In this piece, we will take a look at the 12 best natural resource stocks to buy. If you want to skip our analysis of the natural resources industry and want to take a look at the top five stocks in this list, head on over to 5 Best Natural Resources Stocks to Buy.
Despite the fact that technology is king these days, humankind is reaching for the stars, and an infinite amount of information is available in the palm of the hand, the simple fact is that natural resources are the dominant factor that has contributed to progress.
The world’s cars run on fossil fuels, computers, and gadgets rely on copper, minerals, and other natural resources, and construction relies on lumber to build a large number of buildings. And even though renewable energy is all the buzz these days, petroleum products are still the go to choice for generating electricity and running airplanes and cars. The world’s infrastructure is dependent on natural resources, and at least for the near term future, they are here to stay.
This need for natural resources became even clearer in 2022 in the aftermath of the Russian invasion of Ukraine. Russia and Ukraine are two integral suppliers of gas, commodities, and other agricultural products. A conflict between the two shook up global supply chains for these valuable products. These effects were felt especially in Europe which had come to rely on cheap Russian gas to keep inflation down and fuel economic growth. The sum of the invasion’s effects on the stock market involved primarily the shares of energy companies soaring at a time when their technology peers tanked. This share price growth also reaped dividends in literal form for investors, with Bloomberg reporting that during the three weeks that ended in September 2022 alone, energy companies paid out a massive $16.4 billion in dividends to mark a 15% sequential growth over the second quarter.
Yet, natural resources also confer countries a predetermined advantage, unlike say innovation, which can surface in any country if the right conditions are in place. This also leaves some countries better off than others, and this dominance remains stable over the course of the years unless dramatic new discoveries are made. Our research of the richest countries in the world in terms of natural resources confirms this fact, as some of the largest countries in the world are also the richest. The top three countries are Russia, the U.S., and Saudi Arabia, with each having copious amounts of minerals, gas, and oil.
Building on this, the natural resources industry is also quite lucrative. One important natural resource industry is the mining sector. Research shows that this sector was worth $1.84 trillion in 2021 and was slated to grow to $2 trillion in 2022 to mark a compounded annual growth rate (CAGR) of 12%. As opposed to some industries where the growth rate slows down over the passage of time, the case is the opposite in the mining industry which is slated to exhibit a CAGR of 12.9% to be worth $3.36 trillion by 2026. Naturally, this makes mining companies quite lucrative, with BHP Group Limited (NYSE:BHP), Rio Tinto Group (NYSE:RIO), and Glencore being the top three most valuable mining companies in the world in terms of market capitalization.
Moving towards one of the most important industries in the world, namely the energy industry, shows that this sector is worth trillions of dollars. For instance, the crude oil market alone was worth $2.7 trillion last year and is slated to grow to $2.9 trillion by the end of this year. From then on until 2027, it is expected to grow at a CAGR of 4.6% to be worth $3.7 trillion by then. For more details on the energy industry, be sure to check out Top 20 Most Profitable Energy Companies in the World.
Some top energy companies that we have identified are Saudi Arabian Oil Company (TADAWUL:2222.SR) Exxon Mobil Corporation (NYSE:XOM), and Shell plc (NYSE:SHEL). Combining these with the top mining companies named above lets us see what’s going on in the industry right now. For instance, Shell announced in March that in addition to fueling gasoline vehicles, it will now also power electric cars after having completed the acquisition of Volta Inc in the U.S. This provides Shell access to a network of 3,000 charging points all over America, in more than 30 states as well as providing it the potential to expand this network by adding another 3,400 charging points. Taking a look at mining, BHP took the lead on the artificial intelligence front, when it announced in May that it has teamed up with Microsoft to use artificial intelligence and machine learning at the world’s largest copper mine in Chile. Through this, the mining giant aims to improve production, contractor performance, and copper recovery from the site.
As to what’s on the minds of the companies themselves, here’s what the management of Linde plc (NYSE:LIN) had to say during the firm’s latest earnings call:
Following these principles, we’ve successfully won and advanced many clean energy projects, of which I’d like to highlight just a few. The left side represents projects currently under construction. These are projects with executed contracts, fixed payments and incremental growth with predictable returns. With project CapEx of just under $2 billion, including the new OCI project in Texas, where Linde will supply nitrogen and clean hydrogen by capturing CO2 for underground sequestration through our partner, ExxonMobil. Currently, this project makes up the majority of clean energy projects in our backlog since most electrolyzer investments are designated for the merchant market and therefore, considered base CapEx. There are a few projects like the recently announced Evonik agreement that meet backlog criteria.
But even here, we support local network and supply high-purity clean hydrogen to electronics and other industrial customers as well. Currently, we view these electrolysis — electrolyzer projects as modules in our local supply network for supply of merchant hydrogen. They’re often integrated into our existing hydrogen network, sometimes side by side leveraging the same storage and transportation infrastructure, helping optimize distribution costs. Furthermore, these projects leverage various electrolyzer technologies, including PEM and outline to provide the best fit to customer needs. Sale of Plug is another avenue for Linde to participate in growth opportunities, which may have different customer demands or which may not benefit from integration with our existing supply network.
With these details in mind let’s take a look at some great natural resources stocks, out of which the notable names are Freeport-McMoRan Inc. (NYSE:FCX), Occidental Petroleum Corporation (NYSE:OXY), and ConocoPhillips (NYSE:COP).
