NEW YORK (TheStreet) -- Oil prices' plunge to a four-year low highlights the risks for anyone investing in commodities and the companies that produce them. Commodities -- from iron to coal to soybean to silver, as well as oil -- have been out of favor for years now in what many are seeing as the early stages of an epic glut.
Yet, some commodities are still in demand, and even where they are not, companies have turned the misery to their advantage by lowering costs, making acquisitions, grabbing market share and becoming more efficient.
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To be sure, it's hard to find good investments in a huge sector of the global economy when many companies in it are doing so badly because the price they fetch for their product keeps falling. While the S&P 500 has steadily risen by nearly 60% since the summer of 2011, the Goldman Sachs Connect S&P Enhanced Commodity Total (GSC) , an exchange-traded fund that tracks commodities, is down nearly 40%, and Goldman Sachs' S&P Natural Resources Index ETF (IGE) , which tracks the companies that produce them, was down nearly 10% during this time.
Similarly grim stories can be found in other commodities-type indexes. Worse, the compounding misery is lending credence to the controversial commodities super cycle theory. Its devotees posit there have been four such cycles since the late 19th century and we are in the first years of a period perhaps lasting two decades in which commodity prices will not go up.
In this environment it would appear to be a no-brainer not to play the volatile game of commodities trading or even the much less risky investments in natural resources mutual funds and ETFs.
The better alternative appears to be finding what few companies there are that have managed to push a camel through the eye of a needle. Alcoa (AA) , a strong Value Line pick, appears to be among the standouts not just for its market prominence but for the commodity it sells. Aluminum is one of the few commodities where prices have been headed higher in recent years.