The 3 Best Commodity Stocks to Buy Now
Finding the best commodity stocks to buy can be challenging.
Commodity investing involves directing capital toward the raw materials that are either consumed directly or serve as the building blocks of other products.
While it is possible to purchase raw physical commodities, in this case, we’re talking about investing in the stocks of companies connected to those commodities.
While some are relatively volatile, the best commodity stocks have staying power. Investors have to make educated guesses as to which ones will fare best.
An April report from the World Bank suggested that non-energy commodities, specifically agriculture and metals, should rise roughly 20% in 2022.
These three best commodities stock to buy align with that sentiment and take advantage of secular trends set to continue well into the future.
Also note, there are no energy stocks on this list despite their strong performance this year. That’s because much of their gains are already priced in as investors drove capital into their shares early in 2022.
Albemarle (NYSE:ALB) is one of the best commodity stocks for investors interested in EV growth. The company is a noted lithium producer with lithium being an important metal in the production of EV batteries.
And there currently are lots of good news around both the company and lithium demand.
The company released earnings on Aug. 2 that show massive fundamental improvement. Overall sales reached $1.48 billion in the quarter. That was a $705.7 million increase over the same period a year earlier.
Lithium alone accounted for $891.5 million of that $1.48 billion in sales. The interesting thing is that lithium sales increased from $320.3 million a year ago to $891.5 million this quarter. In other words, demand is soaring.
Demand should continue to soar as the Inflation Reduction Act includes $369 billion worth of provisions for climate and energy. Those provisions dictate that lithium and other metals used in the production of EV batteries be sourced locally. That is a huge tailwind for Albemarle.
Bunge (NYSE:BG) stock is an equity that represents oilseed and grain production.
The company’s operations consist of buying grains, oilseeds, and soft seeds from farmers and then storing, transporting and selling them domestically and for export.
Results have been somewhat mixed for Bunge. On the one hand, sales are increasing. The firm saw sales increase by 16.52% in Q2. But costs cut into profit margins and foreign exchange losses caused net income to drop to $206 million in the quarter, down from $362 million a year earlier.
The good news for investors is that the market remains upbeat on BG stock. It currently trades around $100 but Wall Street believes it should trade higher, giving it a consensus target price of $129.
Bunge also includes a dividend yielding 2.49% at the time of writing. That dividend serves to cushion against greater volatility affecting commodities, helping BG investors.
BASF (OTCMKTS:BASFY) stock should be very attractive to investors given its recent performance. In a macroenvironment where costs are eating into the bottom line of every company, the firm managed to buck the trend.
Sales reached 23 billion Euros in Q2, increasing by 16.3%. Net income increased by an even greater 26.3%, reaching 2.1 billion Euros. The strong quarterly results led BASF to increase sales guidance to between 86 to 89 billion Euros for 2022.
CEO Martin Brudermuller succinctly summarized the situation, “Despite the continued high raw materials and energy prices, we again achieved strong earnings in the second quarter.”
BASF is a German firm that produces chemicals and materials, many of which have agricultural applications. That particular business produces fungicides, herbicides, insecticides, crop protection, seeds, and seed protection.
The company also engages in commodity trading along with its broader chemical business footprint.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.