Which ASX commodities (and stocks) provide the best bang for your buck?

Broadly speaking, investing in commodities is a “thematic trade” – which refers to investments that target ideas, personal values, or trends that don't fit into more rigid sector or industry classifications.

Investor sentiment tends to swing between different themes – we’ve seen this in uranium more recently, its price more than doubling in the 12 months to January. And before that, the lithium price rose six-fold in the two years to last November – before reversing those gains in the space of a year.

I recently sat down with Mark Gardner, CEO of MPC Markets, to discuss his views on commodities. He revealed his preferred commodity currently, also discussing a few of his favourite companies and why they tick his boxes.

Gold: Is it really a safe haven?

Gold prices surged to a record close of US$2,114 per ounce earlier this month, driven by factors including an easing US dollar, rising expectations of a US rate cut, and softer manufacturing data. This sparked the interest of local investors, most ASX-listed gold producers up more than 10% in two days, as noted by my colleague Kerry Sun recently.

Gardner focuses a sizeable chunk of his portfolio on the commodities trade more broadly – but the yellow metal isn’t part of it.

He accepts that the reason many people buy physical gold – as a safe haven asset that can hedge against inflation – but believes it is no longer the best representation.

“I think it's crypto for old people…the nicer way I usually put it is that crypto is digital gold,” Gardner says.

“During the last seven phases of rising inflation, gold has not been an inflation hedge.”

At some stage, gold’s store of value is going to be very valid, with gold a potentially good investment option over the next 10 years.

But coming back to his cryptocurrency reference, he believes gold is under threat over the longer-term, as the digital currency slowly builds more credibility as a legitimate asset class.

“The fiat currency system is undermined by central banks just printing money to get themselves out of trouble, whenever the system breaks,” Gardner says.

“Bitcoin is going to take too much money out of gold because you don't need to go and set up a gold mine, digital currency is more transportable and more easily secured.”

Copper: The challenge for ASX investors

Like gold, copper prices have also been on a tear recently, hitting a 12-month high last week. It’s hard to ignore the theme, given copper’s huge role in electrification and renewables, with around 5 tonnes of the red metal needed to build a single wind turbine.

The problem for Australian-focused investors is the lack of locally listed copper miners. At the larger end of the market, there’s only BHP Group (ASX: BHP), which acquired Oz Minerals in mid-2023, and Sandfire Resources (ASX: SFR).

Gardner says Sandfire has benefited, as the sole ASX-listed pure-play producer’, though he isn’t much of a fan of the stock.

“They’ve got a massive mine coming online, but management is traditionally not great at running projects - and that’s still a couple of years away,” he says.

Lithium: High-cost miners struggle

Australia is the world’s producer of the so-called “battery metal” due to our hard rock spodumene resources. But after climbing more than $81,000 a tonne by the end of 2022, the lithium price remains down around 75% from these levels.

Though the price has rallied back by around 40% since the end of last year, Gardner notes that higher-cost lithium producers still struggle at these levels.

“Anything hard to get at is going to be a waste of time. It's only going to be at surge pricing if there's a supply gap,” he says.

Just last week, lithium miner Liontown (ASX: LTR) secured a $550 million loan deal with major Australian banks and other sources – further boosting its hopes of shipping its first product this year.

This essentially secures the firm until this time, explains Gardner. He has been overweight Liontown for the last couple of months, during which time the stock has rallied around 50%.

Another company Gardner likes in the space is Winsome Resources (ASX: WR1), a Perth-based lithium miner whose flagship project, Adina, is in Quebec, Canada. He believes the stock is one worth considering because of its “easy setup” and relatively simple mining operation.

Uranium: The appeal of nuclear power

Asked to name his preferred commodity, Gardner regards uranium as the clear winner. He believes nuclear power will be the 50-year stop-gap solution that fills the void for reliable base load electricity until storage technology for solar and wind improves.

“The thing we like about uranium is that the economy can go to hell in a handbasket, but people will still need power,” he says.

“Nuclear is the only way to come anywhere near hitting the targets [of the Paris climate accord].”

In terms of local plays, none of the Australian-listed uranium miners have shipped any resource yet. Boss Energy (ASX: BOE) should be the first, with the market expecting the firm to deliver its first uranium within the next fortnight.

Paladin Energy’s (ASX: PDN) flagship Langer Heinrich uranium mine in Namibia is expected to produce its first uranium by June this year.

Another obvious consideration is BHP Group (ASX: BHP), which owns the world’s largest discovered uranium deposits, Olympic Dam in South Australia – despite being known primarily for iron ore and other resources.

“They're a sneaky uranium play, but they had a trigger about five years ago if the uranium price got back above US$70 and it's now around US$110. So, it'll be interesting to see what they do,” Gardner says.

Alligator Energy (ASX: AGE) is another uranium miner that remains on his watchlist, with the $220 million market cap explorer having seen its share price rise from 5 cents to 8 cents recently. “Though we only dip our toe into that when it's a frenzy sort of bull run on uranium,” Gardner says.

Other ways to invest

Several exchange-traded funds provide Australian investors with exposure to the global uranium theme, these vehicles also form a part of MPC Markets’ strategy.

As Gardner explains, he tends to opt for single-stock exposure initially. If these stocks run well, they’ll trim or drop the position and reinvest in an ETF to get diversified exposure. For retail investors, he names Betashares Global Uranium (ASX: URNM) as his preferred ETF pick.