The election of Donald Trump as President of the United States is likely to significantly impact commodity prices. Commodities are things like oil, metals, and agricultural products (soybeans, corn, etc.) that make the economy run.
No matter who is in office, commodities tend to be cyclical. However, investors know that the occupants of 1600 Pennsylvania Avenue and the policies they enact can make certain commodities more attractive than others. For example, Trump used tariffs in his first term and is advocating to expand his use of them over the next four years. These types of policies can have geopolitical consequences, impacting international relations and trade dynamics, which can result in increased price volatility.
Commodities are also highly sensitive to factors like weather, natural disasters, and pandemics. Droughts can affect agricultural yields, and hurricanes can disrupt oil production, impacting supply and prices.
Nevertheless, with expectations of higher growth, there is talk of a commodities supercycle. In this special presentation, we're looking at seven commodity stocks that are likely to benefit from this supercycle.
Quick Links
- Chevron
- Freeport-McMorRan
- Cameco
- Steel Dynamics
- Wheaton Precious Metals
- Nutrien
- Invesco DB Agriculture Fund
#1 - Chevron (NYSE:CVX)
Chevron Corp. (NYSE: CVX) is one of the big oil stocks that stands to benefit from what will be a favorable time for oil companies. The company’s merger with Hess Corp. (NYSE: HES) has been conditionally approved. Although the deal won’t close until late 2025 due to arbitration proceedings regarding some of Hess’ Guyana assets that are shared with Exxon Mobil Corp. (NYSE: XOM), it still looks like a go.
Despite the fact the United States is the world’s leading oil producer and is producing more oil than ever before, “Drill baby, drill” was still a key issue in the recent presidential campaign. The primary benefit for oil production will likely come from an accelerated process to approve permits. To be fair, this began in the Biden administration but came with some regulatory hurdles that are likely to be removed.
Where oil stocks are more likely to benefit is increased demand from economic growth at both the producer and consumer levels. And in this case, size and quality matter. Chevron has many quality assets, and it has a cash-rich balance sheet. CVX stock has lagged the market, but at 14x forward earnings and with a safe, growing dividend that currently yields 4.14%, Chevron offers investors significant upside.
About Chevron
Chevron Corporation, through its subsidiaries, engages in the integrated energy and chemicals operations in the United States and internationally. The company operates in two segments, Upstream and Downstream. The Upstream segment is involved in the exploration, development, production, and transportation of crude oil and natural gas; processing, liquefaction, transportation, and regasification of liquefied natural gas; transportation of crude oil through pipelines; transportation, storage, and marketing of natural gas; and carbon capture and storage, as well as a gas-to-liquids plant.
Read More - Current Price
- $161.30
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 13 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $174.93 (8.5% Upside)
#2 - Freeport-McMorRan (NYSE:FCX)
Freeport-McMoRan Inc. (NYSE: FCX) is another commodity-based stock that is likely to be a solid investment in the next four years and beyond. Freeport is a mining company that is one of the world’s largest producers of copper, gold, and molybdenum. While gold has its own compelling story, investors will want to focus on copper.
Copper demand is likely to soar in the next decade. Too much money has been pumped into the electric vehicle (EV) revolution for it to take a significant step backwards. And the growing demand for data centers will be an additional catalyst for copper.
There simply aren’t many companies capable of meeting that demand. But Freeport is one of them. The company produced a record 4.2 billion pounds of copper in 2023 and believes that number will increase by 800 million pounds by 2027.
FCX stock is up 10% in 2024 despite choppy price action. That volatility was likely due to a slowdown in the EV sector, but it’s likely to smooth out as revenue continues to increase. The Freeport McMoRan analyst forecasts on MarketBeat give the stock an upside of 11%, but those targets are likely to move higher.
About Freeport-McMoRan
Freeport-McMoRan Inc engages in the mining of mineral properties in North America, South America, and Indonesia. It primarily explores for copper, gold, molybdenum, silver, and other metals. The company's assets include the Grasberg minerals district in Indonesia; Morenci, Bagdad, Safford, Sierrita, and Miami in Arizona; Chino and Tyrone in New Mexico; and Henderson and Climax in Colorado, North America, as well as Cerro Verde in Peru and El Abra in Chile.
