Even as the Trump-fueled rally goes from strength to strength, commodities are well placed to hold on to their highest gains since 2010. Leading the gainers for the category are industrials, which have staged a complete turnaround after the losses they suffered last year. For instance, some of 2015’s largest losers, iron, zinc and natural gas have scripted strong performances this year.

Moreover, the sector is likely to have a strong 2017 as well, riding on a better supply demand equation, congenial government policy and higher investment demand. With the New Year around the corner, this may be a good time to pick up select commodities stocks.

2015’s Losers Stage Strong Rebound

In conclusive evidence of the commodities recovery, The S&P Goldman Sachs Commodity Index is up nearly 25% year to date. The best yearly gains in seven years have come on the back of some of last year’s biggest losers. These commodities have regained lost ground this year and moved even higher. Several market watchers and experts believe that this is a fundamental recovery.

Additionally, it is widely believed that demand-supply equilibrium will be reached by the commodities sector only at the end of next year. A majority of commodities had been trading below their marginal cost of production for a long period. This is has caused producers across the world to reduce output levels. Meanwhile, stable long-term global demand is also contributing toward the rebound in commodity prices.

Industrials at the Forefront of Gains

Leading the commodities rally this year have been industrial stocks. Prices of iron ore had nearly doubled as of Dec 14, recovering in spectacular fashion from last year’s decline of 46%. Copper has gained around 22% year-to-date after losing 24% last year. Gold and silver have gained 8% and a remarkable 22% respectively, after losing 10.5% and nearly 12% last year.

Iron ore has led the pack and its fortunes are intrinsically tied to those of China’s steelmakers. China has produced around 810 million metric tons of steel this year, outpacing predictions that it would produce less than 800 million tons. Meanwhile, gold may soon register its first yearly gains since 2012. On the other hand, silver will notch up its highest gain in percentage terms in six years.

Our Choices

Widely believed to be a good proxy for investor attractiveness of commodities, oil prices have rebounded after two years in the wilderness. Meanwhile, there are signs that China’s economy is stabilizing. President-elect Trump’s promises of fiscal stimulus should fuel growth and inflation, lending further impetus to the commodities rally.

Adding commodities stocks to your portfolios makes for a smart choice at this point. However, picking winning stocks may be difficult.

This is where our VGM score comes in. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM score.

We have narrowed down our search to the following stocks, each of which has a Zacks Rank #1 (Strong Buy) and a good VGM score. 

Top Commodities Picks Vs Sector Performance (YTD)

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Silver Standard Resources Inc. (SSRI - Free Report) is focused on acquiring, exploring and developing silver-dominant projects.

Silver Standard Resources has a VGM Score of A. The company has expected earnings growth of more than 100% for the current year. It has a P/E (F1) of 9.26, which is lower than the industry average of 25.84. The stock has returned 57.3% year-to-date, outperforming the Zacks Basic Materials sector, which has returned 23.2% over the same period.

BHP Billiton plc (BBL - Free Report) is engaged in the production of minerals which includes iron ore, metallurgical coal, copper and uranium as well as oil, gas and energy coal.

BHP Billiton has a VGM Score of A. The company has expected earnings growth of more than 100% for the current year. Its earnings estimate for the current year has improved by 34.8% over the last 30 days. The stock has returned 42.7% year-to-date, outperforming the Zacks Basic Materials sector, which has returned 23.2% over the same period.

Rio Tinto plc (RIO - Free Report) engages in exploration, mining and processing of mineral resources.

Rio Tinto has a VGM Score of B. Its earnings estimate for the current year has improved by 7.5% over the last 30 days. The stock has returned 33.1% year-to-date, outperforming the Zacks Basic Materials sector, which has returned 23.2% over the same period.

Teck Resources Ltd (TECK - Free Report) is a diversified resource company committed to responsible mining and mineral development.

Teck Resources has a VGM Score of B. The company has expected earnings growth of more than 100% for the current year. Its earnings estimate for the current year has improved by 49.7% over the last 30 days. The stock has returned 429.5% year-to-date, outperforming the Zacks Basic Materials sector, which has returned 23.2% over the same period.