Safety in Commodities

Billionaire Jim Rogers whose investments I keep a close eye on as he started with nothing and well is a billionaire. Mr. Rogers was likely the first person to call the huge move in farm products and specifically fertilizer stocks and has made huge profits there. Wish I had listened to his advice then. So when he said in his latest interview that he was moving significant assets into commodities this time I am listening and will move even more of Small Town Investors Hedge Fund assets into commodities.

 

Mr. Rogers reasoning seems sound as he noted that if he is right and the economy continues to move sideways and more likely downward that central banks in the United States and Europe will crank up their printing presses and print more money. The result will be lots more currency chasing goods and since commodities, unlike manufactured goods, are limited in supply their prices will rise. On the other hand if he is wrong and the economy begins to move upward then commodities will be in demand and prices will rise. Either way you win.

 

Currently the hedge fund trades significant assets in several commodity stocks. ERF, Enerplus Resources Fund, is our second largest holding and provides oil and gas well type returns. Plus ERF is in Canada where Obama can not touch them policy wise. SCCO, Southern Copper, is also in the fund and is a copper miner and copper is my gold play. Copper is in high demand in this tech world and is in very limited supply. DO, Diamond Offshore, is an offshore oil driller that has moved it's business out of the US now due to restrictions, and has high demand due to the high price for oil.  All three stocks are current holdings. RIG, Transocean, is another offshore oil driller, that is domiciled in Switzerland and does most of it's business outside US waters.  As of this posting it has been placed on my watch list for future consideration. Finally BP a oil company domiciled in the United Kingdom has begun to see the final costs on it's Gulf oil disaster and likely will see some payback from the $20 billion dollar fund. BP has also liquidated enough assets to have a large cash position to move on other opportunities in the oil business. Having reinstated a partial dividend I am also placing BP on my watch list.

 

The hedge fund has just over 20% of it's assets in the three stocks listed above and is looking to add to the commodity positions in the two additional stocks. All five securities offer good dividend yield as well.