Natural resources stocks can protect against inflation and provide diversification benefits in addition to the potential for high financial returns.
Natural resource equities have consistently outperformed the broad stock market over the past century, by an average of 2 percentage points every year.
In addition to providing diversification, natural resource stocks can produce returns that are consistent with those of equities.
Unlike most other stocks, commodity prices tend to move independently of economic conditions. Because of this, natural resource equities have a low or negative correlation to the overall market.
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Nothing written here is financial advice.
We don’t advise holding individual stocks. ETFs and funds are a better option.
This article merely looks at some of the better options.
What are Natural Resources Stocks
Investing in natural resource stocks means purchasing a stake in a company whose primary business is the harvesting, processing, and distribution of natural resources.
Minerals, metals, oil, natural gas, lumber, and agricultural goods are just examples of the resources that may be at your disposal.
Individuals and organizations can gain exposure to a wide range of sectors by purchasing natural resources-related equities, including mining, energy, forestry, and agriculture.
This plan of action provides the opportunity for dividends or the growth in commodity prices to generate income in addition to the potential for capital appreciation.
Opportunities and hazards exist for natural resource stocks because of the correlation between their performance and the supply and demand dynamics of these commodities, as well as global economic developments, geopolitical events, and environmental laws.
Private banking clients often seek the expertise of seasoned financial advisors to identify the best natural resource stocks for their portfolios.
Direct investments in natural resources stocks are available to investors. These include stocks as diverse as mining stocks, logging stocks, and oil drilling stocks.
There are two primary types of companies operating in the natural resource sector: the majors and the juniors.
Extracting, refining, and selling on the market are only a few of the many services that majors offer; they may also pay dividends.
Pure-play entities with a high price sensitivity are the hallmark of junior firms. Even though these companies don’t pay dividends, they could still make a lot of money if the value of the resources they own goes up.
What are the Best Natural Resources Stocks
Diamondback Energy, Inc. (NASDAQ:FANG)
Diamondback Energy, Inc. (NASDAQ:FANG) is a publicly traded oil and gas exploration company with properties in both Texas and New Mexico.
Twenty-eight out of the thirty analysts that have supplied coverage have given the shares a Buy or higher rating.
Diamondback Energy, Inc. (NASDAQ:FANG) was held by 45 of the 943 hedge funds in the first quarter of 2023.
Yacktman Asset Management, run by Donald Yacktman, is the largest hedge fund shareholder, with a $195 million investment in the company.
Along with Freeport-McMoRan Inc. (NYSE:FCX), Occidental Petroleum Corporation (NYSE:OXY), and ConocoPhillips (NYSE:COP), Diamondback Energy, Inc. (NASDAQ:FANG) is one of the top natural resources companies preferred by hedge funds.
Southern Copper (NYSE:SCCO)
A widespread misconception about copper’s value is that it is of little importance because of its link with bronze, an alloy mostly made of copper.
There has been a dramatic increase in the number of reports of copper theft to law enforcement after the end of the Great Recession.
The Federal Bureau of Investigation and other credible groups have noticed and recorded this pattern.
But copper has an even more important function than its potential for unethical profit generation in the broad adoption of electric vehicles (EVs).
Pure copper has a very high electrical conductivity, second only to silver.
As hybrid and battery-electric vehicles have become more popular, the use of copper wiring in automobiles has increased. It follows that Southern Copper should be considered alongside other natural resource stocks.
Investment funds diversify their portfolios by including the best natural resources stocks, a key component in hedging against market volatility.
Occidental Petroleum Corporation (NYSE:OXY)
The Occidental Petroleum Corporation (NYSE:OXY) is a well-known American oil and gas company with a global footprint.
Shares of the firm have an average price target of $69, which would represent a rise of approximately $10 if achieved.
In times of economic uncertainty, the best defensive stocks often include natural resources stocks that provide essential commodities to the market.
The first quarter of 2023 saw a survey of 943 hedge funds; the results showed that 81 of those funds had purchased and held onto shares of Occidental Petroleum Corporation (NYSE:OXY).
Among these alternatives, Berkshire Hathaway, Warren Buffett‘s company, is the largest stakeholder in the organization due to its massive investment of $13.2 billion.
Sibanye Stillwater (NYSE:SBSW)
Sibanye, with its headquarters in South Africa, is fortunate to be operating in an area rich in natural resources.
Platinum Group Metals is the world’s largest primary producer of platinum, second in palladium, and third in gold, as stated on their official website.
Before the geopolitical flashpoint occurs, it is wise to consider minimizing one’s exposure to fiat currencies in light of the negative impact of rising inflation on consumers.
SBSW’s contributions, however, are so highly relevant that their impact is amplified. Electric cars (EVs) will not suddenly become ubiquitous, so keep that in mind right off the get.
Therefore, palladium and platinum will remain in demand because of their role in catalytic converters.
In addition, palladium, which is mostly mined in Russia and South Africa, is widely used in electronics, which has contributed significantly to its astronomical price rise.
Investors looking for stability often turn to the best consumer staples stocks, which can include natural resources stocks that produce essential consumer goods.
