The NCAA basketball championship will be decided Monday night, and chances are we’re liable to see at least a couple of spectacular slam dunks before the trophy is presented. When it comes to investing, we’re all looking for spectacular slam dunks that can give our portfolios that winning edge.
Over the past year, some of the biggest market winners have been commodity exchange-traded funds. These funds are pegged to either the spot price of a particular commodity, or they reflect an index containing companies involved in the production of commodities. While there certainly are a number of commodity ETFs to choose from, I think the following three are poised for more winning returns in 2011.
Market Vectors Agribusiness
The Market Vectors Agribusiness (NYSE:MOO) is an ETF designed to replicate the price and yield performance of the DAXglobal Agribusiness index. This is an agricultural stock ETF that includes some of the biggest corporate names in the agriculture and food production industries.
Standout firms such as Potash Corp. (NYSE:POT), Monsanto (NYSE:MON), Deere (NYSE:DE) and Archer-Daniels-Midland (NYSE:ADM) are just a few of the top companies in MOO. If commodity food prices continue rising the way they’ve been since the Fed announced QE2, stocks in MOO also are likely to continue rising.
iShares Silver Trust
There’s no hotter commodity these days than silver, and we’ve seen a big surge in the value of the iShares Silver Trust (NYSE:SLV), an ETF pegged to the versatile metal’s spot price. This fund seeks returns that reflect the price of silver owned by the trust, minus the trust’s expenses and liabilities. Although SLV is not an exact equivalent of an investment in silver, it’s about as close as you can get without taking delivery of the physical product.
Some have questioned the continued upside in silver due to the fact that the precious metal’s price has gone parabolic since September. This claim is common, but I think it’s unfounded. That’s because the drivers keeping silver prices higher– i.e., a fear of inflation, a weakened dollar and more money printed by the Fed — remain firmly in place. Then we have the tremendous demand for silver from industry, which uses the metal in all types of manufacturing. Taken together, these upside drivers are likely to keep silver shining.
United States Oil
You don’t have to be an investor to know that oil prices — as well as gasoline prices –have risen big time since late February, which is not coincidentally when we witnessed the beginning of the Middle East turmoil that continues raging today. That surge can be taken advantage of with the United States Oil Fund (NYSE:USO).
This fund seeks performance equivalent to the spot price of West Texas Intermediate (WTI) light, sweet crude oil. It does this by investing in futures contracts for WTI light, sweet crude oil, other types of crude oil, heating oil, gasoline, natural gas and other petroleum based-fuels that are traded on exchanges. This fund is a great way to bet on the rising price of all things oil, and given the current conditions in the oil patch, we are likely to see more gushing returns in this commodity ETF going forward.
As of this writing, Jim Woods did not own a position in any of the stocks or funds named here.
