cobalt is soaring in price lately, but why?
Phew! I’m finally getting the chance to catch my breath after a crazy week. I moved on Wednesday — and while my life is still sectioned into cardboard containers that occupy every room like an invading box-shaped species, I’ve now cleared an obvious path to the front door. (Progress!)
Value Partners Asia ex-Japan Equity Fund has delivered a 60.7% return since its inception three years ago. In comparison, the MSCI All Counties Asia (ex-Japan) index has returned just 34% over the same period. The fund, which targets what it calls the best-in-class companies in "growth-like" areas of the market, such as information technology and Read More
cobalt pictured here is soaring in price lately alusruvi / Pixabay
That gave me a chance to finally sit back and reflect on my new apartment.
As we all know, we want to ensure we’re making the right decision when we move — that we did all the research necessary to feel safe and excited about one of the biggest purchases we’ll ever make.
Well, I did some brief research, and at first I concluded this complex wasn’t for me. But just to be sure, I gave it one more look a few weeks later, and that’s when I found the perfect apartment — which had just been put on the market for about 16% lower than the typical price tag.
Now I couldn’t be happier with my new digs.
That got me thinking about the other great opportunities we dismiss at first glance. More specifically, the other great investments.
And one came to mind immediately — commodities.
I know commodities have taken a beating recently and that they’ve been generally considered an underperforming asset class this year. The PowerShares DB Commodity Index Tracking Fund has fallen about 6% over the past month. However, like my apartment complex, this area is worth another look because there are hidden mines of opportunity here (both literally and figuratively).
Commodities — such as oil, precious metals, cotton and much more — provide a path for investing that can offer significant gains if you’re correct about the direction and timing.
For example, one of the hottest investments in the markets right now? An obscure metal known as cobalt.
If you had jumped onto this investment trend early in 2017, you would have made a killing: The metal has soared by almost 70% this year due to the ever-increasing popularity of rechargeable lithium-ion batteries, which power things such as Tesla’s electric cars.
The metal is also facing a supply crunch, which is part of what’s shooting the price up.
See, cobalt is pretty difficult to procure, mainly because about 60% of the world’s reserves are stationed in the Democratic Republic of Congo, which has suffered through a horrific war since the 1990s. Not to mention these mines have been investigated for some truly awful practices, such as child labor. Apple is one company that has stopped buying cobalt mined there by hand as a result. Tesla — which forecasts making 500,000 electric cars in 2018 — has also gone in a different direction, saying it’s searching for cobalt in North America.
That’s a bit of a pipe dream considering not one country in the rest of the world contributes even 10% of the cobalt market (which consisted of 93,000 metric tons in 2016).
That means this supply problem will likely only get worse for the foreseeable future. After all, over half of the cobalt mined now is used for batteries, and that’s likely to climb to 60% within the next three years. And as demand climbs while supply shrinks — well, there’s really nowhere for the price to go but up.
There are clearly pockets of opportunity in commodities that many Main Street investors are missing out on.
So if you’re looking to get ahead of the curve in the investment world, I suggest learning more about commodity investment strategies. But be careful. Natural resources can be a difficult area to navigate if you don’t have the right information.
For example, our natural resources expert, Matt Badiali, pinpoints these types of trends for his readers. However, he doesn’t tend to invest in the commodity itself — which I want to stress here. That’s a mistake that too many investors make, and it causes them to miss out on real wealth opportunities.
Instead, he likes to invest in stocks linked to that commodity. In the case of cobalt, it would have been smart to hunt for a business that relies on cobalt production. After all, if the price of a certain commodity is set to go higher, there’s a good chance that stocks linked to that commodity will go higher too.
By doing your homework and investing in commodities the smart way, you end up finding the profit prospects you might have otherwise missed out on.
I, for one, am going to go home tonight and rest easy knowing I landed a great opportunity by doing my due diligence.
Catch you next week.