"We would maintain a large allocation to commodities at this time, and then aggressively increase our positions at the first sign of a recovery," said David Lee, an equity research analyst at Sauer Capital S.A.. "We believe commodities are poised to hit new highs now then continue to appreciate once a recovery begins to gather momentum."
Until the recovery, Sauer Capital S.A. will look closely at select commodities that require particularly long lead times to add capacity or face challenging geological hurdles. As examples, the Sauer Capital S.A. white paper noted that iron ore used in the production of steel and potash, a fertilizer nutrient, will become very attractive once the economy recovers, however, in the current climate silver and more prominently gold will continue to outperform the majority of investment vehicles in today's markets.
"Focusing investments on commodities with tight fundamentals and producers with low-cost positions is the right approach for these markets," said Lee. "Companies with low-cost positions will enjoy an extended period of above-normal profitability and cash flow."
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