Basic materials sector-related exchange traded funds are reaching new highs as expanding global economies demand basic inputs to fuel further growth.
The Materials Select Sector SPDR (NYSEArca: XLB) added 0.1% Wednesday, trading at an intra-day high of $50.49. The largest materials ETF is up nearly 10% this year.
The materials sector ETF tracks a broad range of companies that operate in chemicals, metals, mining, paper, forestry, containers, packages and construction materials.
“Most of these companies sell into commodity markets and are susceptible to cyclical demand,” according to Morningstar analyst Alex Bryan.
However, the sector tilts toward chemical providers at 74.1%, followed by metals and mining 13.6%, containers and packaging 6.3%, paper and forest products 3.4% and construction materials 2.7%. Dow Chemical Company (NYSE: DOW) is ETF’s largest component at 10.3% of the portfolio.
Among the top performers in the sector, Alcoa Inc (NYSE: AA), which is 3.2% of XLB, has increased 54.8% year-to-date. The aluminum producer has been capitalizing on the surge in aluminum prices this year. [A Reinforced Base Metal ETF]
Additionally, LyondellBasell Industries (NYSE: LYB), which makes up 7.5% of XLB, rose 34.0% year-to-date as the strength of American oil, natural gas and natural gas liquids production help support margins. [A Lyondell Lift for This Materials ETF]
In a rising bull market, momentum plays are also garnering greater attention. Specifically, the PowerShares DWA Basic Materials Momentum Portfolio (NYSEArca: PYZ) has outperformed, rising 12.4% year-to-date. PYZ was one of 10 PowerShares ETFs that converted to tracking momentum-driven indices courtesy of Dorsey Wright & Associates. Due to its weighting methodology, PYZ also has a heavier tilt toward chemicals 82.4%, followed by metals & mining 11.2% and oil & gas 2.7%. [Momentum Materials Masterpiece With This ETF]
Materials Select Sector SPDR
For more information on the materials sector, visit our materials category.
Max Chen contributed to this article.