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Our goal in this profile is to help investors wade through the many competing ETF offerings available. Using our long experience as an ETF publication, and nearly 40 years in the investment business, we can help select those ETFs that matter and may or may not be repetitive. The result is a more manageable list of issues from which to view and make selections.

Commodity-based companies and associated ETFs are critically important as a gauge of economic health and demand, inflation and are also critical additions to investment portfolios. Underlying commodity prices can be affected by many factors including the level of the U.S. dollar which can depress prices when strong. With inflation pressures waxing and waning many believe it’s important to have exposure to commodity oriented stocks and ETFs.

There are many ETF choices from which to choose. We’ve cobbled some good choices together and where repetitive choices exist we’ve paired some together with similarities just too hard to ignore.

We rank the top 10 ETF by our proprietary stars system as outlined below.

Strong established linked index

Excellent consistent performance and index tracking

Low fee structure

Strong portfolio suitability

Excellent liquidity

Established linked index even if “enhanced”

Good performance or more volatile if “enhanced” index

Average to higher fee structure

Good portfolio suitability or more active management if “enhanced” index

Decent liquidity

Enhanced or seasoned index

Less consistent performance and more volatile

Fees higher than average

Portfolio suitability would need more active trading

Average to below average liquidity

Index is new

Issue is new and needs seasoning

Fees are high

Portfolio suitability also needs seasoning

Liquidity below average

We feature a technical view of conditions from monthly chart views. Simplistically, we recommend longer-term investors stay on the right side of the 12 month simple moving average. When prices are above the moving average, stay long, and when below remain in cash or short.

Some more interested in a fundamental approach may not care so much about technical issues, preferring instead to buy when prices are perceived as low and sell for other reasons when high; but, this is not our approach.

For traders and investors wishing to hedge, leveraged and inverse issues are available to utilize from ProShares and Direxion and where available these are noted.

#1: SPDR Energy Select Sector ETF (NYSEARCA:XLE)

XLE follows the Energy Select Sector Index which includes companies in oil, gas, consumable fuels and energy equipment and services. The fund was launched in December 1998. The expense ratio is .20%. AUM is equal to $7.3 billion and average daily trading volume is 22M shares. As of mid-December 2011 the annual dividend yield was 1.57% and YTD return was 3.97%.

Both ProShares and Direxion shares have inverse and leveraged products available.

XLE Top Ten Holdings and Weightings

Data as of December, 2011

  1. Exxon Mobil Corporation (NYSE:XOM): 17.96%
  2. Chevron Corp (NYSE:CVX): 14.31%
  3. Schlumberger NV (NYSE:SLB): 7.22%
  4. ConocoPhillips (NYSE:COP): 4.92%
  5. Occidental Petroleum Corporation (NYSE:OXY): 4.77%
  6. Anadarko Petroleum Corp (NYSE:APC): 3.21%
  7. Apache Corporation (NYSE:APA): 3.00%
  8. Halliburton Company (NYSE:HAL): 2.76%
  9. National Oilwell Varco, Inc. (NYSE:NOV): 2.62%
  10. EOG Resources (NYSE:EOG): 2.31%

#2: iShares S&P Natural Resources ETF (NYSEARCA:IGE)

IGE follows the S&P North American Natural Resources Sector Index which measures the performance of U.S.-traded natural resource related stocks. The fund was launched in October 2001. The expense ratio is .48%. AUM equal $1.8 billion and average daily trading volume is 357K shares. As of mid-December 2011 the annual dividend yield was 1.78% and YTD return was -4.92%.

