There has been a lot of speculation in recent weeks that iShares, ETF Securities and other firms will soon bring an exchange traded fund to the market that tracks physical copper the way the SPDR Gold Shares ETF (NYSE: GLD) tracks physical gold or the iShares Silver Trust ETF (NYSE: SLV) follows silver.
While any physical copper fund will certainly make a splash, don’t feel you have to wait until such an ETF debuts to capitalize on copper price inflation. One of the biggest movers in the past several days has been the Global X Copper Miners ETF (NYSE: COPX) and it could continue to push upwards next week and beyond if copper extends a record-setting run.
Here’s my take on COPX and four other hot ETFs for the coming week:
Copper Miners ETF
The Global X Copper Miners ETF (NYSE: COPX) has been on fire in December. The fund is up +9% on the month, opening at $17.17 on 12/1 and closing at $18.68 on Thursday evening. There’s no mystery as to why — fears of a major currency devaluation has sparked commodity inflation as of late, and copper prices are at record highs. And in the longer term, Bloomberg reports that demand will outpace supply next year and Bank of America Merrill Lynch analysts have warned that copper inventories may drop to an all-time low of less than one week’s usage.
Gold Miners ETF
I know, I know. Everybody loves the trusts like the SPDR Gold Trust ETF (NYSE: GLD) or the iShares Gold Trust ETF (NYSE: IAU) since it’s a pure play on the yellow stuff. But don’t underestimate the miners. In fact, the Market Vectors Gold Miners ETF (NYSE: GDX) has outperformed the trusts in both the short and medium-term. The GLD trust opened Dec. 1 at $135.71, and closed at $135.37 Thursday for a tiny loss. Meanwhile, the GDX miners ETF opened Dec. 1 at $60.02 and has added about +2% to close at $61.43 Thursday. What’s more, the GDX gold miners ETF is up over +14% since Sept. 1 while GLD and IAU are both up less than +11%. Whoever says a pure play on gold is the most profitable investment right now isn’t doing math properly.
Leveraged Bear Financials ETF
Long term there are many reasons to believe financial stocks are on the mend. Back in November, I made the case with 7 reasons to buy financial stocks now. But at least for the short term, I think it’s reasonable to expect some consolidation in the sector after some recent uptrends. The cheer from Uncle Sam exiting Citigroup (NYSE: C) drove up the bank’s stock nearly +12% since Dec. 1 while the broader stock market added about a third of that. Other major financials joined the party with Bank of America (NYSE: BAC) up +10% and Wells Fargo (NYSE: WFC) up +16%. But if we see profit taking as the market takes a breather, investors could find that the Direxion Daily Financial Bear 3X ETF (NYSE: FAZ) is a risky but powerful way to make the most of events. For those unfamiliar with this leveraged fund, it returns 300% of the inverse of the Russell 1000 Financial Services Index – meaning you gain three times what the financial sector loses. (For a detailed case to buy this bear financials ETF, check out Sam Collins’ analysis of why FAZ is a buy under $11.)
Amid distress and uncertainty on the Korean peninsula, most recently with North Korea shelling a South Korean island, some may think that the iShares MSCI South Korea Index Fund (NYSE: EWY) would have seen a rough few months. But when you look at real numbers, EWY has outperformed the broader market significantly both in the short and long term. Year-to-date in 2010 it’s up about +21%, double the broader market. And since Dec. 1 it’s up over +7% — about double the major indexes. And with a free-trade agreement between the United States and South Korea paving the way for new opportunities in 2011, the growth in this region could just be heating up. (Check out a more in-depth iShares MSCI South Korea ETF analysis, and the fund’s risks and rewards)
Another Airline ETF?
This last fund to watch comes not from its profit potential, but the sheer head-scratching curiosity of its launch in the last few days. Leveraged ETF powerhouse Direxion is dipping its toes into the regular old 1X space with the lift-off of the Direxion Airline Shares ETF (NYSE: FLYX). But aside from the ability to snag a quirky ticker symbol, there’s really no compelling reason for the fund’s existence. Granted, its 0.55% expense ratio is slightly better than the Guggenheim Airline ETF (NYSE: FAA) – which, by the way, also gets points for a clever ticker. But considering FAA has just $38 million in assets under management, does Direxion really think there’s a lot of business to poach? I am a big believe in the power of ETFs, and I think that in general they are a great innovation to the market that help individual investors. But this fund is just a waste of time – for investors, and likely for Direxion. But in the words of Benzinga’s ETF professor, there is a silver lining. “When oil goes to $100 and beyond, traders will have two airline ETFs to short,” the ETF prof writes.
Jeff Reeves is editor of InvestorPlace.com. As of this writing, he did not own a position in any of the funds listed here. Follow him on Twitter at http://twitter.com/JeffReevesIP.