- We believe the prices of many commodities will rise in the decades to come due to growing demand and the finite supply of cheap resources.
- Public equities are a great way to invest in commodities and allow investors to:
- Gain commodity exposure in a cheap, liquid manner
- Harvest the equity risk premium
- Avoid negative yields associated with rolling some futures contracts
- Resource equities provide diversification relative to the broad equity market, and the diversification benefits increase over longer time horizons.
- Resource equities have not only protected against inflation historically, but have actually significantly increased purchasing power in most inflationary periods.
- Due to the uncertainty surrounding, and the volatility of, commodity prices, many investors avoid resource equities. Hence, commodity producers tend to trade at a discount, and they have outperformed the broad market historically.
- While resource equities are volatile and exhibit significant drawdowns in the short term, over longer periods of time, resource equities have actually been remarkably safe investments.
Download to read the full article.