Investment options There are two ways for contrarian investors to play this market: Buy the commodity or own a materials company. Buying into the commodity spot price, either with an exchange-traded fund or a futures contract, could result in bigger gains, but Willis said it's a more volatile and more speculative way to invest.
He'd rather own a business because decisions can be based on company fundamentals. Companies can also pay dividends, where a commodity can't, said Sutton. He likes businesses with strong free cash flow yields that will either increase dividends or buy back shares.
Free cash flow yields had been in the single digits, but with companies spending more prudently and improving their balance sheets, he expects those yields to enter double-digit territory this year and next. He also points to a Citigroup report that said free cash flow yields on large-cap diversified miners will see a 24 percent annual compound growth rate between now and While could be kind to commodities, investors will need to be patient, said Marshall.
He usually likes to see gains between 12 and 18 months after purchasing a stock, but since contrarian investments are so deeply out of favor, it could take two or three years before things turn around. Nevertheless, be careful about allocating too many assets to this up-and-down sector, said Ford. Somewhere between 5 percent and 10 percent should be sufficient, he explained. As for which commodities investors should be exposed to, base metals have taken the biggest hit, which is why Sutton is overweight that part of the market.
He's also keen on diversified large caps, and he's "modestly" overweight oil and gas. However, silver, cardamom and turmeric fell A similar trend was evident in and as well. The consumption of sugar in October-December is million tonnes. The price can touch Rs 3, per quintal by the end of the year. Latest Must Read Markets.
And what big reserves there are around the planet are found in mainly in remote and sparsely populated areas — Brazil, western Australia and sub-Saharan Africa. Brazil is blessed with timber, exceptionally fertile land, metal ores and now oil, but the latter is far off the coast and in deep water beneath a layer of salt. The Economist says the imbalance in commodity markets is likely to persist at least until resource-hungry countries become more developed and new supplies become available.
But in the short term, the picture is less clear. Much depends on whether the stuttering world economy lurches into a sharp downturn, as it did in If that happens, expect another race to the bottom. Commodity prices have been gyrating wildly recently, knocked this way and that depending on the tone of the latest batch of economic data. Eugen Weinberg, an analyst at Commerzbank, wonders if the current high oil price isn't based on flawed logic as "today, there are more [economic] similarities with than differences".
On that basis, the oil price could fall off a cliff if the world economy tanks. It is used in the construction of buildings, power generation and transmission, and the manufacture of consumer electronics.
So the higher the demand for copper, the more buoyant the world economy is said to be. Saefong, assistant global markets editor, has covered the commodities sector for MarketWatch for 20 years. She has spent the bulk of her years at the company writing the daily Futures Movers and Metals Stocks columns and has been writing the weekly Commodities Corner column since Barron's on MarketWatch: Back in fashion this fall: mall stocks.
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