This “Mammoth” Commodities Trend Is Still on Course

This "Mammoth" Commodities Trend Is Still on Course

Most of the time, the talking heads on CNBC churn out nothing but “noise.”

The kind of stuff that’s more likely to cloud your investing outlook than make it any clearer.

It’s all too short-term focused to be of any use.

But from time to time, CNBC has guests on who are worth listening to…and learning from.

One of these is Jim Rogers.

Rogers made his fortune at one of the first truly international investment funds, the Quantum Fund, which he co-founded with George Soros.

Between 1970 and 1980, the fund chalked up a gain of 3,365%. And it made Rogers rich enough to retire…at the ripe old age of 38!

The Key to Investing in Commodities Right Now

Rogers still invests. He now lives in Singapore. But he travels back and forth to the U.S.

And on his most recent trip, he pointed the way to a massive energy trend during an interview with CNBC.

You see, Rogers realizes something that very few investors realize.

He understands that energy prices will go up…no matter what way the economy goes.

Here’s exactly what he said:

If the world economy gets better, I earn money on commodities. If the global economy gets worse then they will print more money and I will make money in commodities.

Take a moment to digest that.

And remember that it’s coming from one of the world’s greatest living investors. Someone who made a killing in the 1970s, when most other investors we’re losing their shirts.

I agree with Rogers 100%. If the economy gets worse, you can bet Ben Bernanke won’t just sit on his hands. He’ll do the only thing he knows to do: devalue the dollar some more in the hope that it forces investors to buy stocks.

If the economy picks up, demand for commodities and energy will pick up too…particularly from the emerging world.

One of the Best Energy Stocks on the Planet

To play this trend, one of my favorite stocks is a Brazilian oil giant that’s hated by investors right now.

As a result it has sold off pretty hard—down 24% since its 52-week high.

The problem, as the sellers see it, is that the Brazilian government is the biggest shareholder. And that the current administration will use the company’s oil wealth for domestic policy purposes rather than allow it get on with the business of making profits.

But these worries are overblown. If anything, government ownership will end up being a positive for this company, because it gives it the kind of access to power that often comes in very handy in big emerging markets such as Brazil.

But what’s even more attractive is the sheer scale of reserve growth expectations for this company.

“Mammoth” Oil Finds

They recently made a series of offshore oil discoveries deep under the Atlantic Ocean that are the largest in the Western hemisphere in several decades.

These are what industry insiders refer to as “mammoth” finds. And they mean Brazil will supply more than a third of the increase in non-OPEC oil output over the next five years, according to the International Energy Agency.

And the company is on course to double its production by 2020 to close to 6 million barrels of oil a day.

I love these kinds of set-ups. Because the mainstream has got it wrong – meaning this stock is now selling at close to bargain levels.

It’s trading on a trailing price-to-earnings ratio of just 8.3. That means you pay just over $8 for every $1 of earnings over the last 12 months.

Compare that with ExxonMobil Corporation (NYSE:XOM), where you’d have to pay nearly $12 for every $1 of earnings over the last 12 months – without anything even close to the reserve growth expectations of the Brazilian oil giant.

At current levels it’s definitely one of the best energy stocks on the planet right now—and one I give more details on in my latest research report on Brazil.

Further Reading

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