Broad commodities are showing an impressive comeback after a
steep fall earlier this year, and have caught enough investor
interest of late. This is particularly true given recent moves in
the space, as many metals have been rebounding from their lows or
moving higher.
In the precious metal world, gold climbed 13% from its June low
while silver gained 14% last week, marking the biggest weekly gain
in almost five years. Base metals like copper, aluminum, and zinc
are also trending upwards (read: Base Metal ETFs Soar on Strong
Data).
This surge in broad metals was driven by the perception that
China is improving slowly and the Euro zone has emerged out of
recession, while the U.S. is now growing at a faster clip.
Meanwhile, lower chances of the Fed scaling back its monetary
stimulus sometime soon has led to a decline in the dollar that is
boosting demand for the metals.
Further, investors are now turning their focus on commodities
rather than equities as they think equity markets look expensive at
current levels and could come down in the short term given
uncertainty about the Fed’s tapering (read: 2 Commodity ETFs
Offering Investors Sweet Returns).
This turnaround has finally shifted perception on the mining
space, leading to some strong performances in the broad commodity
world. Given this broad rally, the miners, who are often leveraged
to the price changes of their underlying commodities, have started
gaining traction.
In fact, many mining ETFs are actually spiking lately, with
several up more than 5% over the past three weeks (read: 3 Mining
ETFs Finally on the Upswing). Though investors continue to focus on
the popular funds in the space, several overlooked ETFs have
performed well in the past weeks while volume remained light.
Below, we have highlighted three mining ETFs, which are not only
in green, but have delivered nearly double-digit returns so far
this month. Any of these could be excellent plays for investors
seeking to ride this sudden move in the metal mining space even
higher:
Global X Junior Miners ETF (JUNR)
This ETF provides broad exposure to small cap firms in the
mining world from across the globe by tracking the Solactive Global
Junior Miners Index. The product has amassed only $5.3 million in
AUM while it charges 69 bps in fees per year.
With holdings of 92 securities in its basket, the fund is widely
spread across each security as none of these accounts for more than
3.6% share. Precious metals enjoy the top position in the basket
comprising roughly three-fifths of the assets. The rest goes to
broad metals and minerals, coal and alternative energy, steel, and
aluminum (read: The Guide to Broad Metals and Mining ETFs).
In terms of national breakdown, Canada and the U.S. take the top
spots with 36.25% and 21.53% of assets, respectively. Australia
(19.32%), China (4.88%) and Japan (3.61%) round out the top five,
suggesting that many countries have sizable chunks in the
portfolio.
Though JUNR is down 33.7% year-to-date, it added 8% this month
alone.
PureFunds ISE Junior Silver ETF (SILJ)
Investors seeking true small cap play on the silver mining space
could find SILJ an exciting pick (read: 5 Silver ETFs Surging on
Commodity Strength). Having debuted less than a year ago, the fund
has attracted just $2 million in AUM and charges 59 bps in fees and
expenses.
The fund tracks the ISE Junior Silver Small Cap Miners/Explorers
Index, holding about 26 companies in total. The product stays true
to its ‘junior’ focus, as it doesn’t have any asset in securities
that are mid or large caps. However, the ETF is heavily
concentrated in its top 10 holdings with more than 70% of
assets.The top three holdings – Silvercorp Metal (SVM), Fortuna
Silver Mines (FSM) and Endeavour Silver (EXK) – make up for
combined 36% share. In terms of country exposure, Canadian firms
dominate the fund at 76% while U.S. securities make up for 20%
share.
The product has added about 20% so far this month but is down
nearly 34% in the year-to-date time frame.
Global X Gold Explorers ETF (GLDX)
This ETF provides exposure to the small basket of 20 gold mining
firms by following the Solactive Global Gold Explorers Index. The
product has $35.8 million in AUM and expense ratio of 0.65% (read:
Gold Mining ETF Investing 101).
The product is pretty spread across each security with Seabridge
Gold (SA), Novagold Resources (NG) and Pretium Resources (PVG)
occupying the top three positions with a combined 19.38% share. The
fund mainly consists of the small cap companies of Canada as these
account for 92% of GLDX. The U.S. and Australia takes the remaining
portion.
The ETF gained over 18% so far this month but is still down
41.6% year-to-date.
Bottom Line
Mining ETFs have had a horrendous year and have lagged while
many other sectors have skyrocketed. However, recent trends in the
space have been encouraging for the miners, as metal prices have
bounced off of their lows (see more in the Zacks ETF Center).
Recent trend suggests that the worst may be over for the space.
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GLBL-X GOLD EXP (GLDX): ETF Research Reports
GLBL-X JR MINER (JUNR): ETF Research Reports
PF ISE-JS SC ME (SILJ): ETF Research Reports
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