Commodity-Centric Products That Fit with Traditional Portfolios



Commodity-centric products

Commodity-centric products such as the PowerShares DB Commodity Tracking ETF (DBC), the PowerShares DB Agriculture ETF (DBA), and the United States Oil ETF (USO) are traditional products to invest in commodities. DBC concentrates on the entire commodity sphere, while DBA focuses on an agricultural commodity sphere. USO directly tracks crude oil. The United States Natural Gas ETF (UNG) invests directly in natural gas.

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Equity ETFs that track commodities

The SPDR S&P Metals and Mining ETF (XME) directly invests in companies engaged in metal and mining activities. Newmont Mining (NEM), Hecla Mining (HL), and AK Steel Holding (AKS) account for 5.7%, 5.6%, and 5.5%, respectively, of XME.

Country-specific investment avenues in commodity sphere

The WisdomTree Commodity Country Equity ETF (CCXE) includes high dividend yielding companies from commodity-centric countries such as Australia, Brazil (EWZ), Canada, Chile, New Zealand, Norway, South Africa, and Russia (RSX).

The IQ Global Resources ETF (GRES) uses valuation factors to identify and select global companies that operate in the commodity-specific market segments. However, country-specific ETFs are also subject to cross-currency risks. The graph above shows the performance of DBC.

In the next part of this series, we’ll see how a commodity run became a positive sign for deflation.


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