A Unique Global ETF For A Commodity Rebound
The state of the world commodity markets can only be described as deflationary. This year has seen falling prices across nearly the entire spectrum of commonly traded precious metals, energy, grains and industrial goods.
While there have been limited bright spots in niche sectors such as coffee and cocoa, a broad-based index such as the iPath Bloomberg Commodity Index Total Return ETN (NYSE: DJP) is down more than 8 percent this year. In fact, this index is currently sitting on its year-to-date lows.
Not surprisingly, this weakness also extends to stocks of related industry groups that thrive off higher commodity prices. This includes global agriculture stocks, mining companies, energy names and more.
While this recent performance in the commodity sector has been difficult to endure, many value-oriented investors may be looking at this sell-off as a potential buying opportunity.
One way to play a global rebound in commodity prices is through stocks of associated “commodity countries.” The WisdomTree Intl Basic Materials Fund (NYSE: CCXE) is comprised of stocks from a variety of developed and emerging market countries whose economies are heavily dependent on commodity production.
WisdomTree Intl Basic Materials Fund
CCXE has approximately 170 stocks from countries such as Russia, Norway, New Zealand, Canada and South Africa. Each country within the index is given an equal 12.5 percent allocation, according to the rules-based construction methodology.
The underlying holdings are primarily centered in the energy and financial space as a result of the fundamentally weighted index honing in on dividend paying stocks. In fact, CCXE pays an above-average dividend that is currently listed at 3.72 percent. Distributions are paid to shareholders on a quarterly basis.
On a year-to-date basis, this unique ETF is down 6.8 percent after a rocky September that eroded all of its gains for the year.
While the recent momentum is uninspiring, CCXE may offer an opportunity to play a counter-trend rally in commodity-rich countries that are well off their highs. This ETF contains a well-diversified portfolio of global stocks with a potential value proposition when compared to broad-based U.S. markets that are currently at all-time highs.
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