Trading has been downright brutal for the mining sector in
2013. Commodity prices have fallen sharply on the year, leading
the miners, who are often leveraged to the price changes of their
underlying commodities, to a near collapse in year-to-date
In fact, many mining
are sporting year-to-date losses approaching 45%, easily
outpacing both their commodity brethren, as well as broad market
indexes on the downside. This trend has left many investors
bearish on the space, though the segment is becoming tempting
from a value perspective, assuming you are able to tolerate
significant volatility levels.
This is especially true given recent moves in the space, as
many metals have been bouncing off of lows, and in some cases,
moving far higher. This turnaround has finally shifted perception
regarding the mining space, leading to some strong performances
in the metals world as a result (see
The Guide to Broad Metals and Mining ETFs
In fact, many mining ETFs are actually spiking lately, with
several up more than 5% in the past week, if not more. This comes
as perception on China is slowly shifting to be slightly more
positive, while the U.S. economy hums along at a solid clip.
Meanwhile, a more sluggish dollar as of late hasn't hurt
commodities either, further boosting demand for metals in the
Given this recent move, it might be worth it to take a closer
look at some broad mining ETF options as possible investments in
this type of climate. Below, we highlight three of the most
popular choices in this space, any of which could be excellent
plays for investors seeking to ride this sudden move in the metal
mining space even higher:
SPDR S&P Metals & Mining ETF (
This ETF looks to give investors broad exposure to the metal
and mining industry, holding 40 stocks in the basket in total.
This is accomplished by tracks the S&P Metals & Mining
Select Industry Index, a benchmark that uses an equal weight
method for assigning assets.
Steel stocks make up roughly 40% of the portfolio, followed by
the broad metal and mining space (20%), and then precious metals
(18%) to round out the top three. From a cap look, there is
definitely a small cap focus-as is usually the case with equal
weight products-as large caps only make up about 9% of assets
Global X Debuts Junior Miners ETF
XME is up roughly 5.4% in the past five days, and its price
has increased by 6.6% in the past one month time frame.
Market Vectors Gold Miners ETF (
For a targeted play on gold, investors have GDX for exposure.
This ETF follows the Amex Gold Miners Index, giving investors
access to roughly 30 companies that are involved in some aspect
of the gold mining industry.
Large and mid caps make up the vast majority of this popular
cap weighted fund, while Goldcorp (
), and Barrick Gold (
), combine to make up nearly 25% of the fund on their own.
Meanwhile, from a country perspective, Canadian firms dominate at
64% of assets, followed by the U.S. at 17% and then South Africa
GDX has soared by 10.2% in the past five days, pushing its one
month return to 12.2%.
Global X Silver Miners ETF (
Although often overlooked in the precious metal market, silver
can be an even bigger winner during up markets. One way to target
this space is with SIL, an ETF that tracks the Solactive Global
Silver Miners Index, a benchmark that holds roughly 30 stocks
Time to Buy the Covered Call Silver and Gold
Small and mid caps dominate this benchmark, as large caps
account for just 10% of the assets, suggesting it is well spread
out from a cap perspective. However, when looking at individual
stocks, Silver Wheaton (
), Fresnillo (
), and Industrias Penoles SAB dominate, as the trio combine to
take up more than 30% of assets.
In the past five days, SIL has jumped by 11.7%, while the
trailing one month return is now showing an 18% gain.
Mining ETFs have had a horrendous year and have lagged while
many other sectors have skyrocketed. And with metals facing a
shaky future, some investors had little hope of a recovery in the
space heading into 2014 (also see
4 Ways to Short Gold with ETFs
However, recent trends in the space have been very encouraging
for the miners, as metal prices have bounced off of their lows.
Now, many mining ETFs have seen double digit percentage moves to
the upside in recent trading, suggesting that the worst may be
over for the space.
If this turns out to be the bottom, any of the above ETFs
could be solid choices that may continue to rebound higher in the
weeks ahead, so long as commodity trading remains favorable. Just
be prepared for significant volatility in this rocky market, as
multi-percentage point moves are not uncommon in this rocky
corner of the ETF market.
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BARRICK GOLD CP (ABX): Free Stock Analysis
MKT VEC-GOLD MI (GDX): ETF Research Reports
GLBL-X SILVER (SIL): ETF Research Reports
SILVER WHEATON (SLW): Free Stock Analysis
SPDR-SP MET&MIN (XME): ETF Research
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