Newmont Corporation (NYSE:NEM)
The New York Stock Exchange (NYSE) trades shares of Newmont Corporation (NYSE:NEM), a mining company that extracts and produces precious metals like gold, copper, zinc, lead, and silver, among others.
A union-led strike at the company’s Mexican mining operation is causing problems at the moment.
52 of the 943 hedge funds whose holdings Insider Monkey analyzed during the March quarter of 2023 held investments in the aforementioned company.
Newmont Corporation (NYSE:NEM) is the largest holding of First Eagle Investment Management, which is run by Jean-Marie Eveillard. The asset management company has a sizable position of 18.4 million shares, now valued at $903 million.
Stocks in major natural resource companies including Newmont (NYSE:NEM), Freeport-McMoRan (NYSE:FCX), ConocoPhillips (NYSE:COP), and Occidental (NYSE:OXY) are suggested for investors.
Natural resources companies related to energy and materials are frequently considered among the best consumer discretionary stocks for investors seeking opportunities in this sector.
Olin (NYSE:OLN)
In light of the crisis in Ukraine, many investors are weighing their options about the purchase of natural resource stocks.
The existing circumstances are flourishing, thus it’s necessary to recognize that there are no underlying problems. However, it could be helpful to look at things from a different angle.
At present, the worth of key natural resource reserves has risen sharply, reaching pre-current-year highs.
The stock price of Olin, a worldwide firm that manufactures and distributes chemicals, has dropped by almost 10% since it first opened for trading in January.
Even though losing money is usually discouraging, taking a risky tack could be beneficial here.
Freeport-McMoRan Inc. (NYSE:FCX)
Listed on the New York Stock Exchange under the ticker symbol “FCX,” Freeport-McMoRan Inc. (NYSE:FCX) is a global mining company that focuses primarily on the extraction and production of copper.
The corporation declared a 15-cent dividend for its common stock in June 2023, and analysts generally recommend buying the stock.
As of March 2023, 77% of the 943 hedge funds tracked by Insider Monkey have purchased shares in the mining company.
Fisher Asset Management, run by Ken Fisher, is the largest hedge fund investor in Freeport-McMoRan Inc. (NYSE:FCX), with a $2.2 billion stake in the firm.
Vale (NYSE:VALE)
The Brazilian multinational company Vale is a powerhouse in the global mining and metals industries.
This firm stands out since it produces more iron ore and nickel than any other organization in the world. The latter presents a serious obstacle to the widespread use of electric vehicles.
Since many Western countries are so dependent on fossil fuels, the search for viable alternatives has taken on a new urgency.
Without a doubt, EVs present a compelling and workable option. However, there are specific materials that are required for electric vehicles (EVs), particularly the lithium-ion batteries that power them. Many industries consider nickel a necessary raw material.
It is therefore important to recognize the supplementary part of the equation, in which a rise in nickel prices has prompted a rise in the value of natural resource equities like VALE.
The rising price of nickel could threaten the mainstream adoption of EVs, according to a CNBC analysis.
Electric cars (EVs) are now more expensive than their combustion counterparts with equal characteristics because of the presence of relatively restrictive economies of scale.
It’s anticipated that competing for the attention of middle-class consumers will become more difficult as nickel prices rise.
Nonetheless, given the expected continued strong demand for nickel, VALE stands out as a promising natural resource stock to research.
Pioneer Natural Resources Company (NYSE:PXD)
The stock symbol for Pioneer Natural Resources Company, which explores and produces oil and gas, is (NYSE:PXD).
The state of Texas is home to the bulk of the company’s operations. The vast majority of the 40 analysts that follow its stock have a bullish outlook, with 35 of them rating the stock as Buy or Strong Buy.
Of the 943 hedge funds during the first quarter of 2023, 45 were long shares of Pioneer Natural Resources Company (NYSE:PXD).
Donald Yacktman’s Yacktman Asset Management has the largest stake in the company, at around $259 million.
Chevron (NYSE:CVX)
Crude oil has been the subject of heated debate, especially in light of recent warnings from respected institutions about the dangers of climate change.
However, oil is becoming a more divisive issue as a result of Russia’s invasion of Ukraine. It’s not simply the senseless deaths that have infuriated people throughout the world.
An overemphasis on fossil fuels in Western economies may contribute to the indirect reinforcement of violent tendencies.
The high energy density of fossil fuels means that they continue to be widely used. The power-to-population ratio is unparalleled by all other energy sources save nuclear power.
Chevron is a good option for investing in natural resource equities given the anticipated long timescale for civilizations to develop other solutions.
ConocoPhillips (NYSE:COP)
ConocoPhillips (NYSE:COP) is a global oil and gas enterprise involved in the upstream (oil and gas), midstream (oil and gas refining), and downstream (oil and gas distribution) sectors.
The current price of the company’s shares is $104. The average price objective for the shares is $130, indicating significant potential growth.
After carefully analyzing the investments of 943 hedge funds throughout the first three months of 2023, it was determined that 72 of these funds held a stake in ConocoPhillips (NYSE:COP).
