Twelve For '12: Commodities ETFs to Watch In The New Year
On the heels of our popular “Eleven For '11” series that we ran late last year, we're upping the ante by one this time around. No, it's not the 12 days of Christmas, though some might say it is a 12-round title fight. We're talking about looking at 12 ETFs across various sectors that merit consideration for 2012 and we're getting the ball rolling with some beta by looking at commodities funds.
Always volatile, sometimes controversial, commodities have taken on a new role in the lexicon of ordinary investors thanks in large part to the evolution of the ETF industry. But those that end the discussion with gold and oil funds are missing out because there are many more potentially profitable opportunities for the taking in the commodities world.
So let's get on with looking at 12 commodities ETFs (and ETNs) that are worth looking at in 2012.
iShares Gold Trust (NYSE: IAU): We didn't say ignore gold altogether, did we? After breaking through the $1,900 area in September, gold now resides well below $1,800. Concerned? Don't be. All of the issues that have fueled gold's run – Europe's debt woes, Uncle Sam's debt problem, a weak dollar – remain. Morgan Stanley said in a note today gold could average $2,200 an ounce next year. That makes IAU a steal at current levels.
ETFS Physical Silver Shares (NYSE: SIVR): Maybe more volatile and easily more controversial than gold, silver will be in the spotlight again next year. Whether or not that's a good thing remains to be seen. As we noted earlier, considering that SIVR does the same thing as the iShares Silver Trust (NYSE: SLV), SIVR is the better bet due to its lower expense ratio. Most 2012 price forecasts imply significant upside from current levels.
United States Copper Fund (NYSE: CPER): Until we get an ETF backed by physical copper, the new United States Copper Fund will have to do. Dr. Copper is always a useful tell on the strength of major global economies. Of course, that has meant some tough times for the red metal as of late, but assuming we see more quantitative easing from global central banks, copper will rise.
iPath DJ-UBS Livestock TR Sub-Index ETN (NYSE: COW): We haven't been shy about calling COW a dud this year. After all, cattle and hog prices were soaring this year and the experts were talking about how the newly affluent in emerging markets were eating more high-quality meat. All the while COW was struggling. We'll give credit where it's due and acknowledge COW is up 2.6% year-to-date. Perhaps bigger things await in 2012 if emerging markets return to glory.
ETFS Physical Palladium Shares (NYSE: PALL): The only ETF devoted exclusively to physical palladium holdings is PALL. When things are good, they're very good for this ETF. And when they're bad, they're very bad, a fact highlighted by PALL's fall to around $55 in October from $85 in August. The big catalysts with palladium are auto sales in the U.S. and China and Russian production, or lack thereof. Get both of those things going in the metal's favor, and PALL could easily see the $80 area again.
United States Brent Oil Fund (NYSE: BNO): If you're going to dabble in futures-backed exchange-traded products that track oil, do it with one that offers a play on Brent, not West Texas Intermediate. Yes, BNO should be on your radar for 2012, but if the ETF breaks $79, it could run back to its 52-week high of $84.19 this year.
PowerShares DB Agriculture Fund (NYSE: DBA): Agricultural commodities have seen their share of drama this year, most of it bad. That is true, but two things should be remembered. First, corn, soybeans, etc. will not be left behind in a QE-induced commodities rally. Second, the long-term global food consumption and production trends are scary and that's very good for DBA.
PowerShares DB Base Metals Fund (NYSE: DBB): All of a sudden the PowerShares DB Base Metals Fund's chart looks pretty good as the ETF now has room to tack on 10% or more in effort to get back to the 200-day line. What DBB really needs for a sustainable rally is good economic fundamentals from major global economies. That will prompt increased aluminum and copper demand as well as higher use of other industrial metals.
Market Vectors Gold Miners ETF (NYSE: GDX): An equity-based play or two belong on this list and why not start off with a gold miners ETF? Precious metals mining stocks and ETFs have been under fire this year for lagging the metals they extract from the earth, but that situation has been improving recently. Valuations on large-cap gold miners look compelling right now and if gold's bull run continues next year, and it should, GDX looks like a smart way to play that move.
Global X Fertilizers/Potash ETF (NYSE: SOIL): Sure you can dance with other agribusiness ETFs, but one that is entirely devoted to fertilizer stocks actually makes a lot of sense. If the broader market improves next year, high-beta stocks like fertilizer and potash stocks will rally. And if you like an ETF like DBA, than the Global X Fertilizers/Potash ETF makes a lot sense as an equity-based alternative.
Teucrium Corn ETV (NYSE: CORN): CORN has been a big a disappointment lately and the fund barely took place in Thursday's big rally. Relief may come in the form of election year politics that will likely see no smart candidate go to places like Iowa and Minnesota and say he or she wants to curb ethanol production.
SPDR S&P Oil & Gas Exploration & Production ETF (NYSE: XOP): XOP is a great tool for short-term traders with a volatile nature that is reminiscent of a leveraged ETF. The ETF's low expense ratio and exposure to integrated oil stocks is a plus for conservative investors. Not to mention, XOP is a play on just about every U.S. shale formation, rising oil prices and the fund is full of potential buyers and sellers in the energy M&A game.
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