7 Natural Resource Stocks to Buy Amid the Global Crisis
Ever the outspoken leader, the late Sen. John McCain once remarked that Russia was a gas station masquerading as a country. Though an ungenerous comment particularly due to the global power’s history and present track record of scientific achievements, it does bear some truth. Russia is a major contributor to global energy supplies, which presents an intriguing case for natural resource stocks to buy.
With the destabilizing decision to invade Ukraine, Russian President Vladimir Putin isolated himself and his nation from the global economy – at least the regions that don’t involve China, North Korea, Iran and other countries with dubious relations with the west. In response to Putin’s actions, the U.S. imposed hefty sanctions on Russia. But sanctions go both ways, putting a sharp spotlight on natural resource stocks.
True, mainstream media reports that the punitive measures dramatically affected Russia’s economy. And that’s coming from Elvira Nabiullina, the head of Russia’s central bank. So unless the Russians are playing the greatest sandbagging game ever, they’re feeling the heat.
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However, Americans are also taking it unpleasantly. U.S. gas prices hit $4.43 a gallon recently. Cynically, such circumstances bode well for natural resource stocks to buy.
In part, that’s because natural resource stocks are possibly one of the few reliable stocks to buy during this juncture. Fraught with bloodshed and turmoil, the global economy may simply grind down to base-level realities. What I mean is, if the roof of a skating rink is collapsing, the name of the game is to get out quickly, not to practice your triple axel.
To put it another way, (insert preferred pronoun) who has the gold wins. But also, the winner is the one who owns oil, gas, copper, even lead.
As a caveat, you must remember that no guarantees exist in the market. Certainly, no guarantees exist when open conflict erupts in the heart of Europe – we just have no precedent for this kind of thing in modernity. Therefore, please navigate this idea of natural resource stocks to buy with strict money management and due diligence.
In a fractious world order, these may be the natural resource stocks to buy.
Chevron (NYSE:CVX)
Vale (NYSE:VALE)
Olin (NYSE:OLN)
Sibanye Stillwater (NYSE:SBSW)
Sociedad Quimica y Minera de Chile (NYSE:SQM)
Southern Copper (NYSE:SCCO)
Archer Daniels Midland (NYSE:ADM)
Natural Resource Stocks: Chevron (CVX)
Source: Jeff Whyte / Shutterstock.com
Crude oil has long been a controversial subject, especially recently as mainstream institutions warned about the deleterious effects of climate change. However, oil is in a sense becoming a toxic subject due to the Russian invasion of Ukraine. It’s not just about the unnecessary loss of life that angers the international community. Instead, the overdependence of western nations to fossil fuels may indirectly buttress violent behaviors.
Still, as The Brookings Institution stated, fossil fuels are difficult to quit because of their high energy density. Short of nuclear power, nothing else comes close to the power-per-capita equation. Seeing as how it will likely take many, many years for societies to find alternatives, you might as well tag Chevron as one of the natural resource stocks to buy.
I get it. We’re getting killed with pain at the pump. Where I am, premium gasoline goes for $6 to $6.50 a gallon. It’s going to get worse if circumstances continue this way. But because of this cynical pathway, CVX offers some mitigation through the befriending of one of the biggest bullies in town.
Vale (VALE)
Source: rafapress / Shutterstock.com
A Brazilian multinational corporation focused on the metals and mining industry, Vale was long a relevant name in business. Its biggest headliner is that it’s the largest producer of iron ore and nickel in the world, the latter imposing a distinctly difficult factor toward the broader pivot to electric vehicles.
On one hand, the dependency of western nations on fossil fuels has sparked additional urgency to seek alternative fuels. Of course, EVs present an intriguing and viable option. However, EVs – particularly the lithium-ion batteries that undergird them – require multiple commodities. Well, nickel just happens to be one of those critical commodities.
Thus, we must consider the other side of the equation: nickel prices will go up, which naturally sparked a rally in natural resource stocks like VALE. But per a CNBC report, rising nickel prices could threaten the EV rollout. Right now, relatively limited economies of scale means that EVs are pound-for-pound more expensive than their similarly featured combustion counterparts. Higher nickel prices will hurt ambitions to target middle-income consumers.
Still, nickel will be in demand regardless, meaning that VALE is one of the natural resource stocks to consider.
Olin (OLN)
Source: IgorGolovniov / Shutterstock.com
When it comes to natural resource stocks to buy amid the crisis in Ukraine, many investors are thinking about the obvious. Believe me, there’s nothing wrong with that since the obvious is obviously killing it right now. However, it might not hurt to think outside the box.
Currently, high-profile natural resource stocks are up – way up – on a year-to-date basis. But Olin, a global manufacturer and distributor of chemical products, is actually down about 10% against its January opener. While red ink usually doesn’t inspire confidence, in this case, you might want to consider going contrarian.
