Pedal to the Metal
By Stephen Gandel

(MONEY Magazine) – Steve Leuthold, a top market strategist and member of our Ultimate Investment Club (October 2003), has reweighted his portfolio--with tons of metal. In the past three months, Leuthold Weeden Capital Management bought 1,000 tons of lead, nickel, tin and other metals. Prices of metals and other commodities have risen this year as the economic recovery boosts demand, and Leuthold predicts that the price of most basic ores will double over the next four years.

The main driver: China, where factories are becoming as common as rice paddies. Leuthold's biggest stake, 175 tons, is in copper, which is in short supply in China. He's buying the raw material instead of futures or mining stocks, because trading contracts can be costly and he wants to avoid the risk of corporate mismanagement. "You can't get earnings disappointments from a pile of nickel," says Leuthold. But buying actual metal is tough. It took Leuthold, who got his start on Wall Street 40 years ago as a commodities broker, three months to find warehouse space in countries such as Singapore and Sweden.

Smaller investors can't mimic Leuthold. For individuals, he suggests BHP Billiton (BHP), an Australian miner traded on the New York Stock Exchange. "It's the cheapest large diversified metal company," he says. --S.G.