The Best 3 Stocks For the Commodity Supercycle

The stock market is now flat since the middle of last year and negative YTD. Meanwhile, commodities are outperforming. In fact, gold and copper are at all-time highs. 

Pay attention. This isn’t just random noise, it’s a meaningful signal with major implications. 

In recent articles, we have discussed the need for a more defensive approach given uncertainty stemming from tariffs and amid a slowing economy. 

Some of these strategies include investing in gold stocks and companies that are buying back shares. Another is to prioritize stocks with strong Zen Ratings scores in categories like Safety, Stability, and Value which are more likely to hold up in bearish market environments. 

Sliding stock prices, rising recession risk and policy uncertainty are understandably dominating the minds of market participants at the moment. 

However, there is an equally notable development under the surface that has the potential to deliver outsized gains to savvy and well-positioned investors.

Commodities Vs. Stocks

Over long periods of time, financial markets move in cycles. We can see this in the relationship between stocks and commodities. 

Roughly two thirds of the time, stocks outperform. The rest of the time, commodities outshine, while stocks tend to struggle. 

The last period of sustained outperformance in commodities was from 1999 to 2011, when the stock market was slightly down, while the S&P GSCI Commodities Index was up more than fivefold. 

Of course, the last 14 years have been defined by the inverse set of conditions. Since 2011, the commodities index is down by 21%, while the S&P 500 has more than tripled. 

3 Top Stocks For the Commodity Supercycle

Even with an improving backdrop, commodities do face some near-term headwinds. If recession risk increases and/or economic growth slows, then the sector may struggle. 

Conversely, if market conditions improve and policy uncertainty abates, then commodities are poised to continue outperforming, given improving fundamentals and attractive valuations. 

Already, gold and copper prices are trading at all-time highs, which have effectively foreshadowed strong gains for the broader sector in previous cycles. Therefore, investors need to balance near-term risks with long-term opportunity. 

The 3 stocks below offer the ideal combination of safety and upside. Let’s break them down.

1. Kinross Gold Corp. (NYSE: KGC)

Kinross Gold has 6 active mines in North America, South America, and Africa. Last year, the company produced 2.1 million gold equivalent ounces at an all-in cost of $1,350. Currently, it’s working on a new mine in Ontario, which it forecasts to add 500,000 ounces to its annual production by the end of the decade at an all-in cost of $800 per ounce. 

This has resulted in net debt at decade lows with liquidity over $2 billion. This is also reflected in the company having an A grade for Financials. This category evaluates companies on the strength of their balance sheet, cost reduction efforts, leverage, and return on equity. Notably, these form a stock’s margin of safety during periods of market volatility.

Other attractive characteristics include KGC’s forward P/E ratio of 14.7, which is significantly cheaper than the S&P 500’s forward P/E of 21. 

Given these factors, it’s not surprising that KGC has an overall Buy (B) rating according to the Zen Ratings. Buy-rated stocks have produced an average annual return of 19.88% since 2003, outpacing the S&P 500’s average 10.5% annual gain.

It’s also a part of the Zen Investor portfolio, where it is up more than 32% since being added in October of last year. Each stock in the Zen Investor portfolio is hand-picked by 40+ year market veteran Steve Reitmeister, who uses a rigorous 4-step screening process to locate the highest-potential stocks. Click here to check out other stocks in the Zen Investor portfolio.

2. Silvercorp Metals (NYSE: SVM)

Silvercorp Metals (SVM) is a Canadian silver miner with operations in South America, North America, and Asia. Last year, the company produced 6.6 million ounces of silver, 64 million ounces of lead, and 24 million pounds of zinc at an all-in cost of $12 per ounce. Like many of its peers, SVM has been focused on strengthening its balance sheet by paying off debt and improving operational efficiencies. 

Its last earnings report showed strong momentum as revenue was 39% higher and earnings were up 60% on a year over year basis. This year, the company is forecasting 7 million ounces of silver. Over the next couple of years, it aims to boost production to 9 million ounces due to new production from Ecuador and China. 

SVM has an overall Buy rating (B) in the Zen Ratings. Remarkably, SVM is cheaper than its peers and the S&P 500, while having better growth prospects. This is evident in its low forward P/E of 8.5 and expectations of 36% earnings growth for the full-year, resulting in a grade of B for Value and Growth. 

3. Excelerate Energy (NYSE: EE)

Excelerate Energy (EE) is an American provider of LNG infrastructure and services such as floating storage and regasification with operations across the globe. Last year, the company handled over 1 million tons of LNG, benefitting from the growth in LNG exports which sharply increased following Russia’s invasion of Ukraine. 

The company should benefit from rising natural gas prices over the next decade especially as the commodity has severely underperformed over the last 15 years. From 2011 to 2025, prices averaged around $3 per million BTU, a sharp drop from an average of $8 per million BTU during the commodity bull market. 

The stock is in the midst of an earnings boom with nearly 100% earnings growth projected over the next 2 years. Despite this strong growth profile, the company is cheap with a forward P/E of 14.7, making it appealing for growth and value investors. 

Given these factors, it’s not surprising that EE is rated a Strong Buy (A) by the Zen Ratings. Strong Buy rated stocks have produced an average annual return of 32.5% which outpaces the S&P 500’s average annual return of 10.8%. 

Conclusion

Something is happening in commodities. Yes, the near-term headwinds complicate the situation.

But, the long-term picture is quite clear. Investors should increase exposure to the sector and look to deploy strategies that worked well during previous commodity bull markets.  

What to Do Next?

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