Our commodity sector basket aims to provide a list of broad exposure to the global commodity sector. The basket comprises of 40 stocks across four categories such as agriculture, chemicals, energy, and metals & mining. We have for the most part chosen the largest companies in each category but have had to deviate a bit from that principle to get a diversified basket of stocks. We also aimed at diversifying across different regions of the world to avoid getting a high concentration in a specific country.
Name | Category | Sub-category | Market cap (USD, mn.) |
Deere & Co | Agriculture | Machinery | 84,310 |
Corteva Inc | Agriculture | Seeds and crops protection | 28,981 |
Archer-Daniels-Midland Co | Agriculture | Integrated agribusiness | 28,048 |
Nutrien Ltd | Agriculture | Agricultural chemicals | 27,479 |
Kubota Corp | Agriculture | Machinery | 26,281 |
Bunge Ltd | Agriculture | Integrated agribusiness | 9,159 |
WH Group Ltd | Agriculture | Meat processing | 12,780 |
Wilmar International Ltd | Agriculture | Integrated agribusiness | 23,022 |
Muyuan Foods Co Ltd | Agriculture | Pigs and feed products | 49,179 |
Inner Mongolia Yili Industrial Group Co Ltd | Agriculture | Dairy products | 44,571 |
Ingredion Inc | Agriculture | Sweeteners and starches | 5,270 |
Linde PLC | Chemicals | Industrial gas | 138,139 |
Air Liquide SA | Chemicals | Industrial and health care gases | 79,665 |
BASF SE | Chemicals | Diversified chemicals | 74,515 |
Air Products and Chemicals Inc | Chemicals | Industrial gas | 60,395 |
DuPont de Nemours Inc | Chemicals | Diversified chemicals | 52,184 |
Wanhua Chemical Group Co Ltd | Chemicals | Diversified chemicals | 45,722 |
Chevron Corp | Energy | Integrated oil & gas | 162,568 |
Exxon Mobil Corp | Energy | Integrated oil & gas | 174,288 |
Royal Dutch Shell PLC | Energy | Integrated oil & gas | 139,524 |
TOTAL SE | Energy | Integrated oil & gas | 114,571 |
PetroChina Co Ltd | Energy | Integrated oil & gas | 111,504 |
Enbridge Inc | Energy | Transportation | 65,001 |
Neste Oyj | Energy | Refining and marketing | 56,825 |
ConocoPhillips | Energy | Exploration and production | 42,711 |
Phillips 66 | Energy | Refining and marketing | 30,550 |
Schlumberger NV | Energy | Oilfield services and equipment | 30,388 |
Koninklijke Vopak NV | Energy | Tank terminal operator | 6,692 |
BHP Group PLC | Metals and mining | Iron ore and copper | 156,747 |
Rio Tinto PLC | Metals and mining | Iron ore and aluminium | 131,659 |
Vale SA | Metals and mining | Iron ore | 88,568 |
Southern Copper Corp | Metals and mining | Copper | 50,343 |
Newmont Corp | Metals and mining | Gold | 48,113 |
MMC Norilsk Nickel PJSC | Metals and mining | Palladium, nickel and copper | 52,015 |
Anglo American PLC | Metals and mining | Platinum, Copper and iron ore | 44,118 |
Glencore PLC | Metals and mining | Energy and metals | 45,548 |
ArcelorMittal SA | Metals and mining | Steel | 26,871 |
POSCO | Metals and mining | Steel | 21,730 |
MP Materials Corp | Metals and mining | Rare earth minerals | 5,016 |
Lynas Rare Earths Ltd | Metals and mining | Rare earth minerals | 2,908 |
Source: Bloomberg and Saxo Group
The interesting part of investing in the commodity sector through equities is that it provides investor with exposure to productivity gains, automatic handling of rolling in commodities and provides a leveraged play on reflation.
The performance of the basket is shown below against the MSCI World Index in USD. Since inception on 1 January 2016 the portfolio is up 171% including dividends compared to MSCI World up 83% during the same period. In terms of relative outperformance our commodity sector basket has delivered around 90% relative outperformance with almost 70%-points of the outperformance coming from the period January 2016 to June 2018. This corresponds well with the period of rapidly rising inflation according to the NY Fed Underlying Inflation Gauge highlighted in the beginning. If we are right about rising inflation the commodity sector in general should see increased revenue growth and higher profitability combined with higher valuation multiples.