Commodity Stocks: List of Top Hedge Fund Favorites

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(Written by Rebecca Lipman. List compiled by Eben Esterhuizen, CFA. Institutional data sourced from Fidelity.)

In the end of September, hedge funds had reduced their bets on higher commodity prices only days before raw materials rallied the most in 10 weeks – they’ve since double-backed. Bloomberg reports hedge funds, in the week ended Dec. 27, have raised wagers on rising commodity prices the most in 16 months.

Net long positions increased by 18% to 536,907 contracts. The increase is the greatest since August 2010, according to data from the Commodity Futures Trading Commission.


James Paulsen, chief investment strategist at Wells Capital Management, tells Bloomberg the commodities have already formed a bottom because the U.S has demonstrated sustained economic growth. “Data out of the U.S. flies in the face of recession. More and more people are saying: ‘Maybe things are not that bad.’”

Still, the future of commodities and indeed most economic indicators are in limbo as long as Europe and the US face the prospect of a recession. A downfall from either the EU or the US would have a significantly negative impact on global markets.

Twelve of the 24 commodities on Standard & Poor’s GSCI Total Return Index rose last week, reports Bloomberg. The gains were led by Wheat traded in Kansas City – up 6.2%, followed by cotton at 5.2%. “Gold futures climbed 2.3 percent, heading for the biggest advance since Oct. 25.”

Business Section: Investing Ideas

Big money managers are changing their outlook for commodities, so which stocks stand to benefit the most from this sentiment change?

As a start, it might be a good idea to look at the commodity stocks that they’ve been dumping. These stocks may have been dragged down by excessive pessimism, which may lead to a rebound if hedge fund managers turn bullish on their outlook.

All of these names have seen significant institutional selling–are these trends about to reverse?

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List sorted by market cap.

1. ConocoPhillips (COP): Operates as an integrated energy company worldwide. Market cap of $96.75B. Net institutional sales in the current quarter at -47.0M shares, which represents about 3.53% of the company's float of 1.33B shares.

2. Southern Copper Corp. (SCCO): Engages in mining, smelting, and refining mineral properties in Peru, Mexico, and Chile. Market cap of $25.38B. Net institutional sales in the current quarter at -12.4M shares, which represents about 7.72% of the company's float of 160.67M shares.

3. Ivanhoe Mines Ltd. (IVN): Operates as an exploration and development company. Market cap of $13.10B. Net institutional sales in the current quarter at -7.8M shares, which represents about 3.35% of the company's float of 232.92M shares.

4. CF Industries Holdings, Inc. (CF): CF Industries Holdings, Inc., through its subsidiary, CF Industries, Inc., manufactures and distributes nitrogen and phosphate fertilizer products, serving agricultural and industrial customers worldwide. Market cap of $9.48B. Net institutional sales in the current quarter at -4.4M shares, which represents about 6.67% of the company's float of 66.01M shares.

5. Cliffs Natural Resources Inc. (CLF): Produces iron ore pellets, lump and fines iron ore, and metallurgical coal products. Market cap of $8.92B. Net institutional sales in the current quarter at -5.9M shares, which represents about 4.15% of the company's float of 142.11M shares.

6. Eastman Chemical Co. (EMN): Engages in the manufacture and sale of chemicals, plastics, and fibers in the United States and internationally. Market cap of $5.48B. Net institutional sales in the current quarter at -5.1M shares, which represents about 3.73% of the company's float of 136.90M shares.

7. SM Energy Company (SM): Engages in the acquisition, exploration, exploitation, development, and production of natural gas and crude oil in North America. Market cap of $4.68B. Net institutional sales in the current quarter at -3.5M shares, which represents about 5.52% of the company's float of 63.43M shares.

8. Albemarle Corp. (ALB): Develops, manufactures, and markets engineered specialty chemicals in the United States and internationally. Market cap of $4.57B. Net institutional sales in the current quarter at -4.3M shares, which represents about 4.89% of the company's float of 87.92M shares.

9. Ultra Petroleum Corp. (UPL): Engages in the acquisition, exploration, development, production, and operation of oil and natural gas properties in the United States. Market cap of $4.53B. Net institutional sales in the current quarter at -9.3M shares, which represents about 6.23% of the company's float of 149.38M shares.

10. Alpha Natural Resources, Inc. (ANR): Engages in the production, processing, and sale of coal in the United States. Market cap of $4.49B. Net institutional sales in the current quarter at -14.2M shares, which represents about 6.37% of the company's float of 222.91M shares. 



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas , Commodities , Stocks


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