Pinnacle Activity Ticker
Housing Starts Explode: The Commodity Super Cycle Continues
Pinnacle Digest writes: Holmes and his fund at US Global are almost perennial bulls when it comes to the natural resource market. Citing rising population and infrastructure buildups around the world, Holmes is ever confident of rising prices, not just in copper and oil, but all commodities.
It was reported earlier this week that after four years of dismal performance, housing starts and building permits in September rose to the highest number since July 2008, according to Bloomberg.
Holmes explains that his fund has shifted its emphasis on resources stocks to focus on 10 different sectors. Each of these areas include global companies that are involved in the production, exploration or processing of various commodities which stand to benefit from the world’s growing population, urbanization and rising income trends. Timber is one of these areas set to benefit from the rise in home construction.
Holmes asks one of his leading researchers, Evan Smith, a few questions.
With a fund that is able to invest globally, how do you decide where the best opportunities are?
Before analyzing a particular company, we consider a variety of broad economic factors across developed and emerging countries. We believe government policy is a precursor to change. Therefore we closely track countries’ fiscal and monetary policy actions. To determine rising or falling demand of certain natural resources, we look at factors including GDP rates, rising urbanization rates and other demand factors which would affect the use of commodities.
What other areas do you find interesting right now?
We think the agricultural sector offers opportunity today. With 7 billion hungry people around the world, yields will need to increase on arable lands, benefitting certain processing, farming and agricultural companies. Feeding a growing global population means we need better fertilizers, mechanization and seed technologies to increase the production of grains on less arable soil.
Holmes and his team explain that the USDA's World Grain Supply has hit multi-decade lows.
The BCA, a leading indepedent research firm, recently said that the implication of the USDA's finding is that the imbalance of supply and demand will “likely get resolved via a reacceleration in grain prices, which will encourage an aggressive planting program.”