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 (NYS: AUY) : Engages in gold and other precious metals mining, and related activities, including exploration, extraction, processing, and reclamation. Market cap at $11.87B. Net institutional purchases in the current quarter at 25.3M shares, which represents about 3.41% of the company's float of 742.70M shares
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 (NYS: CXO) : Engages in the acquisition, development, and exploration of producing oil and natural gas properties in the United States. Market cap at $10.36B. Net institutional purchases in the current quarter at 3.3M shares, which represents about 3.28% of the company's float of 100.57M shares
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
5. Mosaic (NYS: MOS) : Engages in the production and marketing of concentrated phosphate- and potash-based crop nutrients for the agriculture industry worldwide. Market cap at $24.55B. Net institutional purchases in the current quarter at 17.6M shares, which represents about 4.14% of the company's float of 424.90M shares
6. Plains All American Pipeline (NYS: PAA) : Engages in the transportation, storage, terminalling, and marketing of crude oil, refined products, and liquefied petroleum gas and other natural gas-related petroleum products (LPG) in the United States and Canada. Market cap at $12.75B. Net institutional purchases in the current quarter at 6.7M shares, which represents about 4.45% of the company's float of 150.71M shares
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
8. Transocean (NYS: RIG) : Provides offshore contract drilling services for oil and gas wells worldwide. Market cap at $19.58B. Net institutional purchases in the current quarter at 15.6M shares, which represents about 4.62% of the company's float of 337.79M 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.
At the time thisarticle was published The Motley Fool owns shares of Transocean. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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