Stick With Commodity Plays as the Boom Continues

After a massive surge higher in a number of commodities as Russia invaded Ukraine, prices for many such goods have come back down a bit. But company executives remain bullish on the space, and with ongoing tensions in many parts of the world, not to mention high inflation, the commodity bull market appears here to stay.

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  • Investors who buy top commodity stocks now, even with shares near 52-week or even multi-year highs, can continue to play this trend higher.

    One space that looks attractive is natural gas, where prices have continued to soar. May futures recently crossed $7 per million British thermal units; a price last seen in 2008. One attractive play with a mix of natural gas and oil is APA Corporation (APA).

    Shares are up 141 percent already in the past year, but revenues are up just 90 percent, underpricing current energy prices on the market right now. That makes it likely that shares have further upside ahead.

    Action to take: Investors may like shares here. The company recently more than doubled its dividend, but has a low payout ratio with room for a further rise from the current yield of 1.2 percent.

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  • Traders might want to target the July $50 calls. Last going for about $2.45, the option has the ability to leverage a further move higher in shares by mid-to-high double-digits in the coming months.

     

    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.