4 Funds Making a Mint on Commodities

03/09/2011 1:12 pm EST

Focus: FUNDS

Jim Lowell

Senior Partner & Chief Investment Strategist, Adviser Investments

Offerings centered on Canada and oil services are among Fidelity’s best bets on rising materials prices, writes Jim Lowell of Fidelity Investor .  

Right about now, with global recovery…still recovering (I had to check!), commodity prices have been on the rise.

Commodities are in increasingly short supply as increasing global consumer demand, geopolitical disruptions, and even Mother Nature take their toll. The result could be a tax on the global recovery, but there are also pluses to this ‘rising prices’ story.

Here are four picks from Fidelity’s commodity-fund lineup.

Fidelity Canada (FICDX)
Manager Doug Lober invests in Canadian companies, or those tied to Canada economically.

This fund is a natural-resource play that trends up in recovery cycles and boom times, as demand for natural resources that feed the economic growth engines increases. The top three sectors are materials (28.4%), energy (23.1%), and financials (20.5%).

If I could buy only one commodity-related fund, this would be my current preference.

Fidelity Select Energy Service (FSESX)
I am not abandoning my Levi Strauss approach to the oil crisis. As prices rise, more and more drilling ensues…and I like owning the store that sells the prospectors their picks and shovels, making a profit no matter if they find black gold in them thar hills or not.

Manager Jonathan Kasen invests in companies that provide products and services for engineering and construction of on- and offshore drilling, reservoir analysis, exploration, technology, and production and well services. Foreign investments make up 19.4% of the holdings.

Top holdings are Schlumberger (NYSE: SLB), Halliburton (NYSE: HAL), Baker Hughes (NYSE: BHI), and National Oilwell Varco (NYSE: NOV).

Fidelity Global Commodity Stock (FFGCX)
I am upgrading my recommendation on this fund, based on the long-term trajectory of increased demand. Manager
Joe Wickwire owns companies that seed, sow, nurture, harvest, process and transport a broad based basket of commodities.

The top five country representations are the US (30.5%), the UK (17.7%), Canada (16.2%), Brazil (4.8%), and Japan (3.8%). The top three sectors are materials (57.3%), energy (33.1%) and consumer staples (4.2%).

The top 10 holdings are BHP Billiton (NYSE: BHP), Exxon Mobil (NYSE: XOM), Potash Corp of Saskatchewan (NYSE: POT), Royal Dutch Shell (NYSE: RDS-B), Rio Tinto (NYSE: RIO), Monsanto (NYSE: MON), Syngenta (NYSE: SYT), Chevron (NYSE: CVX), Vale (NYSE: VALE), and Archer Daniels Midland (NYSE: ADM).

Fidelity Select Materials (FSDPX)
Is it as simple as saying that you can’t build a recovery without materials? Yes, it is.

Manager Tobias Welo invests in companies that manufacture chemicals, construction products, glass, paper, forest products and packaging products, as well as companies involved with metals, minerals, mining and steel. Foreign investments make up 14.5% of the holdings.

The top ten holdings are Dow Chemical (NYSE: DOW), Freeport McMoran (NYSE: FCX), Dupont (NYSE: DD), Monsanto, Praxair (NYSE: PX), Air Products & Chemicals (NYSE: APD), Newmont Mining (NYSE: NEM), Mosaic (NYSE: MOS), Celanese (NYSE: CE) and United States Steel (NYSE: X).

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