3 Commodity Multiplier Stocks for the New Supercycle

The stars are once again aligned for commodities.

I believe a new commodity bull supercycle is just getting underway and we’re on the verge of sharp increases in several important commodities.

For maximum profits, you must get into this brand-new bull market as early as possible.

Here are the details on my three favorite commodities plays in the market right now…

Commodity Multiplier Recommendation No. 1: Matador Resources

My first “Commodity Multiplier Stock” comes from my favorite sector right now: energy.

Anyone who’s followed my research over the past two years knows that I’m extremely bullish on oil.

And I’m not alone. The world’s financial elite – including Warren Buffett and Ken Griffin – are piling into oil.

Many of those bullish oil investors are jumping into the obvious larger players… and will likely do well.

But those big industry giants don’t have the profit potential of Matador Resources (NYSE: MTDR).

The Undervalued Gem in the Energy Sector

Based in Dallas, Matador is an oil and gas exploration and production company with a growing portfolio of shale deposits in the Delaware Basin in southeastern New Mexico and West Texas. 

The Delaware Basin is the top-producing area of the Permian Basin. And the Permian Basin region accounts for almost 40% of domestic crude production and 15% of natural gas production.

But Matador’s asset portfolio also includes the Haynesville Shale and Cotton Valley plays in northwestern Louisiana and the Eagle Ford trend in South Texas.

The company operates drilling locations on over 150,000 acres and and attained a record 460.1 million barrels of equivalent (BOE) of proved reserves by December 31, 2023. The reserves are an increase of 29% compared to the previous year.

Most of its properties have more than 10 years of high-quality inventory life. And the firm is growing by leaps and bounds.

Over the past five years, Matador has made several strategic acquisitions, which has more than doubled production and reserves, reduced costs, and improved operating efficiencies. 

The latest acquisition was announced in June, Matador entered into an agreement to acquire Ameredev, which will include certain oil and natural gas producing properties and undeveloped acreage in New Mexico and Texas. Following the closing of the acquisition, Matador expects to have over 190,000 net acres in the Delaware Basin, approximately 2,000 net locations and produce over 180,000 barrels of oil and natural gas equivalent (BOE) per day with proved oil and natural gas reserves of over 580 million BOE. 

Matador reported total oil and natural gas production averaged 160,305 BOE per day in the second quarter of 2024, a 7% increase over Q1 2024 and a 23% year-over-year increase.

But my favorite indicator for a company is cash flow.

You can grow earnings, but if you’re draining cash, that growth doesn’t mean much.

But, Matador blew my expectations out of the water. The company generated adjusted free cash flow of $460 million in the full year of 2023, all while reducing debt. 

That has allowed the company to repay $140 million worth of borrowings on its credit line since April. 

While Matador reported the first quarter of 2024’s adjusted free cash flow as a respectable $29 million, second quarter grew to a whopping $167 million.

In addition, because the company is making money hand over fist, it’s able to reinvest its free cash flow in further exploration and production.

When Matador acquired Advance Energy Partners the acquisition provided an additional 21 wells that contributed revenue in the second half of 2023.

And in 2024 Matador hit the ground running, reporting record production in the second quarter of 2024 due in part to the 47 gross (38.6 net) operated horizontal wells that generated sales, which was the most ever. The company attributes its success to the teamwork between its production and midstream teams by providing flow assurance between wells.

The acquisition of Advance Energy Partners was only one of nearly 200 deals completed in 2023. Subsequently, Matador is now ranked eighth in total production in New Mexico.

And with the acquisition of Ameredev expected to close late in 2024, we can expect sales and earnings to ratchet higher.

A High Degree of Confidence

When I recommend a stock, part of the selection process is reviewing the company’s track record – especially when it comes to earnings.  

I generally won’t recommend a stock that beats expectations one quarter, misses the next and is generally inconsistent when it comes to meeting Wall Street’s expectations. 

Rather, I want to see a company that regularly beats earnings estimates, quarter after quarter. That gives me confidence that it will likely do so again in the upcoming quarters. 

Matador has met or exceeded Wall Street’s expectations every quarter for 30 straight quarters! That means it has seven years of not missing analysts’ targets. 

And bear in mind, Matador keeps hitting its earnings goals despite a decline in oil and natural gas prices.  

The average price the company received for a barrel of oil in 2023 was $74.70, down 17% from the same period in 2022… 

However, in Q2 of 2024 Matador’s oil price per Bbl is $81.20 and I expect prices to trend higher in the coming months as global inflation, OPEC+ production cuts and the war in Ukraine continue on.

In addition, oil and natural gas from the Permian Basin is being shipped to Europe to fill the supply void created by the Russian boycott. That looks to be a new, permanent source of demand. 

This is a well-managed, rapidly growing energy play. The company has nearly $6.1 billion worth of proven reserves and a current market cap of $7 billion.

The company’s metrics should get even healthier when oil and natural gas prices move higher.  

Don’t wait too long to buy this one. 

Action to Take: Buy Matador Resources (NYSE: MTDR) at market. And use our customary 25% trailing stop to protect your principal and your profits.