Eagle Capital Management, run by Boykin Curry, is the most notable investor among the companies under consideration, holding 7.9 million shares worth over $786 million.
Chesapeake Energy Corporation (NASDAQ:CHK)
Oil and gas production facilities for Chesapeake Energy Corporation (NASDAQ:CHK) can be found in both Pennsylvania and Louisiana. The company earned $1.3 billion in revenue during the first quarter of 2023 and paid out a dividend of $1.18 per share.
There were 943 hedge funds at the end of the first quarter, and 50 of those funds were determined to be long Chesapeake Energy Corporation (NASDAQ:CHK).
Oaktree Capital Management, under Howard Marks’s direction, is the largest shareholder, with a $652 million holding.
Linde Plc (NYSE:LIN)
Among the many companies in the natural resources industry, Linde plc (NYSE:LIN) stands out as a unique entity due to its focus on the manufacturing and distribution of atmospheric gases.
The company signed deals in June to build more air separation units, increasing its footprint in the Chinese market.
In the first three months of this year, 943 hedge funds were tracked, and of those, 70 bought and held shares in the aforementioned company.
The largest investment by a hedge fund in Linde plc (NYSE:LIN) is $335 million worth of shares held by Ako Capital, managed by Nicolai Tangen.
CF Industries Holdings, Inc. (NYSE:CF)
CF Industries Holdings, Inc. (NYSE:CF) is a corporation that sells raw materials and other products by using natural nitrogen and hydrogen.
The company is planning to build a new plant that will allow for the production of carbon-free hydrogen.
This is a significant development because purifying hydrogen is one of the most energy-intensive processes in the world.
As of March 2023, 47 of the 943 hedge funds have held shares in this company. With a $223 million stake, AQR Capital Management, run by Cliff Asness, owns the most shares in CF Industries Holdings, Inc. (NYSE:CF).
Teck Resources Limited (NYSE:TECK)
Teck Resources Limited (NYSE:TECK) is a Canadian multinational mining company focused on the mining and processing of copper, zinc, and coal.
Significant progress was made in June 2023, when the company’s Trail Operations Zinc processing facility earned accreditation as the first standalone location to do so.
Teck Resources Limited (NYSE:TECK) was owned by 66 hedge funds at the end of the first quarter of 2023, out of a total of 943 funds checked.
Soroban Capital Partners, headed by Eric W. Mandelblatt, has the largest interest in the company with a $404 million investment.
Devon Energy Corporation (NYSE:DVN)
Another company actively seeking out and extracting oil and gas is Devon Energy Corporation (NYSE:DVN). The corporation announced a drastic cut to its quarterly dividend in March 2023, cutting it to just 72 cents.
Of the 943 hedge funds at the end of the first quarter, 49 of them owned shares in the company.
Fisher Asset Management, led by Ken Fisher, has a $225 million stake in Devon Energy Corporation (NYSE:DVN), making it the largest hedge fund investor in the company.
Archer Daniels Midland (NYSE:ADM)
It is natural to place a premium on natural resource reserves that contain materials crucial to our economic foundation. However, the fundamentals must also be taken into account.
Archer Daniels Midland is predicated on the idea that food is essential to human survival; without it, people will inevitably perish.
This outlook, albeit gloomy, provides solid support for the company’s activities.
The food manufacturing and commodity trading company Archer Daniels Midland (ADM) is generally seen as a safe but uninspiring investment. There has been a dramatic shift in the circumstances.
The stock of ADM has roughly increased by 24% as of the year-to-date period. Investing in strong companies is not a popular strategy, but it can have long-term intrinsic value.
It is best to avoid relying solely on food and drink for sustenance if there is another option available. But if you don’t, you could counter that ADM (or a similar company) has a workable model.
EQT Corporation (NYSE:EQT)
EQT Corporation (NYSE:EQT) operates primarily in the natural gas industry, producing and distributing the fuel it produces from its massive, untapped deposits.
These reserves are estimated to be in the billions of cubic feet.
A majority of research firms have given a “Buy” rating to the company’s stock. Five of the eighteen analysts polled have given the stock a “Strong Buy” recommendation.
Forty-seven of the 943 hedge funds have EQT Corporation (NYSE:EQT) holdings. Soroban Capital Partners, led by Eric W. Mandelblatt, has amassed a massive $199 million investment, making it the firm with the largest position among the listed shareholders.
Reflexiones finales
Protect your purchasing power by putting your money into natural resources stocks. Compared to the comparatively steady economic conditions of the 1980s, recent years have seen a noticeable surge in inflation.
At the same time, companies focused on natural resources have been thriving. In comparison to other asset classes, the performance of commodities and commodity-related equities has been exceptional.
Natural resources ETFs and stocks are expected to fetch a premium over the market as a whole due to their inflation protection and diversity features.
It’s important to remember, though, that these assets have always been traded for less than their true worth, which bodes well for their long-term success.
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Adam es un autor reconocido internacionalmente en temas financieros, con más de 830 millones de respuestas en Quora, un libro muy vendido en Amazon y colaborador de Forbes.
