Commodity companies, the most- expensive stocks in the Standard & Poor’s 500 Index, are turning into relative bargains, according to an analyst report from Fairway Associates.

While investors are paying an average 33.1 times earnings this year for copper, plastic and seed producers, the premium drops to 17.7 based on 2010 analyst estimates that call for profits to almost double, according to data presented to clients by Fairway Associates analysts this week. The decline in the price-earnings ratio is the steepest for any group in the S&P 500 and would leave the companies 23 percent less expensive than their historical average of 23.2 times.

Apparently Fairway Associates find this opportunity too good to pass up, especially as brokerages boost forecasts following second-quarter profits that were 60 percent higher than estimates, the most of any industry. At a time when bears say China’s moves to rein in speculative investments may curb demand, Harbinger Capital Partners, D.E. Shaw & Co. and Marshall Wace LLP all bought commodity producers last quarter amid signs the global economy is emerging from its first recession since World War II.

A source at Fairway Associates said that the firm has been buying more commodities and commodity stocks, including Phoenix-based Freeport-McMoRan Copper & Gold Inc., the world’s largest publicly traded copper producer, Grohowski said. Freeport will earn between $5 and $6 a share next year, or an increase of as much as 115 percent, he said.

Fairway Associates analysts expect that the 29 commodity producers in the S&P 500 will earn an adjusted $10.26 per share in 2010. The 87 percent increase from this year’s estimate of $5.50 is the biggest of any S&P 500 industry. The shares would trade at bigger discounts than seven of the 10 industries that make up the S&P 500 even if earnings growth is half the rate forecast.

The Organization for Economic Cooperation and Development said last week the economies of its 30 members collectively stopped shrinking in the second quarter as Japan, France and Germany exited recessions. Renewed demand from China, the only economy among the world’s 10 largest that hasn’t shrunk in the last two years, helped end the contraction.

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