Close Close
Sign In
Newsletters
Popular Financial Topics Discover relevant content from across the suite of ALM legal publications From the Industry More content from ThinkAdvisor and select sponsors Investment Advisor Issue Gallery Read digital editions of Investment Advisor Magazine Tax Facts Get clear, current, and reliable answers to pressing tax questions
Luminaries Awards
Podcast Center Video Center Webcasts Resource Center Events
About ThinkAdvisor Contact Us Advertise With Us Asset & Logo Licensing Sitemap Terms of Service Privacy Policy Copyright © 2024 ALM Global, LLC. All Rights Reserved.
ThinkAdvisor

Portfolio > Alternative Investments > Commodities

Commodity Panelists Disagree on Strategy at Morningstar Confab

By Kenneth Silber

X
Your article was successfully shared with the contacts you provided.

Experts on commodity markets touted divergent investment strategies in a panel discussion at the Morningstar Investment Conference in Chicago on June 9. The panelists largely agreed, however, on the underlying economics of tight supply and growing demand across a range of commodities.

The panelists were Bob Greer of PIMCO, MacKenzie Davis of RS Investments, and Geoff Jay of Janus. The discussion, held in a room packed to capacity with hundreds of attendees, was moderated by John Rekenthaler of Morningstar.

PIMCO’s Greer touted using commodity futures for diversification, emphasizing that historically they have provided “negative correlations in many cases from stocks and bonds” along with “greater inflation protection.”

Davis, however, countered that “correlations have risen” and “the negative correlation of equities and commodities has not held up in recent years.” The RS Investments fund manager argued that “futures work well to protect you against supply shocks,” but “increasingly commodities are driven by changes in demand.” His strategy focuses on investing in the stocks of natural resources companies.

Jay, an energy equity research analyst at Janus, emphasized his firm’s approach of “bottom up stock picking,” or focusing on the merits of individual companies.

To some degree, the panelists viewed their divergent strategies as complementary. Greer acknowledged that “oil equities have a place in a portfolio.” Still, he stated that “if you want exposure to the price of oil, it’s preferable to strip away the equity beta that comes with energy stocks,” such as the risk of an offshore platform explosion as occurred to BP’s Deepwater Horizon in the Gulf of Mexico last year.

Asked about oil prices, Jay predicted that they would be higher in a 24-36 month timeframe. He noted that “OPEC spare capacity is very low.”

Greer argued that “we are stretching our capacity in many commodities,” and noted that global demand for commodities will continue to rise as China and other emerging economies develop. “As you increase per capita income in an emerging economy, you will increase demand for commodities,” he said.

Davis noted that supply in the copper market is “quite tight,” and suggested it may become tighter if the new president of Peru, Ollanta Humala, follows through on a proposal to tax copper companies.

Pointing out another commodity niche in which supply is tight, Davis said there is a rising need for workers to handle production jobs in the oil sand fields of Canada. It is possible, he said, to make an income well into the six figures doing such work without benefit of a college education.

NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.