Commodity-related stocks are poised to beat benchmark indexes in the next few decades as resources become scarcer, according to Jeremy Grantham, chief investment strategist at Grantham, Mayo, Van Otterloo & Co.
“I am even more convinced than I was a year ago of the inevitability of rising resource prices,” Grantham wrote two days ago in a quarterly report to his fund company’s investors. Producers will benefit at the expense of other companies, which will have to cope with higher raw-material costs, he wrote.
The CHART OF THE DAY tracks the ratio of a Morgan Stanley index of energy, metals and agricultural shares to the Standard & Poor’s 500 Index, along with the Thomson Reuters/Jefferies CRB Index of raw materials.
Potash Corp. of Saskatchewan Inc., the world’s largest maker of fertilizer, and Goldcorp Inc., the second-biggest gold producer by market value, led the commodity-stock index to a threefold gain since 2000. The S&P 500 fell 6.3 percent during the same period.
Institutions looking ahead more than 10 years “should move steadily to adopt a major holding of resource-related investments,” Grantham wrote. The Boston-based strategist recommended focusing on owners of farms and forests.
His Grantham Foundation for the Protection of the Environment is seeking to invest 30 percent of assets in the category, he added. The current stake is about 20 percent. The foundation had $353.8 million of assets at the end of 2010, the most recent date available in regulatory filings.