Three Materials ETFs Your Broker Forgot to Mention
The materials sector has been a laggard this year among the 10 industry groups tracked within the S&P 500. Of the nine sector SPDRs ETFs, the Materials Select Sector SPDR (NYSE: XLB) has been the worst performer in 2013, though to be fair to XLB, the fund is up 3.2 percent in the past month.
Investors willing to refine their materials ETF search will find even more impressive, recent gains. The Market Vectors Coal ETF (NYSE: KOL) is up 6.6 percent in the past week. Seven holdings in the Market Vectors Steel ETF (NYSE: SLX) have posted double-digit gains in just the past three days, according to Bespoke Investment Group.
Related: A New ETF For Resurgent Coal Stocks.
The list goes on from there. Just look at this roster of unheralded materials ETFs.
First Trust Materials AlphaDEX Fund (NYSE: FXZ)
Year-to-date, the First Trust Materials AlphaDEX fund has performed in line with larger rivals such as XLB, but over the past three months the AlphaDEX methodology has helped FXZ to start breaking away from the pack.
Nearly 34 percent of FXZ's weight is allocated to chemicals names. Not a bad place to be when Air Products (NYSE: APD), DuPont (NYSE: DD) and Dow Chemical (NYSE: DOW) are drawing interest from activist investors. However, FXZ is not heavy on those names. Those stocks combine for just 3.5 percent of the ETF's weight. Now stock has a weight of over 3.9 percent in the $255.6 million FXZ.
FXZ's 54 holdings have a median market value of $5.7 billion and the ETF sports a price-to-book ratio of 1.92 and a price-to-cash-flow ratio of 8.3.
EGShares Basic Materials GEMS ETF (NYSE: LGEM)
For most of this year, the combination of materials and emerging markets under the umbrella has been a toxic brew, something that has happened before with this ETF. That much is affirmed by LGEM's 32.2 percent year-to-date decline. However, LGEM has perked up in significant fashion.
Since putting in double bottom around $9, the ETF has reclaimed its 50-day moving average and is now flirting with $10. An emerging markets ETF heavy on materials stocks is bound to be heavy on South Africa, Brazil and LGEM is. Those countries combine for over 48 percent of the ETF's weight, giving the fund considerable leverage to a rebound in base and precious metals prices.
As is the case with many emerging markets ETFs, LGEM is discounted with a price-to-book ratio of 1.19. Investors are compensated for the risk with an index yield of 4.9 percent, according to EGShares data. The rival iShares MSCI Emerging Markets Materials ETF (NASDAQ: EMMT) is up 4.7 percent in the past week.
iShares MSCI ACWI ex U.S. Materials ETF (NYSE: AXMT)
The iShares MSCI ACWI ex U.S. Materials ETF will be met with predictable criticism for its small size (just $2.3 million in assets under management) and lack of volume (just 200 shares per day), but this ETF is up nine percent in the past month. Earlier, we mentioned the Market Vectors Steel ETF and some of that fund's stocks that have recently been surging.
Some strong SLX constituents, such as Rio Tinto (NYSE: RIO), Posco (NYSE: PKX), Vale (NYSE: VALE) and ArcelorMittal (NYSE: MT) are also found in AXMT. The drawback is AXMT's exposure to beaten up fertilizer names. The fund holds 153 stocks and has an annual expense ratio of 0.48 percent.
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