Commodity stocks are stocks of companies that produce the underlying commodity. So an iron ore mining company will be an iron ore commodity stock...and so on.
These stocks comprise a large segment of the stock market. Despite getting a lot of attention, these stocks are notoriously hard to invest in successfully.
These stocks tend to rise and fall with the price of the commodity. For example, the stock of a crude oil producer will rise along with the price of crude oil and vice versa.
These are cyclical stocks. They move up and down in cycles. This is all common knowledge in the market, yet investors regularly make mistakes in these stocks.
They buy them after the price has gone up a lot and then don’t sell quickly when the tide turns. The reason is the difficulty in timing the commodity cycle. Investing in these stocks demands an in-depth knowledge of the underlying commodity and its global market.
This is difficult even in normal situations. But it can get worse if there are any disruptions due to recessions, supply shocks, natural disasters, changes in government policies, and wars. Yes, that’s right, wars can give a boost to commodity stocks.
This is why retail investors often get burnt in these stocks and also why Equitymaster recommends extreme caution while considering these stocks for you long-term investment portfolio.
Nov 3, 2024
Is this Indian stock's 40% drop a golden opportunity?
Apr 9, 2024
From energy to metals, prices of most commodities have witnessed significant increase. Here's why.
Dec 9, 2023
From commodity chemicals to green energy, this smallcap company could stage a turnaround with its recent foray.
Oct 20, 2023
Is the rally in FACT running out of steam?
Oct 11, 2023
Is GMDC's risk-reward ratio still in favour of investors?
Aug 22, 2023
Shares of the company rallied over 18% in the past one month, only to fall in the subsequent sessions, erasing almost all the gains.
May 24, 2023
CCL Products: Evolving from differentiated commodity player to FMCG brand
Dec 22, 2022
Which is the best metal stock to trade? Find out in this video.
Nov 11, 2022
Metal stocks are looking good on the charts, but which one should you buy?
Aug 17, 2022
The crude oil price is very close to an important support. It could crash if it falls below it.
May 12, 2024
Several factors indicate that copper demand is likely to exceed supply, which could potentially have a positive impact on these 5 companies.
Jan 8, 2024
The year ahead promises exciting shifts in demand and supply, creating plenty of opportunities for these three companies.
Nov 12, 2023
The improved efficiency and emphasis on sustainability in the metals and mining sector has gained investors traction
Oct 16, 2023
Is the risk reward in GMDC still in favour of investors?
Sep 7, 2023
If inflation falls, these companies could do well.
Jul 3, 2023
MCX share price plunges 12%, drops the most in three years. What is dragging this monopoly stock down?
Feb 23, 2023
Should you trade gold or silver? Find out...
Nov 30, 2022
The metal index is breaking out and the momentum is likely to head northwards. The outperforming stocks could head higher.
Sep 19, 2022
Forget economic cycles and commodity cycles... Here's a structural shift that could help you with sustainable investing returns
Jul 13, 2022
JSW Steel has outperformed the metal index since June 2022 and the bullish momentum still prolongs. Here's why...