The manager of this natural resources fund is looking at commodities other than crude now. By Andrew Tanzer, Senior Associate Editor April 19, 2007 Let's say you run a natural resources fund and you turn rather bearish on oil, one of your key sectors. What do you do? That's the predicament Charles Ober, manager of T. Rowe Price New Era (symbol PRNEX), faces. First, here's the story on Ober and his fund, which he's steered since March 1997. New Era has returned a handsome 14% annualized over the past ten years through April 18, beating Standard & Poors 500-stock index by an average of six percentage points per year. Ober has followed resources and energy stocks since 1980, so he's seen a few commodity cycles in his time. Actually, Ober is quite bullish on oil over the long haul. It's just that over the next 12 to 18 months he thinks oil prices will be fairly tame, ranging from $55 to $65 a barrel (oil closed at $63.13 a barrel on April 18). There's a bulge of new non-OPEC production coming on stream during this window that, Ober figures, will hold a lid on oil prices. After that, the OPEC oligopoly should be back in the saddle. In the meantime Ober, who tends to hold stocks for five years on average, is looking at other themes for his portfolio. He thinks coal is one long-term solution to the energy problem, so he holds Peabody Energy (BTU) and Arch Coal (ACI), along with power generators such as Foster Wheeler (FWLT) and Burlington Northern Santa Fe (BNI), a railroad operator that transports coal. He likes agricultural commodities, not so much for ethanol as for demand for soybeans, corn and feed grains from developing nations such as China. So he holds Potash Corp. of Saskatchewan (POT), the leading supplier of high-quality potash, a key ingredient in fertilizer; and he has a position in Deere (DE), the farm-equipment giant. Prices of metals and mining are no longer surging, so Ober's favoring miners, such as BHP (BHP), Rio Tinto (RTP) and CVRD, with low-cost, long-lived reserves. He also holds Caterpillar, a big manufacturer of mining equipment and machinery. Of course, Ober isn't avoiding oil and gas altogether. But he's being more selective. "It's not a rising tide any more," he says. He holds oil-services outfits such as Schlumberger (SLB) and Baker Hughes(BHI) for their productivity-enhancing technologies and ability to sell to oil patches around the globe. He likes oil producers, including Murphy Oil (MUR) and Canadian Natural Resources (CNQ), that are capable of boosting production. And he's fond of rich oil companies, such as ExxonMobil (XOM) that generate excess cash that can be returned to shareholders. If this is indeed a long cycle of strong demand for energy and other natural resources, stocks of the sort found in T. Rowe Price New Era should perform well. Moreover, Ober suggests another reason for considering a commodities fund: as a hedge against inflation and weakness in the U.S. dollar, the currency in which most globally traded commodities are denominated.