There are plenty of investment opportunities in commodity companies, particularly those operating in or focusing on fast-growing emerging markets, says Norway’s SKAGEN Funds.

Despite the volatility seen in commodity markets, the Scandinavian fund manager recommends long-term investments in firms with low debt to equity that have the resilience to weather major shifts in prices.

Some investors are less upbeat on the outlook for commodities because of slower economic growth on a global scale in general and in China in particular. SKAGEN argues that the fairly bleak outlook has created attractive valuations in the market for high-quality companies.

“We see excellent opportunities for iron ore as mining companies are cheap due to concerns about activities in China and the price of the commodity, a concern that we do not believe is justified,” says Chris-Tommy Simonsen, portfolio manager of SKAGEN Global. “With limited investment in the sector since 2008 there will be a capacity shortfall which will support prices and make this a worthwhile long term investment.”

“Investors will benefit from selecting companies in less cyclically sensitive sectors and particularly those invested in emerging markets,” says Ross Porter, portfolio manager of SKAGEN Kon-Tiki. “The power shortage in South Africa means they are looking to build coal fired power stations and so well established and low priced companies in this area would be strong investments for a longer term outlook”.

SKAGEN had £11.8 billion ($19 billion) in assets under management at the end of March.