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Portfolio strategy, ETF investing, long-term horizon
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You have to understand accounting and you have to understand the nuances of accounting. It is the language of business and it’s an imperfect language, but unless you are willing to put in the effort to learn accounting – how to read and interpret financial statements – you really shouldn’t select stocks yourself.” - Warren Buffett

For commodity ETFs, the good news is that you might not need to understand accounting because there is no company’s 10Q for you to read. It is all about fundamental, supply & demand and U.S. dollar.
Below are the top 10 Commodity ETFs (by net assets) I compiled from Yahoo Finance:
Rank
Fund Name
Ticker
1
SPDR Gold Shares
2
iShares Silver Trust
3
United States Natural Gas
4
PowerShares DB Commodity Index Tracking
5
PowerShares DB Agriculture
6
United States Oil
7
iShares COMEX Gold Trust
8
iShares S&P GSCI Commodity-Indexed Trust
9
iPath Dow Jones-AIG Commodity Idx TR ETN
10
iPath S&P GSCI Crude Oil Ttl Ret Idx ETN
To find undervalued commodities, I compared daily price of natural gas (NYSEARCA:UNG) and oil from Jan 13, 1994 through Aug 4, 2009. Data are from US Energy Information Administration (Source). Within these 3,892 trading days, the average Oil : Natural Gas ratio is 8.6 : 1. As you can see from the chart below, today’s ratio ( 18:1 ) is at the historical high.

Either oil is overpriced or natural gas is undervalued. For hedge, you might want to short United States Oil (NYSEARCA:USO) and long United States Natural Gas (UNG). But I don’t think NG price will stay in $3.5 - $4 range for long, even though there are plenty of supply, floats of inventories and lots of economic uncertainty. Below chart shows future price for NYMEX Henry Hub Natural Gas ( source: shttp://futures.tradingcharts.com/marketquotes/index.php3?market=NG_). As you can see, Dec 2009’s price is $5.43.

Pure commodity ETFs might not be a good long-term investment because they typically invest in futures contracts, options and indexes. If you want to invest in commodity related companies ETFs, below are the top 10:
Rank
Fund Name
Ticker
1
Energy Select Sector SPDR
2
Market Vectors Gold Miners ETF
3
Oil Services HOLDRs
4
Market Vectors Agribusiness ETF
5
iShares S&P North Amer Natural Resources
6
PowerShares Water Resources
7
Materials Select Sector SPDR
8
Vanguard Energy ETF
9
iShares S&P Global Energy
10
PowerShares WilderHill Clean Energy
Disclosure: I have long position in UNG.
Source: Not All Commodity ETFs Are Created Equal