Guess what happens when you print trillions of dollars and then run into underinvestment and logistical problems upon reopening a fast-growing global economy? You get commodity price inflation.
It’s hardly a shocking development.
Major commodity markets are collectively up over 52% so far in 2021 – global equity markets are up less than 17% for some perspective.
Why is it happening? One simple framework is “easy money”: with Turkey’s rate cut a few days ago, we have now seen exactly 1,000 central bank rate cuts since the Lehman bankruptcy in 2008. It’s 13 years of accumulating stimulus.
Then you stop the world economy to cut off transmission of the virus, and commodities crash, and producers stop investing in new production. And then you restart everything and demand switches back on instantly. But production is slow to respond and behind the curve.
That story describes almost every major commodity market in the world right now. This is economics 101 – supply and demand drive reality.
With that in mind, we take a look at some of the most compelling stocks in the commodity space, along with their recent catalysts.
Cleveland-Cliffs Inc. (NYSE:CLF) is a flat-rolled steel producer company that supplies iron ore pellets to the North American steel industry.
The company is involved in production of metallics and coke, through iron making, steelmaking, rolling and finishing, and to downstream tubular components, stamping, and tooling.
Cleveland-Cliffs Inc. (NYSE:CLF) reported third-quarter results for the period ended September 30, 2021 a few days ago, including news that third-quarter 2021 consolidated revenues were $6.0 billion, compared to the prior-year third-quarter revenues of $1.6 billion and that the Company recorded net income of $1.3 billion, or $2.33 per diluted share. In the prior-year third quarter, the Company recorded net income of $2 million.
Lourenco Goncalves, Cliffs’ Chairman, President, and CEO said: “In a short period of less than two years, we went from $2 billion annual revenues in 2019 to expected revenues of $21 billion in 2021. Also, the $1.9 billion of Q3 adjusted EBITDA we have just reported is equivalent to half of our year-to-date adjusted EBITDA of $3.8 billion, showing that our profitability continues to increase, as we continue to implement our way of doing business, and take advantage of – and extract synergies from – our modern, efficient and unique footprint.”
And the stock has been acting well over recent days, up something like 18% in that time. Shares of the stock have powered higher over the past month, rallying roughly 29% in that time on strong overall action.
Cleveland-Cliffs Inc. (NYSE:CLF) managed to rope in revenues totaling $5B in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 379.2%, as compared to year-ago data in comparable terms. In addition, the company is battling some balance sheet hurdles, with cash levels struggling to keep up with current liabilities ($73M against $3B, respectively).
Camber Energy Inc (NYSEAMERICAN:CEI) was one of the best performing players in the commodity space a month ago. Then it got hit by a bear attack from a fund that put out a research report arguing against the stock to drive it back down after it rose to nearly $5/share.
CEI has exposure to oil and gas assets through its majority-owned subsidiary, Viking Energy Group Inc (OTC US:VKIN), which has energy assets located in North America in Kansas, Missouri, Texas, Louisiana, and Mississippi. With its firm financial backing, one can easily imagine a lot of expansion opportunity here as well.
Camber Energy Inc (NYSEAMERICAN:CEI) management commented on the “short report”, which is a good sign. Not responding to something like that allows the attackers to control the narrative.
Regarding such report James Doris, President and Chief Executive Officer of Camber, commented, “We are not involved in, nor do we comment on, the day-to-day trading of the company’s common stock. I can say, however, that our business relationships are legitimate and that we are firmly committed to improving the organization’s capitalization and executing on our growth strategy. With respect to the Company’s public filings, our objective is for the Company to become current on or before the expiry of the Initial Cure Period as established by the New York Stock Exchange, which is on or about November 19, 2021.”
From that, one can clearly understand that the bear attack seems to have alleged, in effect, that the company didn’t substantively have a real business. However, as the company paints the picture, it is simply behind in its filings. And it intends to rectify that before it becomes of consequence to its investors.
Time will tell. But the situation, as it seems to be here, could represent an opportunity if the company executes and gets its house in order because its majority owned subsidiary, VKIN, has been posting growing production and revenues in a marketplace where its end-market product has been rapidly growing in value.
Camber Energy Inc (NYSEAMERICAN:CEI) recently delivered another twist to its story: its strides to become a leader in the emerging carbon capture marketplace after recent announcing that VKIN entered into an Exclusive Intellectual Property License Agreement with ESG Clean Energy, LLC regarding ESG’s patent rights and know-how related to stationary electric power generation, including methods to utilize heat and capture carbon dioxide. That’s an ESG theme and a new opportunity to drive growth.
Cameco Corp. (NYSE:CCJ) is perhaps the most recognizable publicly traded uranium producer. The company operates through the following segments: Uranium and Fuel Services.
The Uranium segment involves the exploration for, mining, milling, purchase and sale of uranium concentrate. The Fuel Services segment involves the refining, conversion and fabrication of uranium concentrate and the purchase and sale of conversion services.
Cameco Corp. (NYSE:CCJ) recently released its 2020 ESG (environmental, social and governance) Report. The report illustrates how Cameco integrates ESG principles and practices throughout the company and in its strategy, and includes feature stories and metrics for its 2020 ESG performance.
“This is the 16th annual report on our sustainability performance, in a year that was truly like no other due to the COVID-19 pandemic,” said Cameco president and CEO Tim Gitzel. “Despite the challenges the world experienced in 2020, Cameco was resilient. We kept our focus on ensuring the safety of our workers, protecting the environment and supporting our partner communities. In fact, we received positive recognition for our performance on a number of ESG fronts last year, demonstrating the success of our programs and practices and the value we are creating.”
The stock has suffered a bit of late, with shares of CCJ taking a hit in recent action, down about -2% over the past week. Shares of the stock have powered higher over the past month, rallying roughly 27% in that time on strong overall action.
Cameco Corp. (NYSE:CCJ) managed to rope in revenues totaling $359.2M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of -31.6%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels exceeding current liabilities ($1.2B against $257.5M).
Other key plays in the commodity space include United States Steel Corp. (NYSE:X), Archer Daniels Midland Co. (NYSE:ADM), BHP Group Ltd. ADR (NYSE:BHP), and Alcoa Corp. (NYSE:AA).