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Is Palladium the Play in 2011?

|Includes: Dean Foods Company (DF)

I think so.  I think it is the play for not only 2011, but the play for the auto recovery in general.  Palladium is a rare earth metal, similar to silver and platinum, and is used in many different industries including medical and electronics. However the majority of Palladium is used in the production of catalytic converters. 

So that's it? Catalytic converters? That's why I believe Palladium is such a winner?

Well its slightly more complex than that.  One of the main Palladium miners, Russian based Norilsk Nikel, has seen a severe drop off in production.  Over the past few years this decrease in production has been replaced by the Palladium stockpiles held by the Russian State.  However now that state held stock pile is diminishing as well.  Therefore Palladium is beginning to follow the old rule of supply and demand.  The decrease in supply and increase in demand, brought on by the increased demand of the auto industry,  will lead to higher prices.  In fact BNP Paribas has even raised its target price on Palladium by $75, bringing the target price to $825/oz.  With a current Palladium price of around $730, there seems to be a lot of room for this metal to run.

My favorite stock in this category is Canada- Based North American Palladium (PAL) for many reasons.  For starters it's a Palladium miner not based in Russia.  Due to the deterioration of Russian Palladium stock piles, the demand for Palladium from elsewhere in the world will increase substantially.  North American Palladium (PAL) is a miner of Gold, Silver, and Palladium, which offers a level of diversification across the commodity sector. For these reasons, and the reasons listed above, I feel Palladium will be the commodity to play in 2011, and the best way to play it is through North American Palladium (PAL)

Disclosure: I have a long position in North American Palladium (PAL)