Commodities provide short-term investing opportunities

April 29, 2013

The investment process starts with the ongoing assessment of domestic and global conditions and arriving at a high-level economic view. The Leon Frazer portfolio management team reviews economic conditions and their impact of the firm’s long-term investment themes weekly.  To stay current on the ever-changing domestic and global conditions, portfolio managers spent much of the day reviewing news, reports and data from a variety of sources. Occasionally they come across interesting viewpoints and perspectives. From time to time we will share with you these interesting articles. These articles will provide perspective on the fundamentals behind the Leon Frazer investment philosophy.

It’s Underground, Maybe Its Price Is, Too

The New York Times reports that Jeremy Grantham, founder of one of the world’s money management firms, sees the commodities price decline as a short-term investing opportunity.

Grantham told the Times that he is making long-term buys of “good farmland and forestry and, secondly, in good stuff in the ground like oil, copper, potash and phosphate.” He went on to caution about coal and tar sands. “Skip coal and tar sands because they will be priced out of business,” he told the Times.  Natural gas and other crucial commodities are likely to be in scarce supply and he expects them to rise in value over the next decade.

“There just isn’t enough of these things,” Grantham said. “Of that I’m confident.”

Grantham is the founder of GMO, a Boston-based money management firm with an estimated $100-billion under management.

Read more on Jerry Grantham’s view on commodities.

How to judge a company? Look at its moat

Companies with wide economic moats possess competitive advantages that allow them to repel would-be rivals, writes David Milstead in the Globe and Mail.

Using data complied by Morningstar, the article lists companies with a “wide moat”, including Enbridge and the Potash Corporation of Saskatchewan Inc.

Companies with no moats include Canadian Tire Corp. and Ford Motor Co.

Read more on moats.