3 Under-the-Radar Commodity Stocks to Buy

Three commodity stocks are likely to break out soon if inventories in metals markets continue to decline or demand outpaces supply.

| More on:
analyze data

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn moresdf

U.S. stock markets ended last week with heavy losses, as runaway inflation dampened investors’ confidence. In Canada, the TSX showed more grit and resiliency, with seven of the 11 primary sectors advancing on May 20, 2022. Some market observers are bullish on commodity stocks, particularly precious metals and mining.

The materials sector (+7.9%) has been holding ground amid the uncertainties and remains the second top performer after energy (+54.67%). Also, IAMGOLD (TSX:IMG)(NYSE:IAG), Fortuna Silver Mines (TSX:FVI)(NYSE:FSM), and Capstone Copper (TSX:CS) fly under the radar but are screaming buys.

Strong revenue growth

Toronto-based IAMGOLD has three operating mines (Suriname, West Africa, and Canada) and is building the Cote Gold mine in northern Ontario. In Q1 2022, the $1.36 billion mid-tier gold mining company reported impressive financial and operational results, despite significant challenges.  

Total revenues increased 19.9% to $356.6 million versus the same quarter last year, while total gold production rose 11.5% year over year to 174,000 ounces. IAMGOLD incurred a net loss of $194.1 million in Q4 2021 but has returned to profitability.

Net earnings in the first quarter reached $23.8 million, representing a 22.1% increase from Q1 2021. Notably, net cash from operating activities climbed 39.9% to $142.3 million. The under-construction Cote Gold is a large-scale, long-life project, but a delay in completion could impede the stock’s breakout. Management plans to announce a new project cost guidance before the end of Q2 2022.

Favourable long-term outlook

Fortuna Silver Mines produces not only silver but also gold, lead, and zinc. The $1.27 billion diversified precious metals producer has four operating mines (Argentina, Burkina Faso, Mexico, and Peru), with one more under construction (Côte d’Ivoire). This mining stock has advanced 11.78% in the last five trading days and now trades at $4.37 per share.

In Q1 2022, total sales increased 55% to $182.3 million versus Q1 2021. Moreover, the year-over-year growth in adjusted net income and net cash from operating activities were 21% and 55%, respectively. While silver production declined 13% compared to the same quarter last year, gold production rose 93% to 66,800 ounces.

According to management, inflation and geopolitical drove prices and demand for gold and silver prices higher. In the long term, it expects accommodative monetary policies and inflationary pressures to support higher prices, especially gold.

Looming scarcity

Capstone Copper is the new entity from the business combination of Capstone Mining and Mantos Copper (Bermuda) Limited on March 23, 2022. In 2021, or before the merger, this mining stock was among the TSX30 winners. It ranked fifth out of 30 top-performing growth stocks with its +433% three-year performance.

Apart from producing mines in the U.S. and Mexico, Capstone operates the Mantos Blancos, Mantoverde, and Santo Domingo mines in Chile. The South American country is the world’s number one copper producer. In Q1 2022, revenue increased 31% versus Q1 2021, although net income declined 5% year over year to $61.1 million.

The Chilean Copper Commission (Cochilco) projects copper prices to climb to US$4.40 per pound in 2022.  There’s a perceived scarcity due to the Russia-Ukraine conflict. Thus, market analysts forecast a 74% upside for Capstone in 12 months ($4.85 to $8.43).

Valuable commodities

Precious metals are valuable commodities worldwide. Mining stocks should benefit if inventories in metal markets decline or global supply falls short of demand in 2022 and beyond. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.

More on Metals and Mining Stocks

tsx today
Metals and Mining Stocks

TSX Today: What to Watch for in Stocks on Tuesday, February 14

U.S. inflation data and more corporate earnings could keep TSX stocks highly volatile today.

Read more »

A miner down a mine shaft
Metals and Mining Stocks

Are Hydrogen Stocks or Lithium Stocks Better for Long-Term Investors?

Hydrogen and lithium stocks are excellent options in for long-term plays but remain speculative investments, according to some market analysts.

Read more »

People walk into a dark underground mine.
Metals and Mining Stocks

3 Top Mining Stocks in Canada to Buy in February 2023

Three Canadian mining stocks are attractive prospects for growth investors in February 2023.

Read more »

Gold bars
Metals and Mining Stocks

Better Buy: Barrick Gold Stock or Kinross Gold?

Here are some key reasons why I find Barrick Gold more attractive than Kinross Gold for long-term investors with a…

Read more »

People walk into a dark underground mine.
Metals and Mining Stocks

This Mineral Company Was on the Move in January 2023

While inflation is easing, this mineral company's stock is rising. How can you make money in this mineral stock?

Read more »

gold stocks gold mining
Metals and Mining Stocks

Is Now the Time to Buy Gold Stocks?

Gold prices can continue to rally throughout 2023, as inflation and interest rates peak, making undervalued gold stocks some of…

Read more »

tsx today
Metals and Mining Stocks

TSX Today: What to Watch for in Stocks on Thursday, February 9

As the ongoing corporate earnings season heats up, TSX stocks may remain volatile.

Read more »

A worker wears a hard hat outside a mining operation.
Metals and Mining Stocks

Cameco Stock Is Approaching its 52-Week High: Time to Invest?

Cameco (TSX:CCO) stock is nearing 52-week highs once more after falling from September last year, but should you wait for…

Read more »