Four funds for courageous commodity contrarians

27th July 2015


There are plenty of stock market adages to suit the current commodities rout. “Be greedy when others are fearful” is Warren Buffett’s famous advice. “Buy when there’s blood in the streets” is a more graphic version of the same sentiment writes Tom Stevenson, investment director at Fidelity Personal Investing…

What both say to investors is simple enough to grasp and very difficult to implement. The best opportunities to buy any asset occur when the majority of investors are running in the opposite direction. That’s when the bold contrarian can make a killing – if they have the nerve.

There’s a third saying that applies at moments like these, however. “Don’t try and catch a falling knife” hints at the dangers of trying to take advantage of market panics. It’s easy enough to see that an investment has slumped, but much harder to ascertain when that slide has run its course.

The current slide in commodity prices and the shares of companies operating in this part of the market has probably not finished. I certainly have little appetite for catching this particular knife just yet, but at some point the cycle will turn. When the cycle does turn, brave investors will make great returns, most likely very quickly.

Timing the market is difficult but being well-prepared with a short-list of potential investments ready to hand can help. To that end, here is a list of the four commodities funds on our Select List for when you are ready to take the plunge:

1. Investec Global Gold: “Investec Global Gold is run by George Cheveley and Hanre Rossouw. Unsurprisingly, it has had a very difficult four years since the price of gold peaked in 2011. Unlike some funds in this sector, Investec Global Gold is prepared to invest directly in commodities (through ETFs) as well as in the shares of miners. We think the team stands out versus competitors for the rigour of its investment process.

2. BlackRock Gold and General: “BlackRock Gold and General, run by Evy Hambro, has a good long-term track record and a very disappointing one over the past four years. Hambro has two decades experience at BlackRock and its previous incarnations. While he tries to outperform the FTSE Gold Mines index, he is not unduly concerned with his benchmark, focusing instead on detailed analysis of companies’ financials and meeting their managements.

3. First State Global Resources: “Moving into more general commodities investment, First State’s Global Resources Fund is managed by one of the sector’s longest-standing natural resources teams under Dr Joanne Warner. The First State approach is to combine stable companies, with high-quality assets and low costs of production, with higher-risk opportunities to create the potential for sustainable returns. A particular area of expertise is the Australian mining market, a key focus for global resource managers.

4. Legg Mason Martin Currie Global Resources fund: “The Legg Mason Martin Currie Global Resources Fund, managed by Ruairidh Stewart, has the best shorter-term record of the four commodities funds on the Select List. That reflects the tendency of the fund to underweight the oil, gas and metals and mining stocks which dominate the commodity indices. For example, the biggest holding in the fund is Kinder Morgan, the largest energy infrastructure company in North America. Its pipelines and terminals are obviously affected by swings in energy prices but can be less volatile investments.”



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