Energy stocks have struggled for much of this year, but recently, the group has shown some signs of life. Investors can wade back into the group with ETFs with ample but not 100% energy exposure, a list that includes the FlexShares Morningstar Global Upstream Natural Resource Index Fund (NYSEArca: GUNR).
GUNR provides exposure to the rising demand for natural resources and tracks global companies in the energy, metals and agriculture sectors while maintaining a core exposure to the timberlands and water resources sectors, is a part of the risk management theme.
GUNR specifically identifies upstream natural resources equities based on a Morningstar industry classification system, with a balanced exposure to three traditional natural resource sectors, including agriculture, energy, and metals.
Real Assets Enhance Portfolio Diversity
Real assets can enhance portfolio diversity will reducing correlations to traditional financial assets, such as stocks and bonds.
“Companies in the energy, financial and industrials sectors are sensitive to the business cycle and tend to underperform during periods of economic weakness. Investors may be indicating confidence in future economic growth by taking another look at these stocks,” reports MarketWatch.
When looking at the natural resources space and other hard asset producers, it is important to consider the various industries, such as the differences between the upstream and downstream components of the supply chain.
As the economy expands and inflation ticks up, investors will have to keep in mind the negative effects of rising prices and maybe look to hard-asset related investments and ETFs to help maintain the purchasing power of their portfolios.
“Now, with Wall Street abandoning the sector and seemingly capitulating, the group may be bottoming out. Energy-stock valuations have come down this year and are below their long-term average. And many industry players are responding to investor pressure to rein in capital spending, curb supply, boost returns, and payout more to shareholders in dividends and stock repurchases,” reports Andrew Bary for Barron’s.
On the back of a more than 4% jump this month, GUNR is higher by more than 9% year-to-date.
For more information on the commodities market, visit our commodity ETFs category.