commodity

Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a new or experienced investor, these weekly updates are designed to give you specific advice on successfully investing money. Each Investor Toolkit update gives you a fundamental tip and shows you how you can put it into practice right away. Tip of the week: “Investing money in futures gives you high leverage, but leverage works two ways.” Futures trading provides a perfectly legal way to bet on price changes in commodity, currency and financial markets. When you buy or sell a futures contract, you commit yourself to buy or sell a quantity of a commodity (or currency or financial instrument) in the future. The date and quantity are standard; you fix the price when you buy or sell the contract....

Get my latest advice on how to cut your portfolio’s volatility — and maximize your stock market investing profits — absolutely FREE. If you’re like many investors, recent market volatility has made you more sensitive to risk. In fact, in light of all the bad news being reported in the mainstream media, you may be tempted to throw up your hands and sell all your stocks. But if you do, you’re likely to miss out on strong gains in the coming months and years....

Higher commodity prices and an improving global economy have pushed up the prices of many junior mining stocks recently. That has prompted more members of our Inner Circle service to ask us for our recommendations on junior mines they are considering investing in. (See below for further details on a junior firm that explores for rare earth elements, which have attracted a lot of investor attention lately. We recently analyzed this company for a member of our Inner Circle service.)

Junior mining stocks have strong potential — but use caution

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EMERA INC., $31.13, Toronto symbol EMA, is Nova Scotia’s main electricity supplier. This week, the company agreed to participate in a major new hydroelectric project on the Churchill River in Labrador. Under the terms of the deal, Nalcor Energy, which is owned by the Newfoundland government, will build a new power plant at Muskrat Falls. Emera and Nalcor will then form a joint venture that will transmit the plant’s power to the island of Newfoundland. Emera will pay $600 million for a 29% stake in this new regulated transmission utility....

CHEMTRADE LOGISTICS INCOME FUND $14.04 (Toronto symbol CHE.UN; SI Rating: Speculative) (416-496-5856; www.chemtradelogistics.com; Units outstanding: 30.7 million; Market cap: $431.0 million; Dividend yield: 8.5%) is one of North America’s largest suppliers of sulphuric acid, sulphur, liquid sulphur dioxide and sodium hydrosulphite. It also supplies sodium chlorate, phosphorous pentasulphide and zinc oxide. In addition to selling chemicals, Chemtrade processes spent acid. Chemtrade has three divisions: The Sulphur Products and Performance Chemicals division supplies about 59% of the fund’s revenue. Pulp Chemicals accounts for 10% of revenue, and the International division supplies the remaining 31%. This division removes and markets sulphur and sulphuric acid outside of North America.

Environmental market is secure

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Lately, more Inner Circle members have been asking us about investing in commodity stocks that mine or process rare earth elements. Rare earths are used in a variety of modern devices and applications, including catalytic converters and petroleum refining; magnets in small and large motors; glass additives and glass polishing compounds; rechargeable batteries; television and computer screens; lighting; X-ray machines; and lasers. Prices of rare earth elements have risen sharply. That’s mainly because China, which accounts for around 95% of global production, has imposed a 72% cut in export quotas for the second half of 2010. China regularly imposes quotas on exports of rare earths to boost prices internationally and ensure enough supplies for Chinese companies....

If you want to buy gold, we recommend staying away from buying gold bullion, coins (unless you collect them as a hobby) or certificates representing an interest in bullion. That’s because commodity investments such as gold bullion do not generate income. Instead, they come with a continuing cash drain for management, insurance, storage and so on. You either pay these costs directly or through a premium built into the price of, say, a futures contract. That’s why we recommend that you invest in gold through gold-mining stocks. Unlike bullion, gold-mining stocks at least have the potential to generate income. Newmont Mining, $63.33, symbol NEM on New York (Shares outstanding: 484.7 million; Market cap: $30.7 billion; www.newmont.com), is a relatively conservative choice if you want to buy a gold stock....

Chemtrade Logistics Income Fund, $13.91, symbol CHE.UN on Toronto (Units outstanding: 30.7 million; Market cap: $426.6 million; www.chemtradelogistics.com), is one of North America’s largest suppliers of sulphuric acid, sulphur, liquid sulphur dioxide and sodium hydrosulphite. It also supplies sodium chlorate, phosphorous pentasulphide and zinc oxide. In addition to selling chemicals, Chemtrade processes spent acid. Chemtrade first sold units to the public for $10 each, and began trading on Toronto in July 2001. Chemtrade has three divisions: The Sulphur Products and Performance Chemicals division supplies about 59% of the fund’s revenue. Pulp Chemicals accounts for 10% of Chemtrade’s revenue, and the International division supplies the remaining 31%. This division removes and markets sulphur and sulphuric acid outside of North America....

Last week, the Canadian government said it would block BHP Billiton’s (New York symbol BHP) hostile, $38.6-billion U.S. takeover bid for Potash Corp. of Saskatchewan (New York and Toronto symbol POT). However, under the Investment Canada Act, which governs foreign takeovers of Canadian companies, BHP now has 30 days to modify its offer so that it is a “net benefit” to Canada. In light of the federal government’s decision, we updated our buy/sell/hold advice in last week’s Successful Investor and Wall Street Stock Forecaster hotlines. We cover Potash Corp. in The Successful Investor and BHP in Wall Street Stock Forecaster....

Sherritt International Corp., $7.81, symbol S on Toronto (Shares outstanding: 294.1 million; Market cap: $2.3 billion), is a diversified natural-resource company that produces nickel, cobalt, thermal coal, oil and gas. It also licenses its own mining technologies to other metals companies, and manages 376 megawatts of power-generation capacity in Cuba. Toronto-based Sherritt is a major nickel producer, with operations in Cuba and Canada. It also has a development project on the island nation of Madagascar, off the east coast of Africa. As well, Sherritt produces oil and gas in Cuba, Spain and Pakistan. The company is the largest producer of thermal coal in Canada. (Many power plants burn thermal coal to generate electricity.) The company is also developing Canada’s first coal-gasification project, near Camrose, Alberta. This process converts coal into a gas that can be used in place of natural gas....