Read More - Current Price
- $43.70
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 9 Buy Ratings, 5 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $54.00 (23.6% Upside)
#3 - Cameco (NYSE:CCJ)
Cameco Corp. (NYSE: CCJ) is one of the world’s largest publicly traded uranium companies. Businesses are wrestling with the need for more power to support the insatiable demand coming from artificial intelligence (AI). That's leading to a larger conversation about nuclear energy and uranium.
The big payoff from nuclear is more than a decade away, but that’s why investors should buy picks-and-shovel stocks like Cameco today. This is reflected in the CCJ stock price, which has shot higher by more than 39% after missing earnings expectations in its July earnings report.
However, the company posted a top-line gain of 25% and is forecasting more revenue growth in future quarters. Analysts have a consensus price target of $66.56 for CCJ stock, which is a 25% increase from its current price. Cameco stock is up 23% in 2024, and it has generated a strong total return of over 446% in the last five years.
About Cameco
Cameco Corporation provides uranium for the generation of electricity. It operates through Uranium, Fuel Services, Westinghouse segments. The Uranium segment is involved in the exploration for, mining, and milling, purchase, and sale of uranium concentrate. The Fuel Services segment engages in the refining, conversion, and fabrication of uranium concentrate, as well as the purchase and sale of conversion services.
Read More - Current Price
- $57.61
- Consensus Rating
- Buy
- Ratings Breakdown
- 7 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $66.56 (15.5% Upside)
#4 - Steel Dynamics (NASDAQ:STLD)
Steel Dynamics Inc. (NASDAQ: STLD) is an industry leader that focuses on lower-carbon, high-quality steel products. And its commitment to decarbonization includes its goal to generate 30% of its power to come from renewable electricity.
Steel stocks also appear to be a cautious buy heading into 2025. The bullish case for steel stocks is based on the likelihood of higher tariffs on foreign steel and, potentially, lower corporate interest rates. Both actions would be bullish for corporate earnings.
A potential headwind for steel stocks in general is the current lack of demand, particularly fueled by the automobile sector. Prior to the presidential election, analysts weren’t bullish about that growth, with a consensus price target that indicates STLD stock may have peaked at around $148 per share. However, Steel Dynamics was recently placed on Bank of America’s Value 10 stock list, which highlights stocks with low trailing P/E ratios.
About Steel Dynamics
Steel Dynamics, Inc, together with its subsidiaries, operates as a steel producer and metal recycler in the United States. The Steel Operations segment offers hot rolled, cold rolled, and coated steel products; parallel flange beams and channel sections, flat bars, large unequal leg angles, and reinforcing steel bars, as well as standard strength carbon, intermediate alloy hardness, and premium grade rail products; engineered special-bar-quality products, merchant-bar-quality products, and other engineered round steel bars; channels, angles, flats, merchant rounds, and reinforcing steel bars; and specialty shapes and light structural steel products.
Read More - Current Price
- $144.04
- Consensus Rating
- Hold
- Ratings Breakdown
- 3 Buy Ratings, 4 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $144.29 (0.2% Upside)
#5 - Wheaton Precious Metals (NYSE:WPM)
Gold is one of the best-performing asset classes in 2024. Wheaton Precious Metals Corp. (NYSE: WPM) is a stock to buy if you believe that gold and silver will continue to move higher in 2025.
And despite gold’s move lower after confirmation of Donald Trump’s victory, the dip isn’t likely to last. That’s because the root cause of gold’s surge is less about the geopolitical risks that investors can see but the rise in government spending that is eroding the value of the dollar. That’s not likely to end in a meaningful way anytime soon.
The benefit of owning Wheaton is that the company doesn’t require you to take on the risks of owning physical gold or the cyclicality of mining stocks. Instead, the company secures long-term contracts to buy precious metals from mining companies at fixed, low prices. In times of rising prices, this can help Wheaton generate significant profits.
