Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX): With a market capitalization of $37 billion, FCX is one of the largest publicly traded copper miners in the world, offering significant exposure to the commodity. As of 2011, the company had proven and probable reserves totaling about 119.7 billion pounds of copper.
Notably, J.P. Morgan has been attempting to launch the first physically backed copper ETF, but it is facing opposition from regulators concerned about the impact on the physical markets.
Concrete: The Unconventional Commodity
Concrete may not be a traded commodity on its own yet, but investors can build exposure to the universal building material in many ways. According to the National Association of Homebuilders, the average house built in 1998 used some 14 tons of concrete, or approximately 7.5 yards, to create foundations and slab floors for basements. Here are some ways for investors to build exposure:
Cemex SAB de CV (NYSE:CX): With a $10 billion market capitalization, CX is the largest cement producer in the world, selling products into more than 50 countries. The company only realized about 17% of its revenues from the U.S., but remains one of the largest suppliers to the market given its $15.14 billion in annual sales.
US Concrete Inc (NASDAQ:USCR): With a $108 million market capitalization, USCR provides ready-mixed concrete, precast concrete products and concrete-related products in select U.S.-only markets. As of March 2012, the firm had the capacity to produce 4 million cubic yards of ready-mix concrete and 3 million tons of aggregates [see also How To Lose Money Investing In Commodities].
Eagle Materials, Inc. (NYSE:EXP): With a market capitalization of $2.5 billion, EXP is another U.S. provider of cement, concrete and aggregates. The company also manufactures and distributes gypsum wallboard which is used in construction, providing added exposure to the homebuilding industry.
Building Commodities into Your Portfolio
The homebuilding industry may have seen a sharp increase over the past year, but many analysts believe that there could be significantly more upside potential. Investors should keep an eye on leading indicators for the industry, like railcar volumes and new building permits, to determine whether or not these trends will continue through next year.
Many of the commodities mentioned in this article have also seen significant appreciation alongside the boom in U.S. housing. Investors may also want to consider the fact that some commodities, like timber, have seen some of the most consistent long-term returns when compared to anything from the S&P 500 to T-Bills to the Consumer Price Index.
Finally, investors should consider several factors when building these commodities into any diversified portfolio. For instance, commodity exposure should be balanced with other asset classes to diversify risk, while the beta co-efficient and risks associated with each of the commodities should also be considered relative to the overall portfolio’s acceptable level of risk.
This article was originally written by Justin Kuepper, and posted on CommodityHQ.
