4 ETFs As Replacements For Beaten Down Materials Names

It's as true as the day is long: The risk on trade gets turned off and materials stock suffer. However, high-beta materials names hold plenty of allure for investors that like risk, those that are willing to bet on a global economic recovery or both.

The good news is there are a lot of upper crust materials stocks that have suffered their share of beatings this year and are now on sale. Maybe even better news for the more conservative investor is that there are plenty of ETFs out there that can be used as replacements for owning these stocks directly.

So if you're yearning for materials exposure without making an all-in bet on just one or two specific stocks, consider the following ETFs.

iShares MSCI Australia Index Fund (NYSE: EWA): In a strong bull market, owning some BHP Billiton (NYSE: BHP) is a wise idea. It's the world's largest mining company and is flush with cash with which to make acquisitions and reward shareholders. Still, this is one high-beta name that some investors may not want to own outright. The iShares MSCI Australia Index Fund offers enough BHP exposure at 14% to have you watching BHP, but not losing sleep over it.

iShares MSCI Brazil Index Fund (NYSE: EWZ): We'll be honest and say that we have not been fans of ETFs that are heavy on Brazilian oil giant Petrobras (NYSE: PBR) this year. With good reason because Petrobras has been the worst-performing global integrated oil stock for well over a year now. That said, an argument can be made Petrobras is cheap and long-term investors will be rewarded. If you don't want to bet the farm on Petrobras, try EWZ, which allocates more than 17% of its weight to Petrobras securities.

Materials Select Sector SPDR (NYSE: XLB): The Materials Select Sector SPDR is more conservative than EWZ for sure and it looks like a good replacement for two stocks: Dow component DuPont (NYSE: DD) and Freeport McMoRan (NYSE: FCX). Those names combine for 20% of XLB's weight.

Market Vectors Coal ETF (NYSE: KOL): Investors probably don't need to own Peabody Energy (NYSE: BTU) and Consol Energy (NYSE: CNX) outright at the same time. Adding in Joy Global (Nasdaq: JOYG), it would be risky to own this trio as individual stocks simultaneously. Stop with the coal stock-picking and just buy KOL, which could have a upside of 30% or more from current levels.

Bull case: It's painfully obvious. Investors need to embrace risk in a big way and emerging markets will need to be back in style.

Bear case: Europe continues to way heavy. Inflation remains a concern in Brazil and China and the U.S. economy falters.