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Investors are always looking for the next big thing. When they find it, the opportunity can pay out fast, or it can take a couple years to develop. The trades that work out over the longer-term are usually referred to as a market trend. You might be shocked to find out that you missed out on one of the biggest hidden trends over the last year. I'm not talking Apple, Tesla, or even Bitcoin. While those are all very well-known outperformers, what I'm bringing you today was largely ignored for many years. The Old Bull Market vs Today's Bull Market Up until recently, the equity bull market was euphoric and rewarded even the most amateur investor. Whether it was a SPAC, a tech stock, or even a meme stock, investors could do no wrong. However, something changed late last year. All those high-flying stocks started coming down quickly and started to bleed out as 2022 began. Investors were feeling the pressure and started to capitulate causing the market to nose dive in the first half of the year. Stocks were falling without the support of stimulus checks and the Fed. Sprinkle in high inflation and a Russia/Ukraine war, investors were hurting unless they were involved in an often-ignored asset class. If you haven't guessed it yet, we are talking about commodities! Oil, natural gas, grains, lumber, meats and coffee were the places to be over the last year. The gains not only came in those well-known commodities, but also the underlying stocks that deal in those products. While commodities have pulled back over the last month, they are still outperforming well-known names. And you don't have to deal with futures or options to take advantage of them. Check Out These Numbers Let's look at what some popular tech stocks have done over the last year versus what some commodities have done. Continued . . . | |||||||
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| 1.) Tesla vs Crude Oil – Tesla has been one of the hottest stocks since the pandemic lows. After holding its own against other tech names, the high flyer has gotten beat up in recent months, down 37% year to date. On the other hand, the crude oil ETF USO has performed very well. After going negative in 2020 due to the COVID panic, demand destruction quickly shifted to supply constraint, fueling oil and gas prices higher. Even after a rather big pullback, black gold is up over 43% on the year.
2.) Amazon vs Natural Gas- Everyone loves using Amazon, but the stock really hasn't performed very well as of late. Amazon is also down over 30% year to date, and well off its 2021 highs. Even with the recent stock split, the stock continues to struggle getting off its 2022 lows. Looking at natural gas, we had a huge move of over 140% higher earlier this year. After a large pullback, it's still up 60% on the year, well outperforming Amazon even if calculated from the COVID lows! Natural gas prices are very dependent on supply/demand dynamics, but a recent lack of supply in Europe has lifted price.
3.) Apple vs Wheat and Corn- Surely Apple can take down commodities like wheat or corn, right? Phones are far more important than bread and succotash, right? Wrong! Wheat ETF WEAT is up 25% year over year and Corn ETF CORN is up 13%. While Apple has outperformed most tech, it's still down almost 20% in the year. It can't match up to the necessity of the grains. And since Ukraine and Russia produce a lot of the world's grain needs, a prolonged conflict in Ukraine will cause grain prices to remain elevated.
4.) GameStop vs Coffee- Everyone's favorite meme stock entertained us in 2021, but the stock is down over 30% year over year. The stock moved so fast you needed a lot of coffee to keep up. Coffee ETF JO has flattened out over the last couple months, but has gained over 40% in price over the last year.
5.) XLK vs DBC- Some investors prefer ETFs over individual stocks and even the diversified tech investors are hurting, with XLK down 24% in 2022. Looking at the Commodity Index ETF DBC, we see a gain of almost 25% over this same time frame.
Is There More Meat on the Commodity Bone? Commodities are all about speculation. Factors that move markets can include an increase in demand, a shortage of supply, economic growth or lack thereof. Moreover, the weather is a big catalyst for agriculture. While we might not be able to determine which way the wind blows, investors have tools that let them gain an edge. Technical analysis combined with analysis of individual markets can give an investor a good idea of where price may go. Lately, there are some external factors that have really pressured the supply side for all commodities. While the Ukraine war is a big factor, supply chains and lack of supply that remains from COVID has helped commodities stay elevated. Not only is there more room for prices to go higher, but they might go much higher if these supply constraints remain. Despite recession fears, both commodity prices and commodity stocks could bull their way higher into the end of the year. Zacks' Top Commodity Plays for Today's Market The commodity markets are not for the faint of heart, but they can be extremely rewarding. Now, more than ever, is perhaps the greatest time in a decade to find exposure to the ups and downs of this volatile market. Additionally, while the prices of these commodities might see a lot of volatility, the stocks that benefit from the price of those commodities look to see big profits for years to come. An easy way to get started is to follow my Commodity Innovators portfolio. I'm stalking the strongest trends to find commodity stocks with the most promise. We will minimize our risk without being exposed to the futures market, while keeping the same potential rewards. Using the Zacks Rank, I have a plethora of ETFs and stocks to choose from that will allow us to capture this profit potential created within the commodity markets. Over the past few months, the Commodity Innovators portfolio already handed members recent gains like +109.6%, +50.8%, +65.3%, and even one for +93.1% in just 17 days.¹ And on Thursday morning I'll post a brand-new trade that could rival or surpass the above performances for early investors. You can still be one of the first to see it. Overall, research indicates current market trends are likely to continue producing big opportunities at least through the end of 2022. Bonus: To maximize your profit potential in today's inflationary market you can also access our Special Report, Oil Market on Fire: 4 Stocks with Smoking Upside. It reveals Zacks' top tickers in what could become the hottest commodity of all. I urge you to take advantage of this right away. Your chance to gain access to Commodity Innovators and claim our Oil Market on Fire report is Sunday, July 24. Check out Commodity Innovators today » All the Best,
Jeremy Mullin is a technical expert with 17 years' experience pinpointing the best times to buy and sell commodities. He is the editor of Zacks Commodity Innovators. | |||||||
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| ¹ The results listed above are not (or may not be) representative of the performance of all selections made by Zacks Investment Research's newsletter editors and may represent the partial close of a position. This free resource is being sent by Zacks.com. We look for investment resources and inform you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms of Service". https://www.zacks.com/terms_of_service Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research is not a licensed securities dealer, broker or US investment adviser or investment bank. The Zacks #1 Rank Performance covers the period beginning on January 1, 1988 through June 6, 2022. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank #1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance_disclosure for information about the performance numbers displayed above. Zacks Emails Zacks Investment Research |
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