IGE Top Ten Holdings and Weightings

Data as of December, 2011

  1. Chevron Corp (CVX): 8.27%
  2. Exxon Mobil Corporation (XOM): 8.00%
  3. Schlumberger NV (SLB): 5.52%
  4. ConocoPhillips (COP): 5.31%
  5. Occidental Petroleum Corporation (OXY): 4.36%
  6. Barrick Gold Corporation (NYSE:ABX): 2.87%
  7. Suncor Energy Inc (NYSE:SU): 2.56%
  8. Goldcorp, Inc. (NYSE:GG): 2.35%
  9. Canadian Natural Resources Ltd (NYSE:CNQ): 2.22%
  10. Anadarko Petroleum Corp (APC): 2.20%

#3: Van Eck Market Vectors Gold Miners ETF (NYSEARCA:GDX)

GDX follows the NYSE Arca Gold Miners Index which provides exposure to publicly traded companies worldwide involved primarily in the mining for gold, representing a diversified blend of small-, mid- and large- capitalization stocks. The fund was launched in May 2006. The expense ratio is .53%. AUM equal $7.8 billion and average daily trading volume is 14 million shares. As of mid-December 2011 the annual dividend was .69% and YTD return was -5.92%.

Newer ETFs in the sector include GDXJ (Van Eck Junior Miners ETF) and SIL (Global X Silver Miners ETF). Both are interesting but need just a little more seasoning.

GDX Top Ten Holdings and Weightings

Data as of December, 2011

  1. Barrick Gold Corporation (ABX): 16.35%
  2. Goldcorp, Inc. (GG): 13.21%
  3. Newmont Mining Corporation (NYSE:NEM): 10.76%
  4. AngloGold Ashanti Limited ADR (NYSE:AU): 5.79%
  5. Kinross Gold Corporation (NYSE:KGC): 5.41%
  6. Gold Fields Ltd ADR (NYSE:GFI): 4.95%
  7. Randgold Resources, Ltd. ADR (NASDAQ:GOLD): 4.55%
  8. Yamana Gold, Inc. (NYSE:AUY): 4.50%
  9. Eldorado Gold Corp (NYSE:EGO): 4.48%
  10. Buenaventura Mining Company Inc. ADR (NYSE:BVN): 4.46%

#4: First Trust Natural Gas Sector ETF (NYSEARCA:FCG)

FCG follows the ISE-Revere Natural Gas Index which is an equal-weighted index comprised of exchange-listed companies that derive a substantial portion of their revenues from the exploration and production of natural gas. The fund was launched in May 2007. The expense ratio is .60%. AUM equal $390 million and average daily trading volume is 279K shares. As of mid-December 2011 the annual dividend yield is .53% and YTD return was -1.70%.

FCG Top Ten Holdings and Weightings

Data as of December, 2011

  1. Southwestern Energy Company (NYSE:SWN): 3.75%
  2. Statoil ASA ADR (NYSE:STO): 3.66%
  3. Anadarko Petroleum Corp (APC): 3.60%
  4. SM Energy Co (NYSE:SM): 3.59%
  5. SandRidge Energy Inc (NYSE:SD): 3.57%
  6. Royal Dutch Shell PLC ADR (NYSE:RDS.A): 3.56%
  7. Cabot Oil & Gas Corporation A (NYSE:COG): 3.54%
  8. Murphy Oil Corporation (NYSE:MUR): 3.53%
  9. Exxon Mobil Corporation (XOM): 3.52%
  10. Range Resources Corporation (NYSE:RRC): 3.51%

#5: SDPR S&P Metals & Mining ETF (NYSEARCA:XME)

XME follows the S&P Metals and Mining Select Industry Index which includes the metals and mining sub-sector of the S&P TMI index. The fund was launched in June 2006. The expense ratio is .35%. AUM equal $836 million and average daily trading volume is 3.6M shares. As of mid-December 2011 the annual dividend yield was yield was .82% and YTD return -22%.

An alternative choice given similar trending characteristics is SLX (Van Eck Steel ETF) which follows the NYSE Arca Steel Index featuring companies primarily involved in the production, manufacturing, fabrication and extraction of iron ore. The fund was launched in October 2006. The expense ratio is .55%. AUM equal $157 million and average daily trading volume is 130K shares. As of mid-December 2011the annual dividend yield was 2.00% and YTD return was -30.00%.

