Ways to profit in this chaotic market

After the central banks around the world added cash into their respective markets last week, investors now can expect liquidity in the market. Of course, one needs to distinguish between liquidity and confidence. Although the two often goes hand in hand, confidence is what's keeping this market worried right now. I expect the volatility to continue and the market to remain tricky for most investors.

For safer investments, investors should look into natural resource stocks as well as basic materials. With Asia and Eastern Europe driving the growth globally, experts continue to expect a huge demand in these materials, thus driving up the prices. CMC for example, are benefiting from the basic law of supply and demand. Their stock price reflects their strong earnings, despite the recent shakedown of the stock market.

ConocoPhillips, the nation's third-largest oil company, authorized a $15 billion buyback program through 2008 that includes $2 billion left over from the $4 billion plan implemented in February.
Shareholders may cheer the buyback because it demonstrates management's commitment to return more cash to shareholders. It's also comforting to know that it can afford it. After looking at the company's free cash flow, asset sales and compensation from its Venezuelan production, a buyback of this size is easily within its means.

The Houston oil giant reported first quarter net income of $3.5 billion or $2.12 a share and revenue of $41.3 billion.

Bernstein Research reiterated an outperform rating stressing that the buyback program should boost shareholder value. Secondly, and equally important, with a buyback of this size, the directors are basically telling the shareholders they will not sell the company, at least not in the near term.

"ConocoPhillips has constantly lived under a dark acquisition cloud since the Burlington transaction," Bernstein says, but now shareholders should be relieved from that fear -- at least for the next 18 months. Bernstein raised its price target to $95 from $88.
Investing legend Warren Buffett also is a fan. In fact, ConocoPhillips currently accounts for 2.1% of his portfolio.

More on natural resource plays: As I anticipated in my forecast, XTO Energy produced profits for pleased shareholders this quarter. The company beat its own production guidance, with gas and liquids output up 12% over the prior year. Along with strong pricing, particularly for natural gas, this output growth led to a 35% rise in adjusted earnings. This figure backs out one-time items such as last year's large gain on a distribution from Hugoton Royalty Trust, HGT, a high-yielding company spin-off.

Part of the reason for the torrid production growth was the backlog in the Barnett Shale. Some infrastructure projects were delayed within this prolific unconventional gas play, which prevented a lot of wells from being completed. Completion is the last stage before a well can start pumping out the hydrocarbons. Once the infrastructure came online, so did a whole lot of wells. Barnett's output rose a massive 24% sequentially, a gain that's unlikely to repeat itself.

Lest you be concerned about XTO's exposure to recently weakening natural gas prices, there's actually a large hedging program in effect here. Hedging, in this case, means that the company caps its exposure to commodity price fluctuations, both to the upside and the downside. Management is comfortable with hedging one-half to two-thirds of its production.

This program doesn't just limit risk. It also "keeps an orderly shop," allowing the company to go about doing what it does best -- increasing production with minimal expense -- without having to worry too much about timing that level of production to the commodity cycle. This hedging program could certainly hold XTO's shares back in the event of a sharp rise in the natural gas price,

Following the same thought, buying into foreign ETFs trailing indexes would be a good investment as well. There are several ETFs that tracks stock markets of emerging markets, that investors should take a look at, here's a few: Taiwan, India, Malaysia, and Africa.