Commodity Multiplier Recommendation No. 2: Intrepid Potash

My second Commodity Multiplier Stock is off the beaten path.

This company is capitalizing on a major supply crisis that has been developing for some time now. But recent events have dramatically accelerated the problem and brought it into the spotlight.

I’m talking about the problems facing the agriculture sector and its ability to feed an increasing population… from a decreasing resource base.

Before I discuss the immediate catalyst, let’s first look at the long-term trend that is plaguing the industry…

In 2023, the U.S. was down 21 million acres of farmland since 2017, according to the latest report from the USDA Economic Research Service.

Globally, the same thing is happening… The world has lost one-third of its arable land over the last 40 years.

At the same time, the global population is on the rise.

The United Nations expects the world population to grow to 8.5 billion by 2030 and to 9.7 billion by 2050.

The bottom line is that the world needs to grow more food… from less farmland.

And while you could play it by investing in farmland… or agriculture producers…

My No. 1 way to invest in this trend is a fertilizer called potash.

And the best way to play that angle is with Intrepid Potash (NYSE: IPI).

A Triple Play on Potash

Founded in 2000 and based in Denver, Intrepid Potash is focused on the extraction and production of potash in the U.S. and internationally.

Intrepid operates three solar evaporation mines in Wendover and Moab, Utah, and Carlsbad, New Mexico. (Intrepid also operates an underground mine in Carlsbad.)

Solar evaporation ponds provide one of the safest, lowest-cost, environmentally friendly production methods for potash and salt.

Potash is extremely valuable to the agriculture industry because it has so many beneficial qualities. It improves water retention, yield, nutrient value, taste, color, texture and disease resistance of food crops.

But what makes Intrepid such an intriguing profit opportunity is that the company is a “triple play” on three growing, in-demand business segments.

The company operates through three business segments: Potash, Trio and Oilfield Solutions.

I’ll be focusing on the Potash segment because of all the qualities I just mentioned. But potash is also used as a component in drilling and fracturing fluids for oil and gas wells, and as an input to other industrial processes.

The company’s Trio segment provides natural langbeinite, a unique mineral with three essential nutrients ideal for fruit, vegetables and other crops.

Both the Trio and Oilfield Solutions segments are thriving… but it’s the Potash segment that accounts for about 75% to 80% of company sales.

Helping Feed You… and Everybody Else

Intrepid started the ONLY active agriculture-quality potash mine in the United States. The mine is dedicated solely to providing potash and sulfate of potash magnesia fertilizers.

And I mentioned an immediate catalyst earlier…

Right now, the problem, and the catalyst for Intrepid, is the unfortunate war in Ukraine.

The potash and phosphate markets are booming due to the situation in Ukraine, Europe’s breadbasket.

Ukraine was one of the world’s top agricultural producers and exporters, sending sizable exports of agricultural goods to the European Union, China and the U.S. – not to mention Russia.

In 2022, after Russia invaded Ukraine, farmers across the globe scrambled to lock in fertilizer supplies and prices went through the roof.

Intrepid Potash Intrepid Potash reported $231 million in total revenue for fiscal year 2023. The company showed a strong start to 2024 with $63 million in total revenue for the first quarter of 2024. That’s a 34% increase from the previous quarter.

The second quarter of 2024 also proved to be strong with $50 million in total revenue. So Intrepid Potash is well on its way to surpassing last year’s revenue by the end of December.

The company also has a three-year compounded annual growth rate (CAGR) of 4.67%.

Sadly, the war in Ukraine rages on with no end in sight.

Removing Ukraine’s production from the global market means it needs to be made up elsewhere. That puts higher demand on fertilizers.

On top of that, Russia and its ally Belarus produce 40% of the world’s potash. U.S. sanctions are curtailing exports from those countries. That further tightens an already tight market.

The Ukraine conflict and economic sanctions are impacting 35% to 40% of the world’s potash supply.

And that’s the tailwind for Intrepid.

Currently, the United States imports 94% of its potash, making any domestic production a valuable resource and a huge opportunity.

(And don’t worry about Intrepid quickly running out of supply. The remaining reserve for its actively mined areas range from about 24 years to more than 100 years.)

Intrepid is still a small cap company. Its market cap is only about $275 million.

At its current price of around $22, it is an absolute steal.

Plus, it has ZERO debt.

Food really is the ultimate recession-proof industry. Jump on this one while it’s still cheap.

Action to Take: Buy Intrepid Potash (NYSE: IPI) at market. And use our customary 25% trailing stop to protect your principal and your profits.

Commodity Multiplier Recommendation No. 3: DRDGOLD

Our third play is one of my favorite gold companies.

Right now, we’re seeing a monumental shift in the gold market.

Globally, the government solution to fixing problems is printing TRILLIONS of dollars… and dumping that money into the economy and stock market.

U.S. debt is a record-high $35 trillion… Global debt is a record $315 trillion!

Government spending levels just keep increasing.

As a result, you and I are feeling the consequences – inflation.

And as we are all witnessing, it’s hard to get rid of. With governments still spending money like drunken sailors, elevated levels of inflation will be the new “normal.”

