Corrections are common during economic recoveries and, assuming
things donât get worse in Europe, there are plenty reasons to
expect a pickup in business activity.
As I said, industrial stocks, arenât the only place to profit
from a recovery. Metal and mining stocks are just as prospective in
Industrial metal prices are highly correlated to the strength of
the economy. Metals such as copper, aluminum, nickel, lead, and tin
react quickly to economic recoveries. A pickup in business activity
leads companies to try to fill in inventory gaps by increasing
The copper market seems to be feeling better about the prospects
of avoiding a double-dip recession.Â Copper futures, which
closed at $388.55 on Aug. 10, closed at $407.90 on Thursday â up
almost 5 percent.
The demand for base metals helps mining stocks by both
increasing the amount sold and the price they sell the
metal.Â Furthermore, as Paul pointed out in his recent blog
âWhy GLD And GDX Are Completely Unrelatedâ mining stocks can
act as a leveraged play. Thatâs because costs are pretty much
fixed as commodity prices rise, meaning Â profit margins
So, what are the best mining stocks to invest in? If youâre
looking for industrial metals, plenty of ETFs are on the market to
choose from â some very broad in scope and others concentrating
on a specific metal.Â However, only a few have attracted
significant assets under management.
The largest fund investing in industrial metals is the SPDR
S&P Metals and Mining Fund (NYSEArca:XME) with $744 million in
assets.Â The fund isnât a pure play for industrial metals
because gold stocks make up 14.76 percent of the portfolio,
according to the issuerâs website.
Precious metals likely make up even more than that, as the fund
also boasts 22.79 percent in diversified metal companies. Precious
metals behave differently than industrial metals, and will probably
lose value in a rising market once fear subsides.Â While
thatâs an argument for avoiding funds like XME, the annual
expense ratio is the lowest, at 0.35 percent.
The Jefferies TR/J CRB Global Industrials Fund (NYSEArca:CRBI)
is a pure play investing in only industrial metals. But the fund
has just $3.6 million in assets. Investors may want to look to a
specific metal if they want to avoid precious metal exposure.
Investors interested in copper can choose between the Global X
Copper Miners ETF (NYSEArca:COPX) and the First Trust ISE Global
Copper (NYSEArca:CU). COPX has a lower expense ratio at 0.65
percent and invests in 34 global copper mining companies.Â
CU, on the other hand, is the largest copper fund at $97 million,
but has a 0.70 percentÂ expense ratio and invests in only 27
The Market Vectors Steel Fund (NYSEArca:SLX) is the largest fund
in the steel segment. The fund invests in 26 companies and has an
expense ratio of only 0.55 percent.Â Its competitor, the
PowerShares Global Steel Portfolio (NYSEArca:PSTL) has only $4.3
million in AUM and an expense ratio of 0.75 percent, but invests in
62 mining companies.
Investors looking to profit from a rebound in the market and
business confidence have options.
Industrial sectors are one option, and investing in industrial
metals mining is another.Â Itâs always wise Â to be
thinking about what stocks can benefit the most from an upswing in
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