At the moment, it doesn’t appear that raw materials stocks and exchange traded funds (ETFs) are crumbling under the weight of a struggling market and rising oil prices.
Don Dion for Seeking Alpha says that despite the woes in nearly every sector, the PowerShares FTSE RAFI Basic Materials (PRFM) is up slightly in the last month: 1.6%. Fingers are crossed that high commodity prices will keep things strong. Year-to-date, the fund is down 4.9%, so it’s got some turning around to do.
PRFM invests in materials such as coal, copper, pulp, paper, gold, seeds, aluminum, raw chemicals and steel. Since most of the stocks tie closely with commodity prices, there is volatility in this ETF. The ETF has a pull from across the board, with metals, seeds and fertilizer stocks benefiting from the commodities boom, while paper and pulp were down because of the slow demand of paper. Metals prices are surging while forest products are down, owing to the housing slump.
PRFM’s sector sibling is PowerShares Dynamic Basic Materials (PYZ), which is up 3.6% in the last month. Year-to-date, though, it’s down 4.6%. PYZ chooses small- and large-cap stocks that have the ability to outperform. PRFM has no cap size restrictions, but focuses on the largest materials stocks.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.