Research Report ►(comments)

Commodity prices change when there are unexpected changes to supply and demand of the target commodity. WikiWealth tries to predict these unexpected changes by examining the companies, which supply and demand the commodity (See Fundamental Commodity Analysis). When demand potential is greater then supply potential, then prices will increase; the opposite is also true. WikiWealth's Main Street Analysis captures - along with user help - the impact of supply and demand changes by analyzing the commodity's importance. In general, the more important the commodity, the faster the price will increase when commodity demand increases. A "Buy" rating from both approaches mean the commodity has high potential to increase in value.

Cocoa Summary

Cocoa Commodity Analysis ► (edit / improve) Cocoa is the seed from which chocolate is made. Commodity: Cocoa is rated a Hold. Cocoa demanders have an average potential to increase in value. Unfortunately, there is not enough information to find the potential for cocoa suppliers. Investor Survey: Cocoa’s long term growth potential is moderately favorable due to high scores on sensitivity to price changes, short supply and substitute products. SWOT Analysis: Strength: Cocoa has many uses, such as a moisturizer in cocoa butter; Weakness: cocoa has fluctuating farming cost that has increased over time. Opportunity to grow: the consumption of cocoa could increase as the world’s population increases; Threats to growth: global warming could hurt cocoa production in the future. Trading Strategy: The commodity analysis hold rating indicates that cocoa should stay the same price over the short term, whereas a moderately favorable investor survey means cocoa should increase in price over the long term.

Investment Impacts (help)

USA Country Analysis ► (edit / improve) The United States (US) has a highly productive, capitalist economy and is the largest and most diverse market in the world. Currency: the US dollar (USD) has the potential to increase in value especially versus the Australian and Canadian dollar because of the significant potential of undervalued companies. Investor Survey: the economic environment is very favorable for long term economic growth due to high scores on economic freedom and economic diversity. Trade: China, Japan, Mexico, and Canada are the top US trading partners, while the leading export and import are electrical machinery and vehicles, respectively. Commodity: The US produces a significant amount of coal and wheat for use at home and as an export. However, the US consumes a larger amount of oil, which contributes to their trade deficit. SWOT Analysis: The leading US strength is its entrepreneurial culture, while the main weakness is high health care cost. Energy independence has the opportunity to propel growth, while the major threat is the housing crisis, which will lower growth. Trading Strategy: An undervalued currency, high investment flow potential and favorable business environment lead to a positive outlook for US investments, which will also benefit from positive international actions.

Materials Industry Analysis ► (edit / improve)

Description: The materials industry includes companies whose sales originate from the mining, acquisition and sale of physical substances for manufacturing-related purposes. Read More.

Profit Analysis: The best way to profit from material stock is to find the most undervalued investments (Wall Street and Main Street buy ratings) during economic recessions. Those investments should be undervalued (see Wall Street on left side), and have high Main Street Common Sense investment ratings (see Main Street on right side). When an economic recovery occurs, material stocks tend to outperform the general stock market, because consumers and businesses must increase their inventories quickly to meet demand for manufactured goods. Consumers and business delayed purchases on items they wanted, but resisted buying during tougher economic times. Eventually, material company investments become overvalued, because profits and stock prices increase past their fair values. During the last stages of an economic business cycle, just before a recession, it is best to sell material stocks, because they are likely to decrease in price the fastest. Expensive (overvalued) stocks with low Main Street Common Sense ratings should be sold at any time to invest in better stocks. Two buys ratings are the best and two sell ratings are the worst possible stock investments.

Inflation Hedge: Changes in commodity prices affect material stocks. When commodity prices are high due to increased demand or lower supply, material stocks increase, because demand for their goods also increases. Inflation occurs when the price of goods and services increases. The price of materials are generally the first inputs into the production of goods, so changes in material prices directly affect the cost of products, which is measured by inflation. Therefore, a good hedge against inflation is to own material stock investments. When inflation increases, so do the profits of material companies, which may have directly contributed to the increase in prices.

Trading Strategy: During economic recessions, consumers tend to cut back on spending to save money. Businesses tend to cut back on investments. Industrial companies make the products bought by consumers and businesses, but to make those products, industrial companies must obtain materials. Less spending on goods decreases material business revenue and eventually decreases stock prices. During economic recoveries, consumers and businesses spend quickly to replace or catch up with quickly increasing demand. Material companies quickly receive orders from industrial companies who need to manufacture new products to meet quickly increasing demand. Higher spending increases material business revenue and eventually increases stock prices. During a longer economic expansion, consumer and business demand increases for material companies, but at a slower pace than during the recovery stage.