Specifically, I’m looking to Olin for its other business: being a leading U.S. manufacturer of ammunition. As you know, shooting sports are very popular in America. And one of the most popular rifle caliber ammo is the 7.62×39 cartridge, colloquially known as the 7.62 Soviet.
Yes, we’re talking about the ammo that feeds the notorious AK-47.
Because of the sanctions, Americans will soon be unable to access these comparatively cheap 7.62s. Perhaps, the lack of inventory will boost more demand for the .223 Remington, a caliber very similar to the 5.56 NATO that feeds various American/western weapons systems.
Natural Resource Stocks: Sibanye Stillwater (SBSW)
Source: Shutterstock
One of my favorite ideas to cover whenever the discussion of natural resource stocks comes up, Sibanye Stillwater is essentially the king of precious metals mining. Headquartered in South Africa, Sibanye is located in one of the most endowed regions on Earth. Per its website, the company is “the world’s largest primary producer of platinum, second largest primary producer of palladium and third largest producer of gold.”
As I mentioned in prior InvestorPlace articles, I’m a proponent of having some exposure to hard assets like the aforementioned precious metals – and I do practice what I preach. With soaring inflation hurting consumers before the geopolitical flashpoint erupted, now is a great time to at least consider de-risking some exposure to fiat currencies.
But SBSW itself is more critical because of the extraordinary relevance of its product offerings. For starters, mass-scale EV integration will not occur overnight, which means palladium and platinum will still be in demand for their catalytic converter usage.
Further, palladium – which is mostly sourced from Russia and South Africa – features applications in electronics, contributing to its skyrocketing price.
Sociedad Quimica y Minera de Chile (SQM)
Source: Bjoern Wylezich/ShutterStock.com
You knew this was coming so Sociedad Quimica y Minera de Chile should not shock anyone regarding its inclusion on this list of potential natural resource stocks to buy. Historically, SQM was one of the indirect ideas to consider if you didn’t want to wager on a specific EV company.
I liken it to Super Bowl bets. If you had a choice, you’d much rather sell tickets to the game rather than picking winners and losers. Anything can happen in a matchup and if you’re a conspiratorial or skeptical type, the fix could already be in. But tickets? That’s always a hot commodity and hence, this dynamic contributes to SQM’s popularity.
No matter which EV brand dominates the automotive rankings of the future, the future will most likely need lithium, SQM’s core asset.
Of course, investors have already piled into the stock, which is up around 49% YTD. Certainly, a risk exists that if circumstances normalize, the rally would end up deflating. As well, you’re buying high in the hopes of selling higher. Nevertheless, the company’s extraordinary relevance among natural resource stocks makes it worth a long look.
Southern Copper (SCCO)
Source: Shutterstock
While copper is culturally associated with a tertiary status – bronze being a copper-based alloy – it’s golden when it comes to the criminal element. For years since the onset of the Great Recession, law enforcement agencies have been inundated with calls about copper thefts; just ask the Federal Bureau of Investigation.
But more than a way to make a sleazy buck, copper is actually instrumental in the EV rollout. As a Reuters report stated, “Conductivity of pure copper is second only to silver. With the advent of hybrid and battery electric vehicles, the amount of copper wiring used to power an automobile has increased.” Therefore, it only makes sense to consider Southern Copper as one of the natural resource stocks to put on your radar.
True, as I mentioned earlier, the narrative for full-scale integration of EVs is a complicated one. And it’s only going to be more challenging because of the Ukraine flashpoint. However, it’s untenable to continue barreling into combustion cars now that the paradigm has rudely shifted.
Therefore, SCCO deserves serious attention amid these difficult times.
Natural Resource Stocks: Archer Daniels Midland (ADM)
Source: Katherine Welles / Shutterstock.com
While the main focus on natural resource stocks understandably centers on materials that are vital to our economic machinery, we must also not forget about the fundamentals. If we don’t eat, we die and that’s the cynical but incredibly bullish backdrop for Archer Daniels Midland. A food processing and commodities trading company, ADM has been a safe albeit boring idea. That’s changed quite dramatically.
On a YTD basis, ADM is up around 24%. While buying into strength may not be everyone’s cup of tea, fundamentally, the case for the stock could be a permanently relevant one. What I mean is, if you know of an alternative to food and water, go with that. But if you don’t, then ADM (or similar business) represents a solid idea.
Indeed, the Russians seem to have forgotten a quote by U.S. Army General John J. Pershing. “Infantry wins battles, logistics wins wars.” Again, one of the logistical realities of the global economy is that it doesn’t matter how advanced we become, we still need to eat (and drink).
Yes, it’s boring but don’t overlook ADM when doing your research on natural resource stocks to buy.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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