How about a steel exchange traded fund (ETF) to solidify your portfolio? After oil and gas, steel is the most sought after commodity. The modern world cannot function without it and it is the most important engineering and construction material.  Consolidation in the steel companies has been rapid and with consolidation comes better pricing and more discipline, reports Myra P. Saefong for MarketWatch.

Currently, investors can add steel to their portfolio by buying individual steel company stocks or through Van Eck Market Vectors Steel ETF (SLX).  There are only a few exchanges across the globe that trade steel futures.  The New York Mercantile Exchange and the London Metal Exchange are currently looking into launching steel futures contracts. Knowing these exchanges are researching steel futures, only verifies the need for them.

SLX is up 39% year-to-date and holds 36 U.S. listed stocks and ADRs.  For the average investor, the ETF is the most efficient way to invest in steel. Setting an 8% stop loss or when the ETF declines below its 200 day individual moving average is recommended. Investors can buy individual stocks but they offer too little diversification.

For full disclosure, some of Tom Lydon’s clients own SLX.

Tags: Commodity ETFs, Metals & Mining, Steel