Three Materials ETFs Your Broker Forget To Mention
There is usually something to be said for doing some research on your own and not relying on someone else's specious investment ideas. One of the high points of ETF investing is that because the genre is still relatively new, many good ETFs simply fly under the radar.
Every asset class tracked by ETFs has at least one or two decent ETFs that are overshadowed by bigger, more popular peers, but that doesn't mean there aren't opportunities with less-heralded ETFs.
Believe it or not, the materials sector is a great place to mine for some undiscovered ETF gems. Here's a trio that aren't getting a lot of headlines, but are still producing alpha.
1) IQ Global Resources ETF (NYSE: GRES): Introduced in October 2009, GRES is still dealing with light volume, but has managed to return a sterling 21% in the past year. GRES tracks the IQ Global Resources Index, which uses momentum and valuation factors to identify potential winners in the commodities/materials space, according to IndexIQ's Web site.
GRES is well diversified, with five industries getting double-digit sector weights. Familiar names inlcude Exxon Mobil (NYSE: XOM) and BHP Billiton (NYSE: BHP). Be advised the ETF achieves its livestock exposure through equities like Kraft (NYSE: KFT) and Tyson (NYSE: TSN). Expense ratio: 0.75%
2) SPDR S&P Global Natural Resources ETF (NYSE: GNR): Just seven months old, GNR has managed to return 20% since inception, but despite that and the fact that the SPDR label has lofty status in the ETF world, GNR hasn't gotten a lot of love. At the sector level, GNR isn't as diverse as GRES as three sectors (integrated oil, fertilizer, and mining) account for almost 60% of GNR's weight.
3) PowerShares Dynamic Basic Materials ETF (NYSE: PYZ): PYZ is the best peformer of this trio, delivering returns of more than 26% in the past year, but again, no one has told you about that until now. PYZ is a straight chemicals/materials/mining play, but the ETF does a good job of spreading its allocations across value and growth and mid- and large-cap names.
PYZ is probably in for some rebalancing in the near future as Lubrizol (NYSE: LZ), the ETF's top holding, is being acquired. Other top holdings include Freeport McMoRan (NYSE: FCX) and Dow components Alcoa (NYSE: AA) and DuPont (NYSE: DD). Expense ratio: 0.65%.
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