Commodity companies, the most- expensive stocks in the Standard & Poor’s 500 Index, are turning into relative bargains. While investors paid an average 33.1 times earnings this year for copper, plastic and seed producers last week, the premium fell to 17.7 based on 2010 analyst estimates that call for profits to almost double, data compiled by Bloomberg show. The decline in the price-earnings ratio is the steepest for any group in the S&P 500 and would leave the companies 23 percent less expensive than their historical average of 23.2 times.
To some of the world’s biggest hedge funds, that opportunity is too good to pass up, especially as brokerages boost forecasts following second-quarter profits that were 60 percent higher than estimates, the most of any industry. At a time when bears say China’s moves to rein in speculative investments may curb demand, Harbinger Capital Partners, D.E. Shaw & Co. and Marshall Wace LLP all bought commodity producers last quarter amid signs the global economy is emerging from its first recession since World War II. (more)
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