XME Top Ten Holdings and Weightings

Data as of December, 2011

  1. Commercial Metals Company (NYSE:CMC): 3.56%
  2. Reliance Steel and Aluminum (NYSE:RS): 3.51%
  3. Worthington Industries (NYSE:WOR): 3.37%
  4. RTI International Metals, Inc. (NYSE:RTI): 3.30%
  5. Nucor Corp. (NYSE:NUE): 3.27%
  6. Steel Dynamics Inc (NASDAQ:STLD): 3.21%
  7. Schnitzer Steel Industries, Inc. A (NASDAQ:SCHN): 3.15%
  8. Carpenter Technology Corporation (NYSE:CRS): 3.11%
  9. Allegheny Technologies Inc (NYSE:ATI): 3.09%
  10. Compass Minerals International, Inc. (NYSE:CMP): 2.96%

#6: Van Eck Market Vectors Agribusiness ETF (NYSEARCA:MOO)

MOO follows the DAXglobal Agribusiness Index which consists of companies that derive at least 50% of their revenues from the business of agriculture. The fund was launched in August 2007. The expense ratio is .56%. AUM (Assets under Management) equal $5.8 billion with average daily trading volume of 1.5M shares. As of mid-December 2011 the annual dividend yield was 1.70% and YTD return -10.29%.

MOO Top Ten Holdings

Data as of December, 2011

  1. Monsanto Company (NYSE:MON): 8.38%
  2. Deere & Co (NYSE:DE): 7.09%
  3. Wilmar International Ltd (F34): 6.68%
  4. Potash Corporation of Saskatchewan, Inc. (NYSE:POT): 6.58%
  5. Syngenta AG (OTCQB:SYENF): 6.35%
  6. BRF - Brasil Foods SA ADR (NYSE:BRFS): 4.95%
  7. Archer-Daniels Midland Company (NYSE:ADM): 4.79%
  8. Agrium Inc (NYSE:AGU): 4.20%
  9. Mosaic Co (NYSE:MOS): 4.17%
  10. Yara International ASA (YAR): 3.87%

#7: Van Eck Market Vectors Hard Assets Producers ETF (HAP)

HAP follows the Van Eck Hard Assets Producers Index which consists of companies engaged in the discovery, production and distribution of hard assets and related products. The fund was launched in August 2008. The expense ratio is .59%. AUM equal $187 million and average daily trading volume is 73K shares. As of mid-December 2011 the annual dividend was .88% and YTD performance was -10.00%.

HAP Top Ten Holdings and Weightings

Data as of December, 2011

  1. Exxon Mobil Corporation (XOM): 5.86%
  2. Potash Corporation of Saskatchewan, Inc. (POT): 4.15%
  3. Monsanto Company (MON): 4.05%
  4. Chevron Corp (CVX): 3.24%
  5. Deere & Co (DE): 3.24%
  6. Syngenta AG (OTCQB:SYENF): 2.94%
  7. BP PLC (BP.): 2.13%
  8. BHP Billiton Ltd (OTCQB:BHPLF): 2.11%
  9. Archer-Daniels Midland Company (ADM): 1.99%
  10. Total SA (FP): 1.87%

#8: iShares Global Timber & Forestry ETF (NASDAQ:WOOD)

WOOD follows the S&P Global Timber and Forestry Index which includes companies primarily engaged in ownership, management or upstream supply chain of forests and timberlands. The fund was launched in June 2008. The expense ratio is .48%. AUM equal $136 million and average daily trading volume is 55K shares. As of mid-December 2011 the annual dividend yield was 1.60%% and YTD return -18.80%.

