In the stock market, there’s such a thing as natural resource investing. A portfolio manager or an individual finds it compelling to invest in companies that process or develops natural resources and turn them into durable products. Among these gifts of nature are oil and gas, precious metals, steel, and timber.
Demand for products made from natural resources is ever growing, especially in infrastructure. Some investors find metals a store of value and turn to them when market headwinds are strong. The TSX has a wide selection of natural resources stocks, but four names are screaming buys in 2023.
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Oil and natural gas
Canadian Natural Resources (TSX: CNQ) operates a diversified portfolio of assets globally. The $87.82 billion company is one of the world’s largest independent oil and natural gas producers. Its sustainable cash flow comes from the asset portfolio, a balanced mix of natural gas, light crude oil, heavy crude oil, bitumen and synthetic crude oil (SCO).
Today, the market cap stands at $87.82 billion, although on April 20, 2022, it CNQ became the first Canadian oil and gas company to surpass the $100 billion market value. Industry experts said it joined the big league composed of Chevron, ConocoPhillips, and Exxon Mobil. CNQ trades at $79.33 per share (+5.51% year to date) and pays an attractive 4.38% dividend.
Metals and mining
Barrick Gold (TSX: ABX) is the gold standard for TSX’s metals and mining sector. The $43.71 billion mining company is a gold and copper producer. Mining experts concede that Barrick’s portfolio of tier-one and world-class gold and copper assets is not only the largest but the best in the industry.
Management said it has a clear growth runway given all the mines’ 10-year business plans. Moreover, it anticipates growth projects and a robust pipeline to enhance production levels with no significant dips over the next decade. At $24.81 per share (+6.89% year to date), Barrick pays a modest but super-safe 2.94% dividend.
Steel
Stelco Holdings (TSX: STLC) isn’t a famous name, but the stock outperforms the broader market year to date at +16.89% versus +6.91%. This $2.85 billion company was initially titled “The Steel Company of Canada” in 1910.
The Hamilton, Ontario-based firm has seen steady growth through the years. Today, Stelco is a vertically integrated, independent Canadian steelmaker that builds quality steel products for the global market. At $51.77 per share, you can partake of the decent 3.25% dividend.
Lumber
Acadian Timber’s (TSX: ADN) market cap may be the smallest in the group, but this small-cap stock pays a 7.05% dividend. At $16.81 per share, current investors enjoy a +12.33% year-to-date gain on top of the ultra-high dividend yield. This $283.84 million owns and manages around 1.1 million acres of freehold timberlands in New Brunswick and Maine.
The products it sells to diversified end-use markets include softwood and hardwood sawlogs, pulpwood, and biomass by-products. Management’s business strategy is to maximize cash flows from its existing timberland assets through sustainable forest management. These high-quality assets provide perpetual returns and cash flow stability.
Adopt the strategy
Proponents of natural resource investing believe the pool of investable natural resources is growing, because demand is ever-increasing. Average investors have four fine gems to choose from if they adopt the strategy in 2023.
