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7 Commodity Plays Set to Surge

These investments can be an important part of diversifying your portfolio and keeping your risks low in a volatile market.

Commodity stocks are returning to favor with investors for a variety of reasons. Some like the reliable dividends of major energy producers. Others like the stable revenue stream provided by raw materials stocks even when consumer spending may be weak. And then there are the macro investors who anticipate a surge in certain commodities such as crude oil or gold, and nice profits for stocks in those sectors.

Whatever your motivation to seek out commodity stocks, these investments can be an important part of diversifying your portfolio and keeping your risks low in a volatile market. To help you pick the best commodity investments as the market starts to gear up this September, here are some


experts with their top seven commodity picks:

Commodity Pick 1 - Agribusiness ETF

Recommended by: Richard Young, editor of

Intelligence Report

Strategy: Bedrock investments for the long term

The Market Vectors Agribusiness ETF

(MOO) - Get VanEck Agribusiness ETF Report

is a great long-term commodity investment. After all the hubbub in the agriculture sector when

BHP Billiton

(BHP) - Get BHP Group Ltd. Report

made a hostile move to take over



, Wall Street is anticipating buyouts in the sector as well as general strength for the agriculture industry. Corn and wheat prices remain high, guaranteeing big margins for crop producers. What's more, these producers keep using more and more fertilizer, weed killer and genetically modified seeds to bump up their harvests -- meaning related industries are red hot. Even when consumer spending is weak, these stocks will thrive seeing as everyone needs to eat. The MOO ETF is the best way to play the agriculture sector's strength, reducing your risk with diversification instead of relying on a single stock.

TheStreet Recommends

Commodity Pick 2 - Gold Trust ETF

Recommended by: Robert Hsu, editor of

China Strategy

Strategy: Trading to profit from Asia's economic boom

One of the best buys you can make this month is the

SPDR Gold Trust ETF

(GLD) - Get SPDR Gold Shares Report

, the best pure way to play the bull market in gold. Based on its technical chart pattern, gold looks like it has another leg up -- and is quickly closing in on the June high of 1,271. If gold breaks through that mark, the sky could be the limit. That said, there is only so much upside we can see in gold in the next few months or years so please only buy GLD under $125. If you pay more than that, you will have missed the ideal entry point. As of this week though we're still under that mark so get into SPDR Gold Trust ETF shares while you can.

Commodity Pick 3 - Mesabi Trust

Recommended by: Louis Navellier, editor of

Emerging Growth

Strategy: Small-cap investing with a focus on fundamentals

Mesabi Trust

(MSB) - Get Mesabi Trust Report

leases mining operations in the Mesabi Mining Range located in Silver Bay, Minn, and provides iron ore products to the steel industry. Production has picked up tremendously in recent months, which has greatly increased investor interest in this stock. What's more, income investors are pleased because Mesabi Trust paid an incredible $0.80 dividend in its latest quarter, bringing its annual dividend yield to 12.6%! In its most recent quarter, Mesabi's revenue rose +67.1% and its earnings rose a whopping +500% so there is a lot of reason to get excited about this small-cap. If iron prices go up, expect even bigger profits from MSB.

Commodity Pick 4 - SinoCoking

Recommended by: Robert Hsu, editor of

China Strategy

Strategy: Trading to profit from Asia's economic boom

The biggest winner from China's coal industry consolidation is


(SCOK) a company based in Henan Province. The company produces coal, coke and byproducts to industrial companies. The cost of coal is an important part of the total production cost for SCOK, and stability of coal supply determines the profitability of coke manufacturers such as SinoCoking. The upside of the coal business is clear as Chinese steel demand remains strong in the short term, but one of the biggest reasons I like SinoCoking is a bright future in 2011. The company is building a new coking facility scheduled for completion in spring of next year that will more than quadruple its annual coking production from 250,000 tons to 1.15 million tons and improve its profit margin. This could cause SinoCoking to really break out.

Commodity Pick 5 - Exxon

Recommended by: Richard Band, editor of

Profitable Investing

Strategy: Long-term investing that safely outperforms the market


(XOM) - Get Exxon Mobil Corporation Report

is the most obvious oil stock, so many investors overlook it in pursuit of some diamond in the rough. But I believe it's one of the highest-potential blue-chips out there. The world's largest oil company came in with blowout Q2 profits of $7.6 billion, almost +10% ahead of analyst estimates. Some pundits worry about XOM's hefty exposure to natural gas. (The XTO acquisition, now complete, vaulted Exxon into first place among U.S. gas producers.) However, the domestic gas glut may be ebbing, and underground storage is running about -6% below last year's levels. Looking forward, high-cost producers are shutting down wells, leaving the field to more efficient operators like XOM as crude oil prices stay relatively low. Trading at less than 10X estimated year-ahead earnings and holding $13.2 billion of cash (up $2.4 billion just since the close of 2009), Exxon is a financial fortress -- a great low-risk commodity investment. Sweetening the pot is a current dividend yield of 3%, with increases 28 years in a row.

Commodity Pick 6 - Alliance Resource Partners

Recommended by: Bryan Perry, editor of

Cash Machine

Strategy: Income-oriented investing with mammoth dividends

Alliance Resource Partners

(ARLP) - Get Alliance Resource Partners, L.P. Report

produces of coal for utilities and industry in the U.S. Coal stocks, along with most commodity-related stocks, had pulled back against a strong move up for the dollar in August. Then shares heated up late in the month -- including a +12% run from 8/13 to 9/1. But shares appear to be rolling back and could provide investors with a great income play after posting phenomenal second-quarter results. ARLP is a best-in-class coal producer experiencing strong end-market demand for its high-BTU-rated coal. Plus, I expect another hike in the dividend by year-end -- adding to an already impressive yield of nearly 6%. I recommend Alliance Resources, but try to buy on dips under $50 for the best performance.

Commodity Pick 7 - Canadian National Railway

Recommended by: Richard Young, editor of

Intelligence Report

Strategy: Bedrock investments for the long term

Though it may not be your typical commodity stock, I am very bullish on

Canadian National Railway

(CNI) - Get Canadian National Railway Company Report

. My price charts show that the stock is nearing new highs with more room to run -- primarily due to its business transporting energy and materials. CNI saw double-digit growth in its coal, auto, metal and minerals and intermodal freight traffic in its second-quarter earnings report. As our resource-rich neighbors to the north continue to power through the economic downturn, rail stocks moving Canada's commodities will continue to fare well. Canadian National Railway has a five-year average return of about +15% -- very attractive right now, and sure to keep your nest egg growing. In July, the board announced the repurchase of 2 million more shares as part of the company's ongoing 15-million-share repurchase program, so that gives even more reason to like CNI. Don't forget the 1.6% yield, paid since 1996.

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