With an uncertain economy, soaring inflation, and serious geopolitical conflicts, it’s safe to say that investors are dealing with a complicated stock market in 2022. One market area has been outperforming and stands out as a place to potentially park some capital – commodity stocks. The bull case here is simple - with a limited supply of important global resources like oil, copper, steel, fertilizers, and more, any company that is involved in producing these commodities could benefit from strong prices and robust demand going forward.
Some analysts are even calling for a commodities supercycle, which refers to an extended period of time when commodities trade above their long-term price trend. There’s also the fact that other areas of the market like the tech sector simply aren’t working at this time, making the case for adding commodity stocks even more intriguing. That’s why we’ve put together the following list of 3 compelling commodity stocks to buy now. Let's take a closer look at these impressive businesses below.
1. Rio Tinto
Metals & mining stocks have been shining bright during the first quarter, and there’s certainly a chance they continue to outperform going forward given the circumstances. Investors interested in one of the most quality names in that space should take a look at Rio Tinto (NYSE:RIO), a company that has definitely been known to execute well during economic downturns. Rio Tinto generates the majority of its revenue from iron ore, but also offers exposure to aluminum, copper, gold, diamonds, industrial minerals, and uranium. Since iron ore is an essential piece of the steelmaking process, this company plays a crucial role in the global economy, which is always a positive to consider for the long term.
Global sanctions against Russia are going to tighten the iron ore supply, which is absolutely another positive for this company going forward. An additional positive for investors to consider here is the 9.85% dividend yield, which is certainly attractive in the current market environment. Finally, the fact that Rio Tinto posted EPS growth of 72% in 2021 to $13.21 tells investors all they need to know about its upside if commodity prices continue to stay elevated.
2. The Mosaic Company
Mosaic (NYSE:MOS) is another solid commodity stock that continues to exceed expectations in a very challenging market environment. Mosaic offers a compelling way to gain exposure to an industry that has plenty of tailwinds working in its favor at this time. It is one of the world’s largest producers and marketers of concentrated phosphate and potash crop nutrients for the global agriculture industry. That means Mosaic is a company playing a vital role in sustaining the world’s food supply, which is becoming increasingly important as the world’s population expands.
Fertilizer prices have been soaring thanks to supply chain disruptions caused by Russia’s invasion of Ukraine, which has naturally led to a huge rally in Mosaic’s share price. These issues likely aren’t going to be resolved anytime soon, which sets the stage for Mosaic to generate very strong earnings during the next few quarters. There’s also a lot to like about the fact that phosphate demand should see a boost as electric vehicles become more common because it's an important part of the lithium batteries that power these eco-friendly automobiles. Although this stock has rallied a whopping 76% year-to-date, it's still worth keeping an eye out for buy-the-dip opportunities in the coming sessions.
3. Exxon Mobil
No list of compelling commodity stocks would be complete without at least one energy name, and Exxon Mobil (NYSE:XOM) stands out as a great option to consider in that sector. It’s a massive oil and gas company that is set to benefit from strong energy market fundamentals and reduced capital spending going forward, which puts it a cut above many other companies in the industry. Perhaps the company’s biggest advantage is its integrated business model, which really helps the company thrive during periods of elevated oil and gas prices like we are currently seeing.
The company recently mentioned that its Q1 results could top a seven-year quarterly record, and it will definitely be interesting to see how investors react after the earnings numbers are released on April 29th. Finally, the fact that Exxon Mobil shares offer a very appealing 4.25% dividend yield and that the company has taken big strides towards improving its balance sheet make this a great option for income investors to consider.