WPM stock is up 27% in 2024. However, analysts are forecasting earnings growth of 23% in the next 12 months. That may not be priced into the WPM stock price, which currently has a consensus price target that gives the stock an 8% upside.
About Wheaton Precious Metals
Wheaton Precious Metals Corp. primarily sells precious metals in North America, Europe, and South America. It produces and sells gold, silver, palladium, and cobalt deposits. The company was formerly known as Silver Wheaton Corp. and changed its name to Wheaton Precious Metals Corp. in May 2017. Wheaton Precious Metals Corp.
Read More - Current Price
- $62.97
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 9 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $71.67 (13.8% Upside)
#6 - Nutrien (NYSE:NTR)
Nutrien Ltd. (NYSE: NTR) is a leading producer of potash, an essential agricultural crop input for products that include fertilizer. The company is seeing some weakness in revenue on a year-over-year basis.
However, an operating margin of 15.75% allows the company to continue delivering earnings growth. Operating cash flow of over $5 billion allows the company to reinvest in growth while still maintaining payments on its attractive, high-yield dividend, which has a current yield of 4.41%.
Investors should expect that growth to continue even if there’s uncertainty surrounding the agricultural policies of the Trump administration. That’s because crops still have to be planted, which will keep demand at strong levels.
NTR stock is down 12% this year, but favorable analyst sentiment makes this a stock to buy with a consensus price target of over $60.
About Nutrien
Nutrien Ltd. provides crop inputs and services. The company operates through four segments: Retail, Potash, Nitrogen, and Phosphate. The Retail segment distributes crop nutrients, crop protection products, seeds, and merchandise products. The Potash segment provides granular and standard potash products.
Read More - Current Price
- $45.91
- Consensus Rating
- Hold
- Ratings Breakdown
- 10 Buy Ratings, 6 Hold Ratings, 3 Sell Ratings.
- Consensus Price Target
- $60.33 (31.4% Upside)
#7 - Invesco DB Agriculture Fund (NYSEARCA:DBA)
When you think about commodities, products like corn, soybeans, and livestock come to mind. Investing directly in these products through the futures market is unavailable to many retail investors. And if you can, it comes with significant risk.
However, if you have a speculative streak, the Invesco DB Agriculture Fund (NYSEARCA: DBA) may be an option for you to consider. The fund invests in 11 commodity futures, including cocoa, coffee, live cattle, soybeans, and corn and rebalances annually. It also invests in U.S. Treasuries that provide a hedge against price declines. The fund is rebalanced annually to reflect market changes.
The DBA fund is up 24% in 2024, but to show the cyclical nature of commodities, the fund is only up about 6% from where it began trading in 2007. However, if you began investing in the fund when it bottomed in 2020, you’re sitting on a gain of over 66%.
About Invesco DB Agriculture Fund
PowerShares DB Agriculture Fund (the Fund) is a separate series of PowerShares DB Multi-Sector Commodity Trust (the Trust). The Fund's subsidiary is DB Agriculture Master Fund (the Master Fund), a separate series of DB Multi-Sector Commodity Master Trust (the Master Trust). The Fund offers common units of beneficial interest (the Shares) only to certain eligible financial institutions (the Authorized Participants) in one or more blocks of 200,000 Shares, called a Basket.
Read More - Current Price
- $26.36
- Consensus Rating
- N/A
- Ratings Breakdown
- 0 Buy Ratings, 0 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- N/A
As with any investment, commodity stocks come with risk. Commodity prices tend to make strong moves in both directions. Some of those moves are cyclical and predictable. However, on many occasions, those strong moves can happen without much notice.
The same is true of stocks tied to the underlying commodities. That may make commodity stocks more suitable for traders, particularly options traders, who embrace the opportunity to profit from short-term price movement.
However, as this presentation shows, there are opportunities to take a long position in commodity stocks. Several of these companies have rock-solid fundamentals and use the cash on their balance sheets to increase shareholder value with buybacks and dividends.
The takeaway is this: Investing in commodities is more volatile than other sectors. But MarketBeat has the research and tracking tools that can help you find stocks that are suitable for your investment style.
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