As the commodities space rebounds on a strengthening global economy, investors may look at exchange traded funds that track industries capitalizing on the the increased demand in raw resources.
For example, as investors consider ways to diversify a portfolio, one may look to resources and commodities-related ETFs, such as the VanEck Vectors Natural Resources ETF (NYSEArca: HAP). The fund contains the world’s largest and most prominent commodity producers and distributors.
HAP is a based on an index of global commodity equities. The underlying VanEck Natural Resources Index tracks companies involved in the production and distribution of commodities and commodity-related products and services involved in agriculture, alternatives (water & alternative energy), base and industrial metals, energy, forest products, and precious metals.
The hard asset-themed ETF covers a diverse portfolio of various commodities-related equity companies. For example, sector weight include materials 39.7%, energy 28.4%, consumer staples 15.5%, industrials 10.8% and utilities 2.7%. Top component holdings include Monsanto 6.8%, Deere & Co 6.8%, Nutrien 4.3%, Exxon Mobil 3.9% and Archer Daniels Midland 3.1%.
Additionally, the VanEck Vectors Agribusiness ETF (NYSEArca: MOO) may be a good way to capture momentum in the agricultural or agribusiness sector.
MOO tries to reflect the performance of the Global Agribusiness Index, which tracks the overall performance of companies involved in agri-chemicals, animal health and fertilizers, seeds and traits, from farm/irrigation equipment and farm machinery, aquaculture and fishing, livestock, cultivation and plantations, along with the trading of agricultural products.
The ETF provides exposure to a basic industry driven by increasing populations and demand for alternative fuels, according to VanEck.
Specifically, MOO includes a 33% tilt toward materials, followed by 29.9% consumer staples, 22.9% industrials, 11.4% health care and 2.3% consumer discretionary. Top component holdings include names like Nutrien 8.5%, Deere & Co 8.3%, monsanto 7.7%, Zoetis 7.1% and Kubota 5.9%.
Supporting the positive commodity price performance, global growth among developed and emerging markets has been fueled by improved demand fundamentals. Furthermore, the weaker U.S. dollar has helped raise demand for USD-denominated commodities among international buyers – when the greenback depreciates against other global currencies, commodities tend to rise in U.S. dollar terms.
Furthermore, these resource-themed equity plays may help diversify a traditional portfolio as commodities are seen as an alternative to stocks and bonds.
For more information on the commodities space, visit our commodity ETFs category.