Commodity Stocks: Economic Slowdown Hurts Commodities Prices

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(Written by Alexander Crawford. Short data and price data sourced from Yahoo! Finance. List compiled by Eben Esterhuizen, CFA.)

As the world becomes increasingly concerned about another global recession, commodities including oil and copper were hit hard this past week.

Commodities are the basic materials used in industrial production. When economic activity slows down, so does the use of those materials. And it’s all about expectations. If a company expects lower demand for their products in the future, they’ll produce fewer products today.

Commodities traders are also forward-looking. Fears of an economic slowdown in the future affect trading prices today.

Just this past Wednesday, the price of copper fell more than 7% while oil fell 4%.

“On top of the euro zone worries and China worries, there was a pretty good build in inventories of crude. But more importantly, demand was down across all products — crude, heating oil, diesel fuel,” John Kilduff of Again Capital told CNBC.

“Commodities are getting murdered,” said Dan Greenhaus, chief global strategist at BTIG, on Wednesday.

Looking for evidence of a coming commodity collapse?

For ideas we stared with a universe of 200 commodity stocks, and identified the names that have seen the biggest increases in short interest over the last month.

From this universe we collected price data, and identified the names that have seen the longest losing streaks over the last month (as measured by their performance relative to the S&P 500 index).

These commodity companies have had a dismal month, and short sellers think there's more downside. What do you think?

Analyze These Ideas (Tools Will Open In A New Window)

1. Access a thorough description of all companies mentioned
2. Compare analyst ratings for all stocks mentioned below
3. Visualize annual returns for all stocks mentioned

1. Molycorp, Inc. (MCP): Focuses on the production and sale of rare earth oxides from stockpiled feedstocks in the western hemisphere. Shares shorted have increased from 9.85M to 10.43M over the last month, an increase which represents about 1.03% of the company's float of 56.06M shares. The stock's average daily alpha vs. the S&P500 index stands at -1.4% (measured close to close, over the last month). During this period, the longest losing streak lasted 6 days (i.e. the stock's daily returns underperformed the S&P 500 for 6 consecutive days). The longest winning streak lasted 2 days (i.e. a win streak / losing streak ratio of 0.33).

2. Horsehead Holding Corp. (ZINC): Produces and sells specialty zinc and zinc-based products in North America. Shares shorted have increased from 4.27M to 4.78M over the last month, an increase which represents about 1.18% of the company's float of 43.35M shares. The stock's average daily alpha vs. the S&P500 index stands at -1.09% (measured close to close, over the last month). During this period, the longest losing streak lasted 5 days (i.e. the stock's daily returns underperformed the S&P 500 for 5 consecutive days). The longest winning streak lasted 2 days (i.e. a win streak / losing streak ratio of 0.4).

3. Patriot Coal Corporation (PCX): Engages in the mining, production, and sale of thermal coal primarily to electricity generators in the eastern United States. Shares shorted have increased from 11.83M to 13.58M over the last month, an increase which represents about 2.09% of the company's float of 83.55M shares. The stock's average daily alpha vs. the S&P500 index stands at -1.47% (measured close to close, over the last month). During this period, the longest losing streak lasted 7 days (i.e. the stock's daily returns underperformed the S&P 500 for 7 consecutive days). The longest winning streak lasted 3 days (i.e. a win streak / losing streak ratio of 0.43).

4. Thompson Creek Metals Company Inc. (TC): Engages in mining, milling, processing, and marketing molybdenum products in the United States and Canada. Shares shorted have increased from 14.08M to 15.93M over the last month, an increase which represents about 1.11% of the company's float of 166.46M shares. The stock's average daily alpha vs. the S&P500 index stands at -0.78% (measured close to close, over the last month). During this period, the longest losing streak lasted 7 days (i.e. the stock's daily returns underperformed the S&P 500 for 7 consecutive days). The longest winning streak lasted 3 days (i.e. a win streak / losing streak ratio of 0.43).

5. Metals USA Holdings Corp. (MUSA): Shares shorted have increased from 482.09K to 606.66K over the last month, an increase which represents about 1.53% of the company's float of 8.15M shares. The stock's average daily alpha vs. the S&P500 index stands at -1.14% (measured close to close, over the last month). During this period, the longest losing streak lasted 10 days (i.e. the stock's daily returns underperformed the S&P 500 for 10 consecutive days). The longest winning streak lasted 2 days (i.e. a win streak / losing streak ratio of 0.2).

6. AK Steel Holding Corporation (AKS): Produces flat-rolled carbon, stainless, and electrical steels, and tubular products primarily in the United States and internationally. Shares shorted have increased from 23.23M to 24.35M over the last month, an increase which represents about 1.03% of the company's float of 108.69M shares. The stock's average daily alpha vs. the S&P500 index stands at -0.89% (measured close to close, over the last month). During this period, the longest losing streak lasted 6 days (i.e. the stock's daily returns underperformed the S&P 500 for 6 consecutive days). The longest winning streak lasted 3 days (i.e. a win streak / losing streak ratio of 0.5).



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 , Stocks

Referenced Stocks: MCP , MUSA , AKS , PCX , TC , ZINC

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