In 2012, market volatility is par for the course for any serious investor. The struggle for consistent growth and return on investments is one being waged in all markets across the world; however, income investors remain wary of commodities as a source for positive value. Conservative investors quick point to the prospect for volatility that exists when adding commodity stocks to their portfolios may be missing out on the growth that exists in their dividend potential. Through selective research and investing, commodity stocks are a solid approach to generating higher returns in, while simultaneously increasing the stability of, your portfolio [for more commodity news and analysis subscribe to our free newsletter].
As the instability is likely to continue through the end of the fiscal year and into 2013, here are five commodity stocks in which to consider investing.
- Yongye International (YONG): This is a play on China and the chemicals sector, this stock has outperformed analyst estimates this year and despite China’s hard or soft landing, this company should do all right. Run out of Beijing, China, Yongye is involved in the manufacturing and sales of fulvic acid based crop and animal nutrient products for the agriculture and stock farming industry.
- Triangle Petroleum (TPLM): Triangle petroleum has seen good growth year to date and seems to be holding strong with a beta of 2.21 We aren’t too optimistic about future growth at the moment, however, as the earnings per share are negative, and this stock could be slightly overbought. This could be viewed as a buy from a technical analysis standpoint, as the charts look strong and there is resistance at 6.70, but the fundamental analysis is not fully aligned. The market capitalization is 330M with 51% of shares held by institutional investors [see also Bargain Shopping In Oil and Gas Stocks].
US Brent Oil Fund LP (BNO): This pick is actually an ETF, but it still represents a unique play. The fund tracks the movements of Brent Crude oil through front-month futures. BNO represents a good investment to get involved with domestic oil prices, which could trend upwards as we head into the winter months. With a market capitalization of $63 million, this fund is relatively small and could be pushed around by institutional investors, however, it is performing well and is up over 9.5% YTD.- Denbury Resources (DNR): Denbury Resources, Inc. is an independent oil and natural gas company, engaging in the acquisition, development, operation, and exploration of oil and natural gas properties in the Gulf Coast region of the United States. Despite somewhat lackluster growth in net income, DNR’s revenue growth has been above the industry average of 2.7%. Additionally, DNR’s net profit margin of 35.50%, along with its increase in operating cash flow of 10.65%, have both outperformed the industry average. Though the company does not offer dividends at this time, the company’s continued ability to increase revenue and profit margins, along with a strong return on equity, make DNR an interesting commodity stock to consider [see also 25 Ways To Invest In Natural Gas].
- Kodiak Oil & Gas Corp. (KOG): Kodiak Oil & Gas Corp is an independent energy company focused on the exploration, exploitation, acquisition and production of crude oil and natural gas in the United States. Although the stock is down for the year, we see this as a value play. A large player in the Williston Basin, which has seen its oil production soar from 300,000 barrels per day in May, 2010, to over 650,000 barrels per day in May, 2012, Kodiak is only just beginning to reap the benefits of its decision to control over 155,000 net acres in the Williston area. According to a presentation given to investors last month, the company expects to have an average of 17,000 BOE/day in 2012, with the rate approaching 27,000 BOE/day by the end of the year. Furthermore, the vast number of sites available to drill gives promise to the company’s prospects for the next decade. As the number of producing wells increases, the profits are expected to be enjoyed by shareholders.
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Disclosure: No positions at time of writing.
