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Listen to Dr. Copper: Time to buy metals here

Pras Subramanian

The markets may be sitting at near all-time highs, but they’re not the only asset class in town. You might not realize it, but the metals have been booming recently. Jonathan Hoenig of CapitalistPig hedge fund has been on this trade for months, and he still says there’s room for more upside.

In Hoenig’s mind there’s a number of reasons why the metals have been rallying recently, not the least of which is instability in Ukraine. But more broadly, the strength in stocks is helping base metals, Hoenig says, but what makes them a great diversified investment is that they are not totally correlated to stocks and precious metals like gold and silver.

“As a portion of a portfolio, base metals particularly because they are not over-owned. We’ve seen a tremendous amount of interest coming into precious metals like gold and silver, “ he says, but sees the base metals as the way to go. His fund has been buying palladium, tin and aluminum.

Hoenig advises getting in the trade by checking the several ETFs and ETNs that track metals. The broadest one is the PowerShares DB Base Metals ETF (DBB). Other options are the iPath DJ-UBS Nickel ETN (JJN) and iPath DJ-UBS Copper ETN (JJC).

Just like any trade, Hoenig cautions to start with a reasonable position and use a stop-loss order when trading metals.

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