Copper miners have been among the biggest winners so far in 2012 as China has continued to ease monetary policy.
While these moves are impressive, the copper mining ETFs have done just as well. Global X Copper Miners ETF (COPX) and First Trust ISE Copper Index (CU) are both up about 18% year-to-date. Investors who want exposure to copper might do it through an ETF because investing in individual miners is far more risky. One example of this risk is labor strikes. For part of 2011, miners at FCX's majority owned Minera Cerro Verde SA went on strike. The strike had some impact on FCX during 2011. While the strike is now over, the risk for future unexpected events remains.
So let's review where CU and COPX offer advantages and disadvantages for investors.
Assets Under Management
CU: $99.6 million
COPX: $41.7 million
CU is over twice the size of COPX. This is important for investors who are large because it will be easier to move in and out of CU than COPX. However, for retail investors, the size is not a major worry as both of these funds can accommodate buying & selling small to medium orders.
CU has a slightly higher dividend yield than COPX.
Top 10 Holdings
- Antofagasta PLC (ANFGF.PK): 6.06
- First Quantum Minerals Ltd. (FQVLF.PK): 6.04%
- Xstrata PLC (XSRAF.PK): 5.93%
- Rio Tinto PLC ADR : 5.91%
- Southern Copper Corporation : 5.84%
- Freeport-McMoRan Copper & Gold B : 5.71%
- Ivanhoe Mines, Ltd. (IVN): 5.04%
- Inmet Mining Corp (IEMMF.PK): 4.68%
- Kazakhmys PLC: 4.55%
- Quadra Fnx Mining Ltd (QADMF.PK): 4.49%
- Quadra FNX Mining Ltd. : 6.00%
- Lundin Mining Corp (LMC): 5.95%
- Kazakhmys PLC : 5.49%
- Grupo Mexico, S.A.B. de C.V. : 5.37%
- Freeport-McMoRan Copper & Gold B : 5.31%
- Southern Copper Corporation : 5.29%
- Inmet Mining Corporation : 5.18%
- Antofagasta PLC : 4.97%
- HudBay Minerals, Inc. (HBM): 4.92%
- First Quantum Minerals Ltd. : 4.80%
The holdings of both funds are very similar. The difference between the holdings is not significant enough to matter when deciding which ETF is a better play.
The expense ratio of COPX is slightly lower than CU. However, the difference between the two funds is relatively small.
CU and COPX are very similar investment vehicles. For this reason, investors should first see if commissions are the same for the two funds. If a broker allows you to trade one fund for free then that is the better play. If the commission structure is the same than CU is the better pick because the dividend is slightly higher than COPX.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.