Commodities are, for the most part, necessities. And in tough economic times they can serve as a hedge against inflation in a well-diversified portfolio.
What are commodity stocks?
Commodities are basic goods, such as oil, wheat or cattle. Commodity stocks are shares of companies that operate in those spaces, such as oil refineries, wheat producers or meat-processing companies. Commodity stocks represent things people need, such as food and energy. This can potentially make them strong additions to an investment portfolio.
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7 best-performing commodity stocks
Here are the seven best-performing commodity stocks from Fidelity's Global Commodity Stock Fund (FFGCX). This fund offers a good representation of several commodities-based industries, including the energy, metals and agricultural industries. This fund may include international as well as domestic stock.
Ticker | Company | Performance (Year) |
|---|---|---|
EAF | GrafTech International Ltd. | -81.58% |
SGML | Sigma Lithium Corporation | -68.02% |
ALB | Albemarle Corp. | -57.67% |
DAR | Darling Ingredients Inc | -34.67% |
NE | Noble Corp Plc | -31.63% |
FMC | FMC Corp. | -27.36% |
NTR | Nutrien Ltd | -26.66% |
VAL | Valaris Ltd | -23.74% |
FNV | Franco-Nevada Corporation | -17.30% |
BG | Bunge Global SA | -13.14% |
RRC | Range Resources Corp | -10.72% |
CVE | Cenovus Energy Inc | -9.39% |
BHP | BHP Group Limited ADR | -8.96% |
AR | Antero Resources Corp | -7.34% |
RS | Reliance Inc. | -4.27% |
SUZ | Suzano S.A. ADR | -2.10% |
AA | Alcoa Corp | 0.47% |
CF | CF Industries Holdings Inc | 2.65% |
XOM | Exxon Mobil Corp. | 3.85% |
TTE | TotalEnergies SE ADR | 6.31% |
CNQ | Canadian Natural Resources Ltd. | 7.65% |
TECK | Teck Resources Ltd | 7.89% |
CTVA | Corteva Inc | 10.02% |
SHEL | Shell Plc ADR | 11.74% |
PBR | Petroleo Brasileiro S.A. Petrobras ADR | 12.35% |
WFG | West Fraser Timber Co., Ltd. | 13.81% |
GPOR | Gulfport Energy Corp. | 18.26% |
ET | Energy Transfer LP | 19.01% |
WPM | Wheaton Precious Metals Corp | 37.04% |
AGI | Alamos Gold Inc. | 43.69% |
AEM | Agnico Eagle Mines Ltd | 62.87% |
TRGP | Targa Resources Corp | 73.77% |
PPC | Pilgrim's Pride Corp. | 82.07% |
MNR | Mach Natural Resources LP |
Types of commodity stocks
There are several types of commodities out there. Here are a few examples:
Gold.
Oil.
Meat.
Silver.
Wheat.
Soybeans.
Copper.
Oats.
Cotton.
Rice.
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Commodity stock benefits
The three main benefits of commodity stocks are hedging against inflation, diversifying your investment portfolio and potentially paying dividends.
Since commodity stock prices increase when the price of commodities increase, commodity stocks may work well to combat the effects of inflation. That’s particularly true if you’re getting close to retirement, already have other retirement-worthy investments such as bonds, Treasurys or money market funds, and want to protect your investment portfolio's value. If you have a well-diversified portfolio to begin with, and you’re investing over a long period of time, you may benefit just as well (if not more) by focusing on stocks that have long-term growth potential.
» Check out the best-performing growth stocks
Commodity stocks may increase your portfolio’s diversification because commodities are found in so many sectors. And since commodities are often necessities, it is less likely consumers will cut back spending in the commodities sectors when times are tough. This is in contrast to other areas that may be considered discretionary, such as travel or restaurants.
Some commodity stocks pay dividends, but not all do. The best dividend stocks don’t necessarily pay the highest dividends, but commodity companies with a history of paying reliable dividends and strong financial fundamentals may be worth investigating if you’re looking for commodities exposure.
Commodity stock risks
One of the biggest cons of commodity stocks is that they are fairly reliant on political and climate events, and can be volatile as a result. For example, extreme weather creates risks for crops and livestock, and international affairs can have a significant impact on oil prices. The other risk of commodity stocks is exactly that: They’re individual stocks. Individual stocks harbor all the risks of the singular company they represent. Commodity exchange-traded funds, or ETFs, however, allow you to invest in lots of different commodity stocks at the same time. This can reduce your risk and increase your portfolio’s diversification.
