As a small business owner, I‘m always exploring ways to make my money work harder. Lately, I‘ve been researching profit potential in natural resources. These raw materials offer a hedge against inflation and diversification beyond stocks and bonds.
Global population growth, rising incomes, and new technologies are increasing demand for commodities like metals, minerals, and energy. With finite supply, prices often rise long-term. Let‘s examine four natural resources presenting savvy investment opportunities right now.
Surging Demand Makes Natural Gas a Hot Opportunity
Natural gas ticks all the boxes as a top natural resource investment. Here‘s why:
- Supply/Demand Imbalance: Global natural gas demand is forecast to increase 44% by 2040 according to the EIA. But supply isn‘t keeping pace. Gas production only grew 34% over the past two decades.
- Cleaner Energy Transition: Natural gas emits 50-60% less CO2 than coal when burned for electricity. As countries like China and India shift from coal power, natural gas demand swells.
- Versatile Uses: In addition to electricity generation, natural gas is used for heating, cooking, and vehicle fuel. These broad applications support steady demand.
- Pricing Outlook: Natural gas prices doubled in 2021 and hit a 13-year high in 2022. Tight supply points to sustained higher prices.
For us business owners, rising natural gas prices impact heating, electricity, and transportation costs. But we can hedge these risks by investing in natural gas stocks, commodity funds, or MLPs. Top prospects include EOG Resources, United States Natural Gas Fund, and Enterprise Products Partners.[[Insert graph of natural gas pricing over past 5 years]]
Lithium – The New Oil for the Electric Vehicle Era
Lithium‘s light weight and high energy density make it indispensable for today‘s lithium-ion batteries. Surging electric vehicle demand is causing a lithium shortage, evidenced by:
- 521% increase in lithium prices from 2020 to 2022 (Trading Economics)
- Lithium demand projected to triple by 2025 (IEA)
- 2022 waitlist for a new EV over 12 months long (Kelley Blue Book)
Major automakers like Ford and GM are racing to secure lithium supplies from mining companies and producers like Albemarle, SQM, and Livent Corp. Lithium investments should charge higher as the EV revolution accelerates.
I‘ve invested in the Global X Lithium and Battery Tech ETF (LIT). It holds lithium mining stocks and battery material companies primed to profit from EV growth.
Copper Enters New "Electrification Era"
Move over, oil – copper is gaining status as the new essential commodity. Why?
- Renewable energy systems require 4-5X more copper than fossil fuels
- EVs use 2-3x more copper than internal combustion vehicles
- global copper mine production trails demand by over 1 million metric tons (IEA)
These dynamics pushed copper prices to record highs in March 2022. Yet analysts see further upside as the energy transition intensifies copper demand. I‘m bullish on copper miners First Quantum Minerals and Southern Copper for big electrification upside. An indexed copper commodity fund like CPER also offers direct exposure.[[Insert 5 year copper pricing chart]]
Farmland Offers Food Inflation Hedge
I first considered farmland investing when egg prices at my bakery tripled in 2022. Global farmland per capita is decreasing steadily while populations and incomes grow. This imbalance suggest more food inflation ahead.
Farmland has generated annualized returns of 11% over the past 20 years. As an inflation hedge, it provides portfolio ballast amid stock volatility.
I invested $50,000 in the Gladstone Land Corporation REIT. It owns 140 farms across the U.S. valued at over $1.5 billion. The diversified holdings and 5% dividend offer stable farmland returns.
For us small business owners, natural resources can energize portfolio growth. Aligning investments with mega-trends like electrification and food security can yield sustainable profits. Yet each investment carries risks, so thorough research is a must.
What natural resources are you most bullish on right now and why? I welcome your perspectives.