Commodity ETNs Not Crashing
The price of crude oil hit a new five-year low over the weekend after OPEC refused to cut production. As ugly as the chart is for oil, it is not alone with a number of other commodities trading at or near lows.
The iPath Bloomberg Cotton Subindex Total Return SM Index (NYSE: BAL) is trading near a four-year low, the iPath Bloomberg Copper Subindex Total Return Sub-Index (NYSE: JJC) hit a new five-year low and the iPath Bloomberg Sugar Subindex Total Return Sm Index (NYSE: SGG) is a few ticks from a four-year low. While it may appear to be the end of the road for the commodity ETFs and ETNs, not all are created equally.
There are sub-sectors in the commodity sector that have been able to hold up better than the broad sector. When the time comes that commodities as a whole start to attract money, it will likely be led by the sub-sectors that have held up the best during the downturn.
Several of the top-performing commodity funds this year to keep an eye on are listed below.
The iPath Bloomberg Livestock Total Return Sub-Index ETN (NYSE: COW) is up over 18 percent this year, beating the S&P 500 as well as the broad commodity index. The ETN is composed of an unleveraged investment in the futures contracts of live cattle and lean hogs. With the former commodity making up 67 percent of the portfolio and the latter accounting for the remainder.
The iPath Bloomberg Coffee Subindex Total Return SM Index (NYSE: JO) is up an amazing 61 percent in 2014, as there have been supply issues with the commodity. The ETN tracks an unleveraged investment in one futures contract on coffee.
The iPath Bloomberg Aluminum Subindex Total Return SM (NYSE: JJU) has also had a solid year, up 10 percent since the start of 2014. Similar to the other ETNs, the vehicle tracks an unleveraged investment in one futures contract on aluminum. The metal as been strong this year as supply issues and increasing demand have resulted in the outperformance.
Heading into 2015 the view towards commodities, as a whole is negative, however there will almost certainly be opportunities regardless of the movement of the broader sector.
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