Our Methodology
To compile our list of the best natural resources stocks to buy based on hedge fund sentiment, we first narrowed down the top mining, forestry, and oil companies by market capitalization. For clarity, only oil and gas exploration and production firms were selected in the oil segment, since only they are pureplay natural resource firms. The companies were then ranked according to hedge fund shareholders as of Q1 2023, and the natural resources stocks with the most hedge fund investors are as follows.
12 Best Natural Resources Stocks to Buy
12. Diamondback Energy, Inc. (NASDAQ:FANG)
Number of Hedge Fund Investors In Q1 2023: 45
Diamondback Energy, Inc. (NASDAQ:FANG) is an oil and gas exploration company with production assets in Texas and New Mexico. Out of the 30 analysts covering its shares, 28 have rated it Buy or better.
45 of the 943 hedge funds polled by Insider Monkey for their Q1 2023 portfolios had invested Diamondback Energy, Inc. (NASDAQ:FANG). The firm’s largest hedge fund shareholder is Donald Yacktman’s Yacktman Asset Management with a $195 million stake.
Along with Occidental Petroleum Corporation (NYSE:OXY), Freeport-McMoRan Inc. (NYSE:FCX), and ConocoPhillips (NYSE:COP), Diamondback Energy, Inc. (NASDAQ:FANG) is a top natural resources stock among hedge funds.
11. Pioneer Natural Resources Company (NYSE:PXD)
Number of Hedge Fund Investors In Q1 2023: 45
Pioneer Natural Resources Company (NYSE:PXD) is an oil and gas exploration and production firm. Its operations are primarily focused in Texas, and out of the 40 analysts that cover its stock, the majority, or 35, have rated the shares as either Buy or Strong Buy.
Insider Monkey’s first quarter of 2023 survey covering 943 hedge funds revealed that 45 had held a stake in Pioneer Natural Resources Company (NYSE:PXD). The firm’s largest investor in our database is Donald Yacktman’s Yacktman Asset Management with an investment worth $259 million.
10. CF Industries Holdings, Inc. (NYSE:CF)
Number of Hedge Fund Investors In Q1 2023: 47
CF Industries Holdings, Inc. (NYSE:CF) is a basic materials firm that utilizes natural nitrogen and hydrogen to sell raw materials and other products. The firm is planning to produce 100% carbon free hydrogen through a new plant – a significant development since hydrogen purification is one of the most energy intensive processes in the world.
As of March 2023, 47 of the 943 hedge funds part of Insider Monkey’s research had bought and owned the firm’s shares. Cliff Asness’ AQR Capital Management is CF Industries Holdings, Inc. (NYSE:CF)’s biggest investor through a $223 million stake.
9. EQT Corporation (NYSE:EQT)
Number of Hedge Fund Investors In Q1 2023: 47
EQT Corporation (NYSE:EQT) is a pureplay natural gas company with trillions of cubic feet of the resource in its reserves. The firm’s shares have an average rating of Buy, with five of 18 analysts having rated them as a Strong Buy.
Insider Monkey dug through 943 hedge funds for their first quarter of 2023 investments to find out that 47 invested in EQT Corporation (NYSE:EQT). Out of these, the largest shareholder is Eric W. Mandelblatt’s Soroban Capital Partners with a $199 million investment.
8. Devon Energy Corporation (NYSE:DVN)
Number of Hedge Fund Investors In Q1 2023: 49
Devon Energy Corporation (NYSE:DVN) is another oil and gas exploration and production company. The firm declared a 72 cent quarterly dividend in March 2023, lowering it by quite a bit.
By the end of this year’s first quarter, 49 of the 943 hedge funds profiled by Insider Monkey had held a stake in the firm. Devon Energy Corporation (NYSE:DVN)’s largest hedge fund investor is Ken Fisher’s Fisher Asset Management since it owns a stake worth $225 million.
7. Chesapeake Energy Corporation (NASDAQ:CHK)
Number of Hedge Fund Investors In Q1 2023: 50
Chesapeake Energy Corporation (NASDAQ:CHK) is another oil and gas company with facilities in Pennsylvania and Louisiana. The firm’s first quarter of 2023 earnings report saw it report $1.3 billion in net income and a total quarterly dividend of $1.18 per share.
50 of the 943 hedge funds part of Insider Monkey’s database had owned Chesapeake Energy Corporation (NASDAQ:CHK)’s shares in Q1 2023. Out of these, the biggest shareholder is Howard Marks’ Oaktree Capital Management with a $652 million stake.
6. Newmont Corporation (NYSE:NEM)
Number of Hedge Fund Investors In Q1 2023: 52
Newmont Corporation (NYSE:NEM) is a mining company that produces a variety of metals such as gold, copper, zinc, lead, and silver. The firm is currently facing troubles in a Mexican mine where it is facing a union strike.
After sifting through 943 hedge funds for their March quarter of 2023 shareholdings, Insider Monkey discovered that 52 had invested in the company. Jean-Marie Eveillard’s First Eagle Investment Management is Newmont Corporation (NYSE:NEM)’s largest shareholder, owning 18.4 million shares that are worth $903 million.
Freeport-McMoRan Inc. (NYSE:FCX), Newmont Corporation (NYSE:NEM), Occidental Petroleum Corporation (NYSE:OXY), and ConocoPhillips (NYSE:COP) are some best natural resources stocks to buy.
Click to continue reading and see 5 Best Natural Resources Stocks to Buy.
Suggested Articles:
- 13 Most Profitable Large Cap Stocks
- Top 15 Independent Oil and Gas Companies in the World
- 15 Biggest Oil Companies in Texas
Disclosure: None. 12 Best Natural Resources Stocks to Buy is originally published on Insider Monkey.