In response to the massive global money printing taking place… virtually every country on earth is now hoarding gold.

This is setting up a MASSIVE supply shortage for gold… at a time when gold demand is suddenly going through the roof. The combination is acting as rocket fuel for gold’s price.

Merrill and its analysts say the price of gold will hit $3,000. Bank of America is predicting $5,000. Some forecasts are as high as $10,000 per ounce.

Keep in mind that gold is currently selling for approximately $2,517 per ounce. So these price estimates call for a minimum increase of 50% to nearly 500%.

Gold-related stocks often have returns that are multiples of gold’s move.

There’s little doubt in my mind that we are headed for a massive gold bull market in the months ahead.

That’s great news for DRDGOLD (NYSE: DRD).

Unstoppable Demand Ahead

But this is not a gold mining company in the traditional sense…

DRDGOLD is a South African gold producer and a world leader in the recovery of gold and precious metals from the retreatment of surface tailings.

The company has two tailings facilities in South Africa – the Ergo Mining Operations and Far West Gold Recoveries. And the company is in the process of determining the economic viability of copper recovery from Copper 360’s tailing dams. DRDGOLD should have a decision by the end of 2024.

Let me explain a bit more about tailings… tailings are the material left over after processing ore to recover the contained metals. The tailings have traditionally been dumped or piled near the mining site.

In order to get the gold out of the ground, tons and tons of rock and dirt have to be removed. When a mine is complete, there is often a mountain of tailings.

Much of the 150-year mining process in South Africa has focused on extracting the highest-grade gold and ore.

The leftover material – the tailings – contains lower-grade gold and other precious metals.

In past decades, it wasn’t economically feasible to extract the remaining minerals from these tailings…

But now, with precious metal prices soaring and the cost of finding and developing new mines escalating, the huge stockpiles of tailings are being revisited.

Advances in technology in the tailings process, combined with higher gold and precious metal prices, have made the tailings business not just feasible… but highly profitable!

And DRDGOLD is sitting in the catbird seat in the tailings industry…

Lower Costs and Higher Profits

Most gold mining companies first have to find the gold. This can cost them millions of dollars, just on exploration.

Then, even after they’ve found a gold reserve, they have to spend a huge sum to get the stuff out of the ground.

Traditional gold mining companies are interested only in the high-grade gold reserves, and they don’t have the proper equipment needed to extract the lower-grade gold.

That’s where DRDGOLD comes in.

It extracts millions of ounces of gold from these tailings using its propriety nanoextraction technology.

And that’s the beauty of it! It doesn’t have to go in and dig. It just takes the old tailings and starts pulling out the gold.

It’s FAR easier and cheaper than traditional mining.

It can cost more than $1 billion to get a single gold mine up and running! DRDGOLD is able to bypass that whole time-consuming and expensive process.

That’s why the future looks dramatically profitable for this tailings processor…

Here are the key highlights from the company’s operational update for its fiscal 2024, ending June 30, 2024, when compared with its fiscal 2023 results…

• Gross profit increased by 14% to 1.8 billion rand.
• Revenue climbed 13.5% to 6.2 billion rand. That was due to primarily an increase in production.
• All-in sustaining costs per kilogram decreased 13%.
• Cash and equivalents are .5 billion rand. And the company is debt-free!

DRDGOLD also reports an 17.7% five-year compounded annual growth rate (CAGR).

The beauty of DRDGOLD’s business is that surface tailings operations are substantially automated with minimal labor and fixed cost requirements.

DRDGOLD’s total costs are about $1,528 per ounce of gold retrieved.

And with gold trading at more than $2,500 an ounce… this is a very profitable business.

So as gold prices rise – as I fully expect in the months and years ahead – DRDGOLD’s profits will skyrocket.

The company has the facilities and technological know-how to fine-grind gold-bearing tailings to achieve highly profitable recovery.

The level of efficiency DRDGOLD has achieved is well beyond the capabilities of typical mining processes.

In addition, increasing commodity prices across the board have made it feasible to extract not only the remaining gold in these tailings but also uranium, nickel, copper and other metals.

That’s why this play is different from any gold trade you’ve likely made before…

There’s no shortage of available gold and precious metals supplies for DRDGOLD to tap into.

And here’s another thing working in the company’s favor… Its gold production is not hedged. Its gold is sold at current market prices. The price of gold will be heading higher.

Last but not least, the icing on the cake… DRDGOLD pays a healthy dividend. The current yield is 2.6%. This current dividend rate should be very attractive to investors looking for extra income on their investment.

It’s All Coming Together

DRDGOLD is a low-risk but very high-reward way to play the resurgent interest in gold and the higher prices ahead.

This stock is currently trading for less than $8, but it’s not going to stay at that level for very long.

There is little doubt in my mind that this will be THE premier gold stock of the coming years. No company is better positioned to tap into above-ground gold deposits.

So if you are looking for a way to beat inflation… capture massive capital gains… and collect hefty dividend checks in the meantime, this is the company for you.

Action to Take: Buy DRDGOLD (NYSE: DRD) at market. And use our customary 25% trailing stop to protect your principal and your profits.