3 Natural Resource Stocks in Overdrive Amid World Tensions
What should you invest in right now, you ask? Two words: Natural resources! Let's dig into some great options.
What to do when eastern Europe suddenly erupts into violence? Griping about the cost of gasoline (has anyone else shifted to filling up when the tank is half full?) has its cathartic moments, but it's also important to remember that whole countries are living in fear right now.
Even so, beyond donating and helping out where you can, it's natural to want to look after your own portfolio. In a broken world, you may want to "steady as many ships as possible," and you may be able to make things "right" with natural resource stocks. Let's take a look.
Why Natural Resource Stocks?
Natural resource stocks include companies that produce, distribute and store natural resources, including metals, agricultural goods, lumber, oil and natural gas.
Certain natural resources have seen remarkable changes since the start of the pandemic. Remember in July 2020, when people quit traveling and demand dropped so much that the price of a barrel of West Texas crude went below $0? What a different story now. Geopolitical tensions and supply and demand issues have made prices go into overdrive.
Right now, natural resources stocks can offer attractive valuations, portfolio diversification and inflation protection, but it goes without saying that you'll still need to do your own company research before you take the plunge.
Take a Look at These 3 Natural Resource Stocks
We'll take a look at some thriving natural resource stocks to help you make a decision about the best ones for you.
Devon Energy Corp., headquartered in Oklahoma City, Oklahoma, explores, develops and produces oil and natural gas properties through its Delaware Basin, Eagle Ford, Heavy Oil, Barnett Shale, STACK and Rockies Oil entities.
The company's fourth quarter 2020 daily production was approximately 300,000 barrels of oil, more than 125,000 barrels of natural gas liquids and about 920 million cubic feet of natural gas.
Devon Energy Corp.'s operating cash flow tripled in 2021 and its free cash flow reached the highest level in Devon's 50-year history and it reported 32% of operating cash flow in Q4, largely due to Delaware Basin production growth and margin expansion.
Its Q4 dividend payout improved to a record high of $1 per share, with a 45% increase to the fixed quarterly dividend. The company's share-repurchase program retired 14 million shares at a total cost of $589 million in Q4 and its board increased share-repurchase authorization by 60% to $1.6 billion.
Production in the first quarter of 2022 should reduce by 3% due to severe winter weather. Adjusting for this downtime, the company expects production to approximate 570,000 Boe per day in Q1 of 2022.
Sibanye Stillwater Limited, based in Weltevreden Park, South Africa, operates as a precious metals mining company in South Africa, the United States, Zimbabwe, Canada and Argentina. The company produces gold, platinum group metals (including palladium, platinum and rhodium) and byproducts like iridium, ruthenium, nickel, copper and chrome.
The company owns the following complexes and engages in the following:
- East Boulder and Stillwater mines in Montana
- United States and the Columbus metallurgical complex
- PGM recycling activities
- Kroondal, Rustenburg, Marikana and Platinum Mile operations in South Africa
- Mimosa on the southern portion of the Great Dyke in Zimbabwe
- Driefontein, Kloof and Cooke surface operations on the West Rand of the Witwatersrand Basin
- Beatrix in the southern Free State
- Marathon PGM project in Ontario, Canada
- Altar and Rio Grande copper gold projects in the Andes in Argentina
- Hoedspruit and Zondernaam PGM projects in South Africa
- Burnstone and southern Free State gold projects in South Africa
The company showed solid operational performance in all operating segments in 2021.
Profit attributable to owners of Sibanye-Stillwater increased by 13% in 2021 to $2.2 billion, from $1.8 billion in 2020. Earnings for the year increased by 27% to $2.5 billion. The company also experienced a 19% increase in net cash flow from operating activities to $2.2 billion and an 88% increase in adjusted free cash flow to $2.5 billion.
The company made significant progress on its green metals strategy, including capital expenditures on K4, Burnstone and Klipfontein projects for future operational sustainability.
Southern Copper Corp., headquartered in Phoenix, develops, produces and explores copper, molybdenum, zinc and silver operations through its Peruvian operations (which focuses on the Toquepala and Cuajone mine complexes and smelting and refining plants as well as industrial railroad and port facilities that service both mines), Mexican open-pit operations (through the la Caridad and Buena Vista mine complexes and smelting and refining plants and support facilities that service both mines) and Mexican underground mining operations segments. The Mexican Underground Mining Operations segment operates five underground mines, a coal mine, and several industrial processing facilities.
In 2021, net sales, net income, adjusted EBITDA and cash from operations hit record highs for Southern Copper Corp.
Net sales were $2,823.7 million in Q4 2021, which represented a 20.1% increase compared to 2021. Growth was primarily fueled by higher metal prices and metal prices increased for copper, molybdenum and zinc.
2021 net sales hit a record high of $10,934.1 million, which represented an increase of 36.9% over 2020. Net income in Q4 was $833 million, which represented a 41.1% increase with compared to 2020. The net income margin was 29.5% versus 25.1% in 2020. Net income was driven by an increase in sales and cost control measures which allowed the company to take fuel, power and other operating costs into consideration.
Adjusted EBITDA was $1,726.5 million, which represented an increase of 37.7% compared to $1,254.1 million in Q4 2020. Adjusted EBITDA in 2021 also hit a historic high of $6,852.7 million; 77.1% above the figure in 2020. Cash flow from operating activities in 2021 was $4,292.4 million, another historic high, which represented an increase of 54.2% over the $2,763.6 million in 2020.
Copper production registered a decrease of 8.5% in Q4 2021 and decreased 4.3% year-over-year to 958,200 tons.
Consider Natural Resources Stocks
There's no question that natural resources are one of the only ways you can go right now, but it's still a good idea to do some research before you decide whether you should nestle natural resources stocks into your portfolio.
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