7 Best Performing Large Cap Commodity Stocks

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 |  Includes: AUY, CF, CHK, GG, KMI, POT, RRC
by: Rash Menaria

Here is a list of the seven best performing large cap commodity stocks based on year to date returns.

Ticker

Company

Industry

YTD Returns

AUY

Yamana Gold, Inc.

Gold

31.36%

CF

CF Industries Holdings, Inc.

Agricultural Chemicals

34.07%

CHK

Chesapeake Energy Corporation

Independent Oil & Gas

21.33%

EP

El Paso Corp.

Oil & Gas Pipelines

38.97%

GG

Goldcorp Inc.

Gold

21.78%

POT

Potash Corp. of Saskatchewan, Inc.

Agricultural Chemicals

17.09%

RRC

Range Resources Corporation

Independent Oil & Gas

46.76%

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Two stocks that are likely to continue their outperformance going forward are CF Industries and Potash Corp. Both are fertilizer producers. Demand for fertilizers is more dependent on farm economics than broader macroeconomic environment. The most important factor for farm economics is grain prices. I see grain prices remaining at elevated levels, given the excess amount of money supply which has entered the system thanks to bailouts, quantitative easing and stimulus. Further, since demand for food grains is inelastic, I don’t see any major impact of recession.

Another factor which is important for the fertilizer stocks is the amount of inventory in the supply chain. One major reason for a correction in fertilizer stocks in 2008 was the excess inventory at fertilizer retailers, which affected the volumes negatively at fertilizer producers as well as pressured the prices. A current downturn is different and retailers have not overstocked inventory this time around after taking a lesson from the last downturn. This further decreases any scope of downside in the fertilizer stocks.

In the long term, I see fertilizer stocks as a good bet against inflation and a play on rising global population and higher nutritional demand per capita.

Yamana Gold Inc. is a gold producer with gold production, gold development stage properties, exploration properties, and land positions in Brazil, Argentina, Chile, Mexico and Colombia. Out of 18 analysts covering the company, 15 have buy ratings and three have hold ratings.

Chesapeake Energy Corporation is a producer of natural gas and oil and natural gas liquids in the United States. The company operates in three segments: Exploration and production; marketing, gathering and compression; and service operations, which include its wholly-owned drilling and trucking operations. The company focuses on discovering and developing unconventional natural gas and oil fields onshore in the United States. Out of 32 analysts covering the company, 18 have buy ratings, 12 have hold ratings and two have sell ratings.

El Paso Corporation is an energy company that operates in the natural gas transmission and exploration and production sectors of the energy industry. It operates in two segments: Pipelines and exploration and production. It also has a marketing segment. All 12 analysts covering the company have buy ratings.

Goldcorp Inc. is a gold producer engaged in the operation, exploration, development and acquisition of precious metal properties in Canada, the United States, Mexico and Central and South America. Out of 20 analysts covering the company, 16 have buy ratings and four have hold ratings.

Range Resources Corporation is an independent natural gas and oil company. The company is engaged in the exploration, development and acquisition of primarily natural gas and oil properties, mostly in the Appalachian and Southwestern regions of the United States. Out of 38 analysts covering the company, 18 have buy ratings, 19 have hold ratings and one has a sell rating.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.