¹ WikiWealth only uses the largest 30 companies in each industry for the basis of these financial measures. Each statistic is the market weighted average of the 30 companies.

² Investment potential (margin of safety) is a weighted average of the discounted cash flow (DCF), the enterprise value (EV) market multiple, and the Warren Buffett investment methods.

Major Cocoa Consumers ► Press "Edit / Improve"

USA Country Analysis ► (edit / improve) The United States (US) has a highly productive, capitalist economy and is the largest and most diverse market in the world. Currency: the US dollar (USD) has the potential to increase in value especially versus the Australian and Canadian dollar because of the significant potential of undervalued companies. Investor Survey: the economic environment is very favorable for long term economic growth due to high scores on economic freedom and economic diversity. Trade: China, Japan, Mexico, and Canada are the top US trading partners, while the leading export and import are electrical machinery and vehicles, respectively. Commodity: The US produces a significant amount of coal and wheat for use at home and as an export. However, the US consumes a larger amount of oil, which contributes to their trade deficit. SWOT Analysis: The leading US strength is its entrepreneurial culture, while the main weakness is high health care cost. Energy independence has the opportunity to propel growth, while the major threat is the housing crisis, which will lower growth. Trading Strategy: An undervalued currency, high investment flow potential and favorable business environment lead to a positive outlook for US investments, which will also benefit from positive international actions.

Germany Country Analysis ► (edit / improve) Germany (EUR) is the largest economy in Europe and relies on a strong and sophisticated industrial base to drive their exports. Currency: Germany is part of the Euro economic zone, whose currency has the potential to decrease in value on a global scale per the purchase price parity. Investor Survey: Germany’s economic environment is favorable for long term economic growth due to high scores on economic freedom, economic diversity, and government transparency. Trade: The UK, France, and USA are the top export partners, while the leading export industry is industrial goods. Commodity: Germany imports many commodities to feed its industrial base: crude oil, coal, copper, aluminum, lead, zinc, and natural gas. SWOT Analysis: The leading German strength is their engineering expertise, while the main weakness is their declining birth rate. Trading Strategy: An overvalued currency, moderate investment flow potential and favorable business environment lead to a slightly positive outlook for German investments.

France Country Analysis ► (edit / improve) France (EUR) has a capitalist economy with significant government intervention. Currency: France is part of the Euro economic zone, whose currency has the potential to decrease in value on a global scale per the purchase price parity. Investor Survey: France’s the economic environment is moderate for long term economic growth due to high scores on government transparency, but low scores on economic diversity. Trade: Finland, Belgium, the UK, Germany, and Italy are the top export partners, while a significant import is uranium. Commodity: Uranium powers France’s nuclear energy industry. SWOT Analysis: The leading French strength is their nuclear energy experience, while the main weakness is a declining birth rate. Trading Strategy: An overvalued currency, moderate investment flow potential and moderate business environment lead to a slightly negative outlook for French investments.

UK Country Analysis ► (edit / improve) The UK (GBP) has a highly productive, capitalist economy with a strong financial services industry. Currency: The British Pound is slightly overvalued on a global basis. The purchase price parity indicates that the British Pound should fall in value over time. Investor Survey: The UK’s economic environment is very favorable for long term economic growth due to high scores on economic freedom, government transparency, and economic diversity. Trade: Belgium, India, the EU, Netherlands, and France are the top export partners, while the leading industry is financial services. Commodity: The UK produces a significant amount of natural gas and imports of cocoa for domestic consumption. SWOT Analysis: The leading UK strength is the London Stock Exchange, which aids the financial services industry. The main weaknesses include high consumer and fiscal deficits. Trading Strategy: An overvalued currency, moderate investment flow potential and very favorable business environment leads to a neutral outlook for UK investments.

Russia Country Analysis ► (edit / improve) Russia (RUB) is a resource rich, centralized economy with a large land mass and population. Currency: Russia’s currency is significantly undervalued according to the investment flow analysis, purchase price parity, and interest rate parity. Investor Survey: Russia’s economic environment is very unfavorable. Russia’s economic freedom, government transparency and SWOT analysis scores are very low. Trade: China, and Turkey are Russia’s top export partners, while the leading industry is energy. Commodity: Russia produces a significant amount of natural gas, coal, copper, uranium, palladium, and crude oil. Russia exports many energy products to European Union members. SWOT Analysis: The leading Russian strength is their oil and gas industry, while the main weakness is political risk. Proximity to energy hungry Europe has the opportunity to propel growth, while falling oil prices may lower growth. Trading Strategy: An undervalued currency, high investment flow potential, but unfavorable business environment leads to a neutral outlook for Russian investments.

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