Three Commodities to Bet With Buffett

Warren Buffett, the Oracle of Omaha, is one of the most famous investors in the world. So when he makes a big bet, there are plenty of individuals who are willing to follow or are at least curious as to whether or not they should do the same. Buffett’s latest bet was placed in the U.S. housing industry, a market segment that has been rattled since 2007 and is still struggling to find a foothold. The famed businessman justified his bet by stating that he has watched every asset class besides housing for the last two years and now that markets have flattened, he sees housing with room to run [see also Why Buffett is Dead Wrong on Gold].

Investors wishing to hop in on Buffett’s bet should take it with a grain of salt, as Robert Schiller, the expert who called the housing bubble and likewise has a housing index named after him, is not so sure of housing. Though he says it is possible we have reached a bottom, he also does not see the proper momentum needed to categorize housing as “in-recovery”. But for those who still wish to follow Buffett, we outline three commodities to help you bet like a billionaire.

Copper

This is a relatively obvious choice, as copper has very close ties to the housing industry. It is used in plumbing, wiring, and in a number of other appliances that appear in a standard house. If the housing industry is slated for a recovery, demand for copper will spike as well as the price of this metal. For those looking to take advantage this commodity you can utilize standard futures contracts on the COMEX. Those looking to avoid direct futures investing can utilize the  DJ-UBS Copper Total Return Sub-Index ETN (JJC) which is home to over $110 million in assets. Finally, you can invest in the production side of the equation with companies like Freeport McMoRan (FCX) and Southern Copper (SCCO), both of which offer competitive dividend yields [for more commodity news subscribe to our free newsletter].

Timber

Another major product of the housing and construction industry, timber/lumber has been one of the best performing commodities in recent years, as it has outpaced the S&P 500 by gaining approximately 15% each year since 1987 (save one bad year during the U.S. housing crash). The CME offers futures for both random length lumber and softwood pulp, allowing investors to obtain direct exposure to the commodity. Those looking for ETF options can look to the S&P Global Timber & Forestry Index Fund (WOOD) and Guggenheim Timber ETF (CUT), both of which focus on timber producers. And finally, for those who like to single out individual stocks, take a look at Plum Creek Timber (PLC) and Weyerhaeuser Co (WY).

Steel

Steel’s ties to the housing industry are not quite as heavy as the two aforementioned commodities, but it is still the primary resource used for support structures that are essential to any home. As always there are futures contracts available for active traders on the NYMEX. There are currently two ETFs that allocate their assets to steel producers, the Market Vectors Steel Index ETF Fund (SLX) and the Global Steel Portfolio (PSTL). Stock pickers have a handful of securities to choose from, with Arcelor Mittal (MT) and United States Steel Corp (X) being among the most popular choices [see also Four Commodities To Buy Before Roubini’s “Perfect Storm”].

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Disclosure: No positions at time of writing.

This entry was posted in Agriculture, Commodity ETFs, Commodity Futures, Copper, Industrial Metals, Steel, Timber and tagged , , , , , , . Bookmark the permalink.

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5 Responses to “Three Commodities to Bet With Buffett”

  1. [...] Jared Cummans: Warren Buffett, the Oracle of Omaha, is one of the most famous investors in the world. So when he makes a big bet, there are plenty of individuals who are willing to follow or are at least curious as to whether or not they should do the same.(…)Read the rest of 3 Commodities To Bet Along With Warren Buffett (JJC, PLC, WY, MT, X, SCCO, FCX, WOOD, CUT, PSTL, SLX) [...]

  2. [...] DJ-UBS Copper Total Return Sub-Index ETN (JJC): For those looking to single out copper exposure, this fund will be the most popular option. JJC invests solely in front-month copper futures and trades more than 55,000 every day [see also Three Commodities to Bet With Buffett]. [...]

  3. [...] list. The company does have several mine developments in the pipeline, which may give the stock a much needed boost in the next few [...]

  4. [...] be far too low by the standards of many. Should inflation be higher, timber has a strong chance to outperform the numbers put forth by Grantham, as the asset has long been a strong hedge against [...]

  5. [...] be far too low by the standards of many. Should inflation be higher, timber has a strong chance to outperform the numbers put forth by Grantham, as the asset has long been a stronghedge against [...]

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