16%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs