On August 31, 2015, we reviewed the Bloomberg Commodity Index had the following to say:
“While achieving the extreme downside target doesn’t mean that the decline in the index has ended, the majority of the decline from the 2008 peak is behind us.”
“We believe that those interested in the investment opportunities in commodity stocks should review the top tier stocks that have 7% or more individual commodity weighting in the Bloomberg Commodity Index.”
Based on that assessment, the following sectors would have been represented in individual commodity stocks:
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gold
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copper
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corn
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oil
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natural gas
What has been the sector ETF performance of the related categories? Below is the respective charts with percentage change:
The gold ETF rose as high as +117% and currently sits with gains of +75%. Notice that there was marginal downside action for the sector after September 4, 2015.
The copper miner ETF did not fair as well immediately after September 2015, falling as much as –40%. However, the recover has been dramatic with the ETF chalking up an “in-line” performance with the gold ETF at +68% gains.
The Teucrium Corn Fund has underperformed with a decline of –12.78% since the late August 2015 call on commodities. This may be the sector to watch as it may be an outperformer in the category, if market conditions continue.
The United States Oil Fund (USO) has suffered in a similar fashion as the corn fund but by a greater magnitude at a decline of –24%.
Getting crushed in this category was the United States Natural Gas Fund (UNG) with a decline of –42%.
Unsurprisingly, the individual stocks affected by the representative sectors have had much better performance than the sector ETFs with losses. As an example, our real-time purchases of Flowers Foods (FLO), Raven Industries (RAVN) and Helmerich & Payne (HP) had exceptional gains within the context of a declining sector at +36%, +63% and +74%, respectively. Each of these stocks are heavily impacted by the segments of the above sectors of the Bloomberg Commodity Index. The dichotomy between the commodity and the representative stocks explains why we have a long-held belief that the stocks are better for investors, in the short and long-term, rather than the pure play on the commodity itself.
Below is the updated review of the Bloomberg Commodity Index (BCOM) and our take on what to expect going forward.
