The market is breathing new life into miner stocks, and with exchange traded funds, investors can take a different approach to the mining sector.
Precious metals miner ETFs have been among the worst performing funds year-to-date; however, the recent turn around in precious metals has fueled a huge surge in miner stocks, especially for small-cap silver miners.
The PureFunds ISE Junior Silver ETF (NYSEArca: SILJ) jumped 26.5% over the past month, but the ETF is still down 33.8% year-to-date. Meanwhile, the iShares Silver Trust (NYSEArca: SLV), which holds a basket of physical silver, has increased 18.3% over the last month. [Silver Miner ETFs Test Short-Term Trends]
SILJ country allocations include Canada 76%, U.S. 20%, Australia 3% and U.K. 1%. Top holdings include Fortuna Silver Mines 11.3%, Endeavour Silver Copr 10.3% and MAG Silver Corp 9.4%.
Silver has shown greater volatility compared to gold, but the greater risk can come with higher returns. Additionally, silver mining companies experience greater swings, compared to the physical metal, but they have generated robust returns, and small-cap miners can potentially outpace large-caps. Chanin points out that SILJ has gained almost 50% since its June low.
“Investors can find more bang for your buck in silver,” Andrew Chanin, co-founder and chief operating officer of PureFunds, said in a phone interview. “Silver provides a higher beta play.”
Chanin also pointed out that silver demand for both as investment and industrial input is rising. Specifically, demand for U.S. silver eagle coins is on a record pace of sales. Silver is also used as an efficient heat and electricity conductor. The growing solar industry has also bolstered silver prices. Additionally, silver has many medical uses, including anti-microbial, surgical appliances and biotechnology applications.
Investors can also take on metals and mining sector ETFs, but PureFunds has created the PureFunds ISE Mining Services ETF (NYSEArca: MSXX) to target service providers for the growing mining industry. [A Look at the New Mining Services ETF]
Country allocations include Australia 53%, US 14%, Canada 9%, Sweden 8%, Chile 6%, Hong Kong 5%, Indonesia 2%, UK 2% and South Africa 1%. Top holdings include Mineral Resources 8.3%, Atlas Copco 7.8% and Monadelphous Group 7.3%.