Tuesday, May 5, 2009

Big Player Buys into Commodities

A manager of close to $100B moves into overweight on commodities. AMP Capital moves into commodities b/c of the strength in China according to Bloomberg. Surprising that they are making the move into copper and oil after 50% runs. We agree that these sectors will be a great place to invest over the next 3-5 years. Just more proof that a lot big money has completely missed these runs. Freeport (FCX), Foster Wheeler (FWLT), Atwoods (ATW), and Alpha Natural Resources (ANR) are our favorite plays on the commodity boom. 2010 could be the first in a while that both China and the US show growth in the demand for copper. This at a time that gobal supplies have shrunk due to the recession with some $200B in projects delayed.

More from AMP:

  • AMP Capital Investors, which manages close to $100 billion, is plowing cash into commodities on expectation demand will strengthen with a China-led recovery in the global economy.
  • The company yesterday switched from an “underweight” allocation in commodities future contracts to “overweight,” said Nader Naeimi, an AMP investment strategist in Sydney. Oil and metals were AMP’s top priorities.
  • AMP boosted its investment in a basket of commodities and assigned an “overweight” allocation to primary metals and energy and “underweight” to precious metals and soft commodities, such as wheat and soybeans.
  • “Rather than making money out of financial engineering, people are going to be making money out of making things,” said Naeimi. “So there’ll be a lot more upside pressure on commodity demand, while there is still limited supply.”
  • Mining companies have delayed about $200 billion of projects, according to an estimate by iron-ore producer Cia. Vale do Rio Doce, as the recession has sapped demand for raw materials. Global oil supplies will be “severely constrained” by lower prices and investment, the International Energy Agency said in a report last month.

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