WOOD Top Ten Holdings and Weightings

Data as of December, 2011

  1. Rayonier, Inc. (NYSE:RYN): 8.10%
  2. Weyerhaeuser Co (NYSE:WY): 8.06%
  3. Plum Creek Timber Co Inc (NYSE:PCL): 7.89%
  4. West Fraser Timber (NYSE:WFT): 5.01%
  5. Svenska Cellulosa (SCA B): 4.99%
  6. Potlatch Corp. (NASDAQ:PCH): 4.81%
  7. MeadWestvaco Corporation (NYSE:MWV): 4.64%
  8. International Paper Co. (NYSE:IP): 4.49%
  9. Stora Enso Corporation (STERV): 4.46%
  10. UPM-Kymmene Corporation (OTC:UPMKF): 4.29%

#9: Guggenheim Timber ETF (NYSEARCA:CUT)

CUT which follows the Beacon Global Timber Index consisting of companies that own or lease forested land and harvest timber for commercial use of wood-based products including paper, packaging, lumber and pulp. The fund was launched in November 2009. The expense ratio is .65%. AUM equal $133 million and average daily trading volume is 140K shares. As of early mid-December 2011 the annual dividend yield was 3.60% and YTD return -20%.

CUT Top Ten Holdings and Weightings

Data as of December, 2011

  1. Svenska Cellulosa AB (SCA B): 5.47%
  2. MeadWestvaco Corporation (MWV): 5.13%
  3. Holmen AB (HOLM B): 4.88%
  4. International Paper Co. (IP): 4.86%
  5. Plum Creek Timber Co Inc (PCL): 4.74%
  6. Stora Enso Oyj (STERV): 4.74%
  7. UPM-Kymmene Oyj (OTC:UPMKF): 4.72%
  8. Rayonier, Inc. (RYN): 4.67%
  9. Greif, Inc. A (NYSE:GEF): 4.59%
  10. West Fraser Timber (WFT): 4.56%

#10: First Trust Global Copper ETF (NASDAQ:CU)

CU follows the ISE Global Copper Index which is a linear weighted index following public companies in the copper mining industry based on analysis of revenue derived from the sale of copper. The fund was launched in March 2010. The expense ratio is .70%. AUM equal $58 million and average daily trading volume is 57K shares. As of early mid-December 2011 the annual dividend was yield was 1.00% and YTD return -26.00%.

CU Top Ten Holdings and Weightings

Data as of December, 2011

  1. Xstrata PLC (XTA): 6.46%
  2. Southern Copper Corporation (NYSE:SCCO): 6.04%
  3. Ivanhoe Mines Ltd (IVN): 5.88%
  4. Freeport-McMoRan Copper & Gold B (NYSE:FCX): 5.83%
  5. Rio Tinto PLC ADR (NYSE:RIO): 5.83%
  6. Antofagasta PLC (ANTO): 5.52%
  7. KGHM Polska Miedz (KGH): 5.48%
  8. Katanga Mining Ltd (KAT): 4.85%
  9. First Quantum Minerals Ltd. (NYSEARCA:FM): 4.60%
  10. Inmet Mining Corporation (OTC:IEMMF): 4.46%

This sector overall responds to perceived and real economic conditions. Should investors sense an economic slowdown demand for base commodities will decline and so too will associated stocks. Conversely should investors believe an economic expansion is underway then products and stocks should rally. Uniquely, the level of the U.S. dollar is also another important determinant as to price action given commodities overall are priced in dollars. A strong dollar in the current environment should mean a decline in commodity prices and vice versa.

It’s also important to remember that ETF sponsors have their own competitive business interests when issuing products which may not necessarily align with your investment needs. New ETFs from highly regarded and substantial new providers are also being issued. These may include Charles Schwab’s ETFs and Scottrade’s Focus Shares which both are issuing new ETFs with low expense ratios and commission free trading at their respective firms. These may also become popular as they become seasoned.

You may address any feedback to: feedback@etfdigest.com.

Disclosure: The ETF Digest has no current positions in the featured ETFs. (Source for data is from ETF sponsors and various ETF data providers.)

Source: Top 10 Commodity Producers ETFs