Five Single Commodity ETFs Your Broker Forgot to Mention
So many commodities exchange-traded products, so little time. In fact, there are now enough commodities ETFs and ETNs on the market today where it can legitimately be said investors have a dizzying array of choices.
In other words, the more single commodity funds that come to market, the likelihood increases that a few are bound to fly under the radar. Admittedly, some of these unheralded plays aren't worth investors' time, but others are worth eschewing popularity for and taking a look at in search of potential noteworthy returns.
Simply put, it's time for commodities ETF investors to expand their horizons beyond the SPDR Shares (NYSE: GLD) and the U.S. Oil Fun (NYSE: USO) in search of other funds that merit consideration. With that, here are five single commodity ETFs we're pretty sure your broker forgot to tell you about.
ETFS Physical Silver Shares (NYSE: SIVR): To be fair, the ETFS Physical Silver Shares is by no means unheard of, under-the-radar, etc. However, the conversation about ETFs backed by physical silver is dominated by the iShares Silver Trust (NYSE: SLV). SLV has almost $9.9 billion in assets under management and average daily volume of nearly 26.5 million shares.
On the other hand, SIVR has $2.7 billion in AUM and trades less than 485,000 shares per day. Who cares? At the end of the day, SLV and SIVR do the same thing, but SIVR does it cheaper with an expense ratio of 0.3% compared to 0.5% for the iShares offering.
United States Copper Fund (NYSE: CPER): As Benzinga recently noted, the newly minted United States Copper Fund is off to a decent start having hauled in over $2.4 million in AUM in less than three weeks of trading. CPER tracks a portfolio of copper futures contracts backed by 3-month U.S. Treasury Bills. CPER's portfolio is currently comprised of March, April, and December 2012 contracts. While you wait on an ETF backed by physical copper, CPER is worth a look if the red metal's prices rebound.
United States Brent Oil Fund (NYSE: BNO): One of the most prominent themes in the discussion about oil prices this year has been the wide spread between the Brent and West Texas Intermediate prices. WTI may be the U.S. benchmark, but Brent is the global benchmark and the pricier of the two contracts. Pricier by a wide margin that is.
Most oil investors know about USO and the controversy surrounding this fund. Let's just make life easy and say that as long as Brent's premium to WTI remains elevated, BNO is the better fund. It's up almost 21.3% year-to-date while USO is negative.
Teucrium Sugar ETV (NYSE: CANE): The iPath DJ-UBS Sugar TR Sub-Index ETN (NYSE: SGG) finally got a rival when the Teucrium Sugar ETV debuted in September. In the commodities landscape, sugar may not be as important as gold, silver or oil, but it's every bit as volatile, if not more so. Two months of data doesn't make for a large sampling, but since CANE came to market, it has slightly outperformed SGG. Both funds track various sugar futures contracts.
United States 12 Month Oil Fund (NYSE: USL): OK, maybe your feeling patriotic and just want to support the U.S. oil benchmark. Or maybe you're feeling some Texas state pride. Either way, we reiterate our view that you should not do those things with USO. Try USO's better constructed cousin, the 12 Month Oil Fund. USL does offer exposure to the front-month crude contract, but the ETF mixes in contracts from the next 11 months, substantially reducing the need to roll a large amount of contracts every month. That cuts down on the investor's expenses and has probably helped USL outperform USO over the past six months
Bull case: Obviously, commodities prices need to rise. Plain and simple. Some QE3 wouldn't hurt, though improvements in the U.S. and Chinese economies would be better over the long-term.
Bear case: Also easy to surmise. Remember that developed European nations are major commodities buyers. The long those countries are under the gun of sovereign debt problems, the longer commodities prices have limited upside.
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