By Jan Van Eck via Iris.xyz

As the year progresses, commodities look as if they could become the best performing asset class in 2018 (see Q2 2018 Investment Outlook: Commodities Seizing Their Moment). We believe that major opportunities continue to exist – especially in energy stocks.

Back in March, our view was that with global growth kicking in and fueling demand, commodities were well positioned for a strong year and significant opportunities were emerging.

For several years now, one of our main themes has been that, beyond the macro trends, commodity companies have been undergoing a rationalization process. Since the end of 2015, supply has been constrained. Precious metals companies were the first to restructure and focus on shareholder returns and shareholder equity, followed by the base metals sector. We have, subsequently, seen good rallies in both.

We believe the time has now come for energy companies. For the last year, we have been examining how such a reform process, when applied to the U.S. energy market, has the potential to transform that industry too. Our fund managers note how energy companies, especially those in unconventional oil and gas exploration and production, are now transitioning from “investment” to “harvest” mode, with mature, cash-flow heavy business enabling dividends and share repurchases (see Natural Resource Companies Focus on Returns in 2018).

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