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A Six-Pack Of Commodity-Based Funds

 March 15, 2011 02:30 PM


by Jim Lowell, editor Fidelity Investor

The last time I focused on commodities was back in 2009 when the recovery was piecing itself together. Now, most of the pieces of the recovery are in place, with the notable misfits being job creation and home values.

Here's a look at six of Fidelity's commodity and resource related funds that earn my buy recommendation.

Today, commodities are in increasingly short supply as increasing global consumer demand, geopolitical disruptions, and even Mother Nature have taken their toll on the supply of goods and services.

I view commodities as a real world currency whose value typically increases in times of economic expansion and decreases in times of economic contraction.

Commodities are lighting up the screen and blinking an early warning on inflation.

Commodities and the companies that profit from sowing, nurturing, harvesting, processing and shipping them, have been on a better run than the broader market averages, leading many to suggest they're overpriced and overdue for a pullback.

Fidelity Canada (FICDX):

Manager Doug Lober invests in Canadian companies or those tied to Canada economically.

This fund is a natural resources play which trends up in recovery cycles and even during 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 Energy Service (FSESX):

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, Halliburton, Baker Hughes, and National Oilwell varco.

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%).

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