With the energy sector still on the mend following its laggard showing in 2019, it makes sense that some investors remain leery of the space. With the FlexShares Morningstar Global Upstream Natural Resource Index Fund (NYSEArca: GUNR), investors don’t have to be fully committed to the sector, but can still enjoy plenty of upsides.
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 isn’t a dedicated energy ETF. It also features exposure to materials and mining names, giving investors broader exposure to equities that can benefit from favorable commodities cycles,” according to InvestorPlace.
Gains With GUNR
Natural resources cover energy, metals, agriculture, timber, and water. They provide exposure to the basic economic building blocks, capitalize on supply and demand dynamics, and benefit from short- and long-term inflation drivers. Global populations and living standards are increasing, driving up the collective demand for goods. Additionally, we see that there is a widespread need for global infrastructure development and repair, which require natural resource consumption.
“GUNR reflects the value propositions offered by the energy and materials sectors as more than 44% of the fund’s holdings are classified as value stocks, more than triple its weight to equities with the growth designation. Another perk: GUNR devotes almost two-thirds of its roster to ex-U.S. stocks, giving it a yield of 3.22%, well in excess of the S&P 500,” reports InvestorPlace.
GUNR takes an “upstream” focus that targets companies with ownership or direct access to the raw materials. These natural resource companies have revenues, earnings, cash flows, and valuations that are closely linked to natural resources. The upstream focus provides improved correlation to commodity futures compared to downstream operations, granting investments greater inflation protection.
“[I]nvestors continue to benefit from innovation within a variety of investment vehicles that focus on real assets,” notes FlexShares. “Furthermore, strong demand for real assets is being met with an unprecedented supply of opportunities for investment, and we believe trends indicate that it will continue to grow. The Real Assets classification (e.g., timber, water, infrastructure, natural resources, etc.) is continually evolving, influenced not only by new asset types, but also regulatory and issuance changes.”
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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.