Agricultural commodities bottomed in late April, but not before filling your order to buy PowerShares DB Agricultural Fund (DBA). Fantastic!
The underlying basket of commodities turned higher earlier this month. And I see more where that came from.
That’s because cocoa, coffee and sugar are bottoming on their weekly charts as they face ongoing production threats from El Nino.
Grain markets are also turning the corner, aided by a bullish reversal in wheat after a late-April blizzard across Kansas and the Great Plains that hampered this year’s production outlook.
The May USDA crop report underscored that outlook when it that lowered production forecasts and reduced carryover supplies of both wheat and soybeans.
Hold DBA for more upside.
Now, my new recommendation: RSP Permian, Inc. (RSPP).
RSPP is an independent oil and natural-gas company. They’re engaged in the acquisition, exploration, development and production of unconventional oil and natural-gas liquids found in the coveted Permian Basin in Texas.
While many major oil concerns have exposure to the Permian Basin, RSPP is a pure play in the region. And the company boasts one of the lowest cost-structures in the industry, and they recently ramped-up spending to take advantage of their strategic position.
That’s important because production in the Permian Basin yields double-digit returns, even in the face of lower oil prices.
And should oil prices move lower, the company has staying power because of an untapped $1.1 billion credit line.
And I’m not the only one with a positive view on the stock, the average 12-month analysts’ forecast compiled by Bloomberg Analytics comes in at $53.50 — over 30% above current levels.
Here’s what to do …
My recommendation: Using 3 percent of the funds you have allocated to the Materials, Energy & Ags section, buy shares in RSP Permian Inc., symbol RSPP, at $40.62 or better. When filled, place a good-till-canceled protective sell-stop at $34.74.
Finally, continue working your order to buy Range Resources Corp (RRC) on a pullback to $24.15. When filled, place a good-till-canceled protective sell-stop at $20.47.
The company doubled its capital-spending budget and expects a noted increase in production during the second half of the year, which bodes well for future growth potential.
