While the business news cycle tends to focus on the latest technological innovations, it’s important to consider the best commodity stocks to buy for 2023 as these companies undergird said advancements. As recent geopolitical flashpoints demonstrated, access to critical resources is just as important as the end products they help facilitate.
Moving forward, securing supply chains to important industrial and agricultural material will likely take a priority. Therefore, even with the equities sector absorbing a beating, investors should plan ahead with the best commodity stocks to buy for 2023. Quite simply, this segment commands demand structures that probably won’t ever be replaced.
Wheaton Precious Metals
BHP Group (BHP)
Source: T. Schneider / Shutterstock
Based in Australia, BHP Group (NYSE:BHP) is a multinational metal and mining specialist. In addition, the company produces natural gas and petroleum products, affording it an all-in-one business structure. At time of writing, BHP features a market capitalization of approximately $158 billion. On a year-to-date basis, BHP gained nearly 18%, storming above this year’s volatile market sessions.
Fundamentally, BHP brings myriad relevancies to the table. In particular, its production of copper may help undergird the global electric vehicle rollout. According to a report by CME Group, EVs “use more than double the copper of an internal combustion engine automobile, and the metal is also used heavily in EV infrastructure.”
In a way, BHP enjoys a double whammy, serving both the mobility units as well as the charging platform. Therefore, it deserves serious consideration among the best commodity stocks to buy for 2023.
Rio Tinto (RIO)
Headquartered in London, U.K., Rio Tinto (NYSE:RIO) bills itself as a leading global mining group that focuses on finding, mining and processing the Earth’s mineral resources. Presently, Rio Tinto commands a market cap of almost $118 billion. Since the start of the year, RIO returned shareholders roughly 8%. Most of this dynamism came recently, with shares up 20% in the trailing month.
Bolstering enthusiasm for the mining specialist is its myriad product segments. As with rival BHP, Rio Tinto represents a major producer of copper, which will serve the electrification of mobility. In addition, RIO will likely benefit from its lithium business. At the moment, the U.S. and western forces tightly contest China’s dominance in this sector. Should EVs blossom, expect RIO to corral substantial demand.
Another factor boosting the company’s candidacy among the best commodity stocks to buy for 2023 centers on the financials. Rio Tinto enjoys excellent profit margins across the board. In addition, its return on equity – a measure of how efficiently an enterprise converts equity funding to earnings – pings at 35.3%. This exceeds nearly 96% of industry competitors.
Easily representing one of the best commodity stocks to buy for 2023, Vale (NYSE:VALE) deserves more credit than its receiving. A Brazilian multinational corporation focusing on metals and mining, it’s possible that underlying political volatility detracted from Vale’s investment proposition. Nevertheless, the company has been a strong performer in 2022, returning 19% YTD.
In particular, investors ought to consider Vale as one of the best commodity stocks to buy for 2023 because of its nickel production. Per its corporate profile, the company represents the largest producer of iron ore and nickel in the world. Moving forward, nickel will almost surely undergird several industries of tomorrow.
Per the Nickel Institute, the advantage of the namesake metal is that it “helps deliver higher energy density and greater storage capacity at a lower cost.” If EVs were to change mobility through economies of scale, nickel – through its integration in advanced battery technologies – will play a significant role.
Headquartered in Denver, Colorado, Newmont (NYSE:NEM) initially presents a risky proposition among the best commodity stocks to buy for 2023. As the world’s largest gold mining firm, Newmont would ordinarily command significant relevance. It still does but recent macroeconomic headwinds pose challenges to the underlying market.
As the New York Times mentioned, the November jobs report came in much hotter than expected. Again, ordinarily, this news would spark optimism for the economy. However, it also means that the Federal Reserve’s efforts to contain inflation via raising the benchmark interest rate did little. Therefore, the central bank must take the gloves off. Unfortunately for NEM, this circumstance suggests even higher rate hikes next year.
Still, the average spot gold price at time of writing sits just under $1,800. It’s quite possible that the fear trade inspired investors to bid up the yellow metal. In turn, Newmont may enjoy a surprising tailwind. Thus, while NEM is down nearly 23% YTD, don’t be surprised to see it rise again in 2023.
Wheaton Precious Metals (WPM)
Source: Phawat / Shutterstock.com
For investors that have strong confidence in the fear trade thesis, they may want to consider adding Wheaton Precious Metals (NYSE:WPM) to their list of best commodity stocks to buy for 2023. Headquartered in Vancouver, British Columbia, Wheaton currently commands a market cap of nearly $18 billion. Further, WPM lost only 5.5% YTD, beating out both the benchmark equities index and many other precious metal miners.
Fundamentally, Wheaton offers greater predictability because of its streaming business model. Under such an arrangement, a company makes a deal with a mining firm to purchase all or a part of the metal production at a predetermined discounted price. On paper, it’s a symbiotic relationship: miners receive upfront capital while the streaming enterprises can profit off discounted commodities.
What also makes Wheaton intriguing is its exposure to the silver market. While both gold and silver feature monetary and industrial applications, silver features heavily in the latter component. As the best electrical and thermal conductor of all metals, silver is essentially permanently relevant.
Headquartered in St. Louis, Missouri, Bunge (NYSE:BG) is an agribusiness and food company. One of its main businesses involves international soybean exports. In addition, Bunge is involved in food processing, grain trading and fertilizer. Currently, the company carries a market cap of $14.3 billion. Since the beginning of the year, BG gained nearly 3%.
While it’s not pleasant to dive into cynical arguments for the best commodity stocks to buy for 2023, Bunge aligns with harsh realities. According to the World Food Programme, the global food crisis reached unprecedented proportions. Specifically, conflict, climate shocks and the coronavirus converged to form a massive headwind in terms of feeding world populations.
Like it or not, BG will likely rise in demand based on sheer pertinence and necessity. On a more positive note, the market prices BG at only 8-times forward earnings. In contrast, the sector median value is 15.8 times. Therefore, it’s one of the more undervalued ideas among the best commodity stocks to buy for 2023.
Source: T. Schneider / Shutterstock.com
Based in Tampa, Florida, Mosaic (NYSE:MOS) mines phosphate, potash, and collects urea for fertilizer through various international distribution networks. Per its public profile, Mosaic represents the largest producer of potash and phosphate fertilizer in the U.S. Due to exceptional relevance, MOS gained nearly 17% since its Jan. opener. However, in the trailing month, MOS dipped 5%, affording contrarians a discounted opportunity heading into the new year.
Fundamentally, Mosaic ranks among the best commodity stocks to buy for 2023 based on critical need. Back in September 2020, a report published on Nature.com warned that soil erosion could aggravate the global phosphate shortage. Today, Russia’s invasion of Ukraine poses severe challenges for the broader fertilizer market.
Again, it’s a cynical talking point yet it also speaks to harsh, unavoidable realities. On a financial note, Mosaic enjoys strong profit margins along with a return on equity of over 33%, reflecting a high-quality business. Finally, the market prices MOS at 4.9-times forward earnings, which is conspicuously undervalued.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
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