commodity

We’ve had lots of success with the junior mining stocks we recommend in Stock Pickers Digest, our newsletter for aggressive investing. For example, in a recent issue of Stock Pickers Digest, we updated our buy/sell/hold advice on a junior mine that’s risen more than 300% for us in the past year. See below for further details on this up-and-coming diamond producer.

Keep risk in mind with junior mining stocks

...

Canadian Pacific Railway (symbol CP on Toronto) has long been a cornerstone of the Canadian economy. CP was incorporated on February 16, 1881. The company began cross-Canada train service after the rail link to the Pacific coast was famously completed with the driving of the “last spike” at Craigellachie, British Columbia, on November 7, 1885. Prime Minister John A. MacDonald’s government built the rail line to satisfy a condition of British Columbia’s entry into Confederation in 1871....

Oil prices fell from their July 2008 peak of $148 U.S. a barrel to just under $40 U.S. in February 2009. Prices have roughly doubled since then, but are unlikely to get back to their 2008 highs any time soon. We think oil prices could rise further if the global economy continues to recover, as we expect. Even so, we continue to advise against overindulging in natural gas and oil stocks. That’s because the Resource sector (including oil and natural gas) is highly volatile, and no one can accurately predict future commodity prices.

This oil stock’s diversity and high-quality reserves give it a strong foundation

...

Oil prices fell from their July 2008 peak of $148 U.S. a barrel to just under $40 U.S. in February 2009. Prices have roughly doubled since then, but they are unlikely to pass their 2008 highs any time soon. We think oil prices could rise further if the global economy continues to recover, as we expect. As well, oil and natural-gas stocks can provide your portfolio with a good hedge against inflation. Even so, we continue to advise against overindulging in oil and gas stocks. That’s because the Resource sector (including oil and natural gas) is highly volatile, and no one can accurately predict future commodity prices....

MAPLE LEAF FOODS INC. $9.27 (Toronto symbol MFI; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 136.8 million; Market cap: $1.3 billion; Price-to-sales ratio: 0.2; Dividend yield: 1.7%; SI Rating: Average) slumped 4% on June 8, on news that the Ontario Teachers’ Pension Plan plans to sell its 35.3% stake in the company. Investors worry that some hidden problem has prompted the pension plan to sell Maple Leaf. The McCain family, which owns 31.6% of Maple Leaf, seems uninterested in buying the Teachers’ stake. However, major investors sell major investments (or choose not to buy out partners who want to sell) for a variety of reasons. The Teachers pension plan has been shifting away from common stocks and into real estate, foreign companies, private companies and other investments for a decade. Canadian stocks formerly made up a majority of the plan’s holdings. Now they represent 9%. Maple Leaf is the plan’s biggest single holding of a listed company. It bought more Maple Leaf as recently as late 2008....

Members of our Inner Circle service often ask for our portfolio investing advice on stocks they are thinking of buying that we don’t cover in our newsletters. These companies range from the most speculative penny mines to large multinational corporations.

Many of these stocks fall into a grey area....

In the first quarter of 2010, Canada’s economy posted an annualized growth rate of 6.1%. That’s the fastest pace in more than a decade, and much stronger than the 5.8% that the Bank of Canada and consensus forecasts called for. The sharply higher growth has added to investor concerns about inflation, and was part of the reason why the Bank of Canada raised its key interest rate by 25 basis points, to 0.50%, on June 1. That’s the first time the bank has raised the rate since 2007. However, despite the sharp rise in economic growth, Canada’s current inflation rate of 1.8% (as measured by the consumer price index) is still well within the Bank of Canada’s target range of between 1% and 3%....

Exchange traded funds (ETFs) have gained popularity among investors in recent years, mainly because they offer low management fees. However, you should always keep in mind that not all exchange traded funds are created equal. For example, there are a lot of ETFs that have been created to tap into popular, but risky, themes and fads. So you need to be very selective with your ETF holdings. Exchange traded funds are set up to mirror the performance of a stock-market index or sub-index. They hold a more or less fixed selection of securities that represent the holdings that go into the calculation of the index or sub-index. ETFs trade on stock exchanges, just like stocks. Investors can buy them on margin or sell them short....

China Investment Corp. (CIC) continues to catch investors’ attention by making a number of big purchases in the resource sector, including crude oil stocks. CIC is the Chinese government’s “sovereign wealth fund.” Sovereign wealth funds have been around since the 1950s. They are state-owned investment funds that are usually financed by an economic surplus. Many Middle Eastern sovereign wealth funds, for example, are financed by state oil revenues. CIC is directly funded by the Chinese government, largely with U.S. dollar reserves accumulated through exports.

An aggressive move into the oil sands

...

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, $58.32, symbol NEM on New York (Shares outstanding: 491 million; Market cap: $28.6 billion), is a relatively conservative choice if you want to buy a gold stock....