Three Commodities Set to Outperform in Bear Market

By Commodity HQ  NOV 21, 2012 10:25 AM

Big money is betting on gold, timber, and agriculture. Here are the specific plays.

 


Commodities have enjoyed several strong years thanks to emerging market growth and increased demand around the world. As analysts continue to tout hard assets like gold and timber, investing demand for this asset class has continued to rise. It is now recommended that investors set aside anywhere from 5-10% of their assets for commodity exposure. But while these investments have been fruitful for the past few years, a number of institutions have begin to build a bearish sentiment for the future of the commodity space.

“Hedge funds cut bullish commodity bets for a sixth straight week, the longest slump since the depths of the global recession four years ago, on mounting concern that economies are slowing,” writes Debarati Roy. It seems 2012 may see broad commodity indexes post their first loss since 2008, which has a number of investors worried. Analysts at Citigroup recently stated that the commodity “super-cycle” has come to an end as China’s economy begins to cool off. Experts are predicting that returns will be much more differentiated, meaning that certain commodities may outperform, but the space as a whole is not looking quite as rosy.

The question that now remains is how investors can effectively play the commodity space if indeed a bear market is approaching. Given that a broad-based strategy is not favored in today’s environment, we outline three commodities that may have a chance to outperform the rest.
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Editor's note: This article by Jared Cummans  was originally published on Commodity HQ.
No positions in stocks mentioned.