Investors need to own gold and silver as a hedge against U.S. dollar debasement by the Federal Reserve. They should start by picking up shares of Barrick Gold (ABX) , said Mike Underhill, portfolio manager of the RidgeWorth Capital Innovations Global Resources and Infrastructure Fund.
"Barrick has a low cost of production at $830 an ounce in a world where gold is trending toward $1,400," said Underhill.
The RidgeWorth Capital Innovations Global Resources and Infrastructure Fund is up 17% thus far in 2016, according to Morningstar. The $4.5 million fund has dropped an average of 1% annually over the past five years, yet it is still outpacing 79% of its rivals in Morningstar's natural resources category. The fund sports a trailing 12-month yield of 1.7%, according to Morningstar.
Underhill is also bullish on U.S. Steel (X) , up 156% year to date, even though the steel manufacturer is trading at a pricey 24 times next year's earnings. He said U.S. Steel will be able to maintain its market share, as well as its pricing, as the prices for scrap steel trend higher.
Weyerhaeuser (WY) is another one of Underhill's top picks despite the fact that it too trades at an expensive P/E ratio of 28 times 2017 forecast earnings. Underhill said the timber company will benefit from a long but steady housing recovery.
"The U.S. housing market has made significant strides since 2008, albeit slowly. Home prices are at their pre-crisis peaks and household formations are back above their long-term averages. The need for timber for housing continues to increase at a powerful pace," said the portfolio manager.
Finally, Underhill is a fan of KapStone Paper and Packaging (KS) , which is down 20% year to date after an earnings miss caused a massive selloff in February. KapStone engages in the production of container board, corrugated products and specialty paper.
"KapStone will see price increases in packaging, which will lead to dividend growth," said Underhill. "And now that the CEO has retired, it is a potential takeout play as well."