Commodities are generally known to offer diversification benefits to stocks since commodities prices tend to move to the beat of their own drum. One way to gain exposure to commodities is through basic materials stocks (i.e., commodities producing companies), although these stocks' prices are also subject to company risks.
To illustrate this, we ran a screen on the basic materials sector for large-cap stocks with market caps above $10 billion. We then screened for those with bullish sentiment from the smart money, with significant net institutional purchases over the current quarter.
Institutional investors include hedge fund managers and mutual fund managers, and because of their experience and access to sophisticated research, their trades are interesting to other investors and analysts. When a company's stock sees strong net buying from institutional investors, it indicates that these investors are generally bullish on the stock.
Business section: Investing ideas
Below are the stocks resulting from this screen. These commodity-producing companies are seeing bullish sentiment from hedge funds and other institutional investors -- do you also think they are poised to outperform?
Use this list as a starting point for your own analysis. (Click here to access free, interactive tools to analyze these ideas.)
1. Yamana Gold
2. Continental Resources: Engages in the exploration and production of crude oil and natural gas primarily in the north, south, and east regions of the United States. Market cap at $15.96B. Net institutional purchases in the current quarter at 1.9M shares, which represents about 4.65% of the company's float of 40.84M shares
3. Concho Resources
4. Ivanhoe Mines: Operates as an exploration and development company. Market cap at $12.24B. Net institutional purchases in the current quarter at 8.1M shares, which represents about 3.1% of the company's float of 261.19M shares
6. Plains All American Pipeline
7. Pioneer Natural Resources: Engages in the exploration and production of oil and gas in the United States, South Africa, and Tunisia. Market cap at $12.54B. Net institutional purchases in the current quarter at 5.6M shares, which represents about 5.06% of the company's float of 110.71M shares
Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.
Kapitall's Alexander Crawford does not own any of the shares mentioned above. Institutional data sourced from Fidelity.