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ETF Update: Commodity, Agriculture, and Wind Energy ETFs

by: Tom Lydon June 12, 2008 | about stocks: DBA / DBE / GAZ / JJE / PZD / QCLN / RJA / TAN / UAG / UNG / USL    
Tom Lydon

Tom Lydon

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Commodity ETFs Were a Bunch of Bull In May, and Remain So In June

Commodity ETFs were among the strongest performers for May, and if things keep going the way they are, June might be another decent month. In fact, it might be a good time for those of you who missed our special report on commodities to have a look, because this area doesn't seem like it's going to disappear from the headlines anytime soon.

Not halfway through the month, and new records are being reached daily for both gas and oil prices. Gas is at a record national average of $4.052 a gallon, and oil prices rocketed close to $137 a barrel after inventories fell, reports John Wilen for the Associated Press.

With prices like that, commodity-focused ETFs could continue to draw investors who are looking to hedge out of the woodwork.

Year-to-date, most of the top ETFs are commodities related and asset growth has been dramatic, ETF Express writes. Total assets in them stand at $37.3 billion.

Of the top 20 ETFs and ETNs year-to-date, 17 of them are focused on commodities. The top five ETFs so far this year are:

  • United States Natural Gas (UNG), up 62.6% year-to-date
  • iPath DJ AIG Natural Gas Total Return Sub-Index ETN (GAZ), up 61.6% year-to-date
  • iPath DJ AIG Energy Total Return Sub-Index ETN (JJE), up 47.2% year-to-date
  • United States 12-Month Oil (USL), up 45.3% year-to-date
  • PowerShares DB Energy (DBE), up 45.1% year-to-date

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Flooding in Midwest Damages Corn Crops and Raises ETFs

Agriculture ETFs shot up in trading today as a flood in the Midwest damaged the 2008 corn crop.

Corn futures rose more than 4%, the fifth straight record trading session, reports Sam Nelson for Reuters. Corn prices have risen 80% in the last year, and 17% of that has been accrued in the first 11 days of this month. Other futures are higher, too, including soybeans, which are up 3%, and wheat, which is up 5%.

Key corn-producing states, such as Illinois and Iowa, are getting flooded. It's caused the U.S. Department of Agriculture to slash its estimate for corn yields per acre.

Agriculture ETFs that track futures for these commodities are traded higher yesterday as a result:

  • PowerShares DB Agriculture (DBA): up 9.5% year-to-date; holds futures for corn, wheat, soybeans and sugar
  • ELEMENTS Rogers International Commodity Agriculture ETN (RJA): up 4.3% year-to-date; seeks to replicate an index of agricultural commodity futures contracts, including soybeans, corn, oats, rice and wheat.
  • E-TRACS UBS Bloomberg CMCI Agriculture Index ETN (UAG): up 3.3% since April 4 inception; seeks to replicate an index that represents the value of a range of agricultural commodity futures contracts, among them wheat, corn and soybeans.

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ETFs Are Hoping to Start Blowin' In the Wind

As an ETF investor, do you need a weather man to know which way the wind blows?

PowerShares and First Trust Advisors don't think so. They have recently filed with the SEC for ETFs that will hold shares in companies that provide products and services to the wind energy industry, such as turbine makers and utilities with wind farms, reports Trang Ho for Investor's Business Daily.

Neither of the filings listed the holdings. The PowerShares Global Wind Energy Portfolio requires a market cap of $200 million, and the First Trust ISE Global Wind Energy Index Fund will be two-thirds pure plays that provide goods and services only to the wind-energy industry.

Wind power made up almost 30% of all new electricity-generating capacity in 2007. That's up markedly from less than 1% in 2002. By 2030, it's predicted that wind energy could supply 20% of the U.S. energy needs.

As the price of oil continues to rise and concern about the environment mounts, these alternative forms of energy could continue to grab investors' interest. But as a word of caution, this sector can be volatile. While we await the launch of these funds, there are other alternative energy ETFs now available, including:

  • Claymore Global Solar ETF (TAN), up 0.7% since April 15 inception
  • First Trust Nasdaq Clean Edge ETF (QCLN), down 22.6% year-to-date
  • PowerShares Clean Tech Portfolio (PZD), down 1.7% year-to-date

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This article has 2 comments:

  •  
    Jun 12 09:09 AM
    Virtually all of our top ranked ETFs are commodity plays. These include DBE, OIL, DBC, GSP and XME. If you prefer individual stocks, the best bets now include REXX, MOS, AGU, POT and EAC. In the mood for short-selling in this manic market? Check out CTX, JPM, CAL, WFC and REGN. Visit our website for more info.
    Reply
  •  
    Jun 30 03:05 PM
    www.ubs.com/e-tracs
    Reply
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