5 Top Commodity ETFs Since the Market Lows

October 23, 2009 at 11:00 am by Tom Lydon      Bookmark and Share

ETF commoditySince the market’s March 9 low, commodity exchange traded funds (ETFs) have skyrocketed as countries start to recuperate from the economic blows. Here are five commodities that have been among the strongest performers.

Coal. China has reduced its supply of coal by clamping down on pollution while demand remains unchanged, which could result in higher prices for the commodity. Now, China will need to import coal to maintain its production and power plants. Coal is the world’s fastest-growing fuel based on consumption. Coal is also a major component in producing steel. (More on coal here).

  • Market Vectors Coal ETF (NYSEArca: KOL): up 184.3% since low; up 121.7% year-to-date

ETF KOL

Steel. Steel has experienced rising popularity as the global infrastructure sector recovers and automakers increase demand. The Chinese markets and the U.S. dollar weakness has helped prop up the base metals market. (Four ways to play base metals).

  • Market Vectors Steel Index ETF Fund (NYSEArca: SLX): up 147.7% since low; up 95.4% year-to-date

ETF SLX

Metals & Mining. These funds track indexes made up of the stock of commodity producers. One argument in favor of investing in hard asset equity ETFs is that you may know a little about a particular commodity, but the person running a company involved in mining or producing that commodity is duty-bound to know a whole lot more. Commodity producers can make brilliant business decisions, and they can also benefit when new mines are discovered. They can also cut costs and boost profits. (The benefits of hard assets).

  • SPDR S&P Metals & Mining (NYSEArca: XME): up 123.1% since low; up 74.3% year-to-date

ETF XME

Basic Materials. Base metal prices have jumped as demand for the metals increase, more notably from China as the country recovers and hoards metals. Base metals should continue their upward journey as fundamentals in a global recovery strengthen. (More on China’s shopping spree).

  • iShares Dow Jones U.S. Basic Materials (NYSEArca: IYM): up 100.9% since low; up 58.5% year-to-date

ETF IYM

Copper. Copper prices are at their highest levels in 13 months, thanks to both a drooping dollar and concerns about supply of the metal. Prices have doubled this year, mostly because China stepped up its demand as its economy recovered. Analysts also predict that copper will be the top performer among base metals. (Where copper is going).

  • iPath Dow Jones AIG Copper TR Sub Index ETN (NYSEArca: JJC): up 81.3% since low; up 112.7% year-to-date

ETF JJC

Commodities have been on a hot streak, but as we’ve learned from recent bubbles, it’s wise to have an exit strategy in the event of a correction. You can read more about strategies here.

For full disclosure, Tom Lydon’s clients own shares of IYM.

Max Chen contributed to this article.

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  • Winston Rogers
    As usual, you post the most dramatic moon shot, chasing performance ETFs. It's almost like you want to sucker people into buying high. And on CNBC, it's the same crap. Softball questions from the airheads in tight sweaters while you talk about clunker super sub sector ETFs up 100% YTD, holding all of 28 companies in some dark corner of the market.

    There's articles you have, like the one about international ETFs, that have some merit, and maybe some advice on market timing, commentary and opinions like the article recently about metals, that people might find interesting. But this kind of crap is just filler and padding. There's zero substance here. It's the literary equivalent of iceberg lettuce.

    I can run a morningstar screen and find the junker high beta ETFs. Anyone can. There's no added value in this.
  • Thanks for your comments, Winston. We certainly don't advocate performance chasing, but using a trend following discipline based on the 200-day moving average. For positions that are far above their long-term trend lines, some investors might be comfortable putting in 50%, then waiting until it moves up 5%, then going all in from there.
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