The moribund energy sector is showing some signs of life and that could be enough to compel investors to revisit related ETFs. A safer, quality option for doing that is with the FlexShares Morningstar Global Upstream Natural Resource Index Fund (NYSEArca: GUNR).
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. With some wild moves in downtrodden energy stocks, the gambling element of energy investing is back, but investors can take some risk out of the equation with GUNR.
“Oil companies are reporting their worst earnings results in years, but their stocks are on the rise. In fact, the energy sector is up 4% on the week, better than any other sector in the market,” reports Avi Salzman for Barron’s.
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, which is a part of the risk management theme.
Put GUNR On Your Radar
“Oil inventories fell over the past week, the U.S. Energy Information Administration said on Wednesday. Oil prices also rose on Tuesday after an explosion in Beirut. There were initial fears that the blast was caused by an attack, though more evidence now indicates it was an accident,” according to Barron’s.
GUNR isn’t entirely dedicated to the energy sector, presenting investors with an adequate means of capturing the potential upside in the sector with an avenue for reducing some of the volatility associated with oil and gas equities.
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.
“The producers of these goods are called the downstream component and historically have been negatively affected by rising resource prices,” a Flexshares case study for the fund noted. “By adding focused exposure to the upstream market, however, we believe investors can minimize the risk of rising resource prices to their downstream investments.”
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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.