Materials Funds Have Killer Week

With U.S. steel-sheet prices rising to a record $1,068 a ton this week, double year-ago levels, the basic materials funds dominated other sectors. Funds focusing specifically on steel production and distribution proved to be a bargain.

Excluding the worst-performing UltraShort Basic Materials ProShares(SMN Quote) that bets against the sector with 200% leverage, the average basic materials fund we track gained 2.38% for the five trading days ending Thursday, July 31. To be included in the group, funds had an aggregate of at least 25% of their holdings invested in the chemical, forest and paper products, iron and steel and mining industries.

One factor helping to propel the SPDR Metals & Mining ETF(XME Quote) to the top spot on our best-performing list is pricing power. Imports constrained by dollar weakness led to lower inventories and the ability to pass-through price increases.

For the one-year period through July 27, steel reinforcing bar is up 62.8%, carbon steel plate is up 86.7%, and hot rolled coil is up 113.9%.

The solid pricing environment helped put America's fourth-largest steel producer and SPDR holding AK Steel(AKS Quote), up 38.50% for the period, on the auction block for a potential takeover offer.

Lakshmi Mittal, the head of ArcelorMittal(MT Quote), up 15.60% this week, is predicting global demand growth for steel of 3% to 5% with China, India, and South America being the bright spots. He explains that world production will need to increase by as much as 75 million tons to keep pace. ArcelorMittal is the second largest holding of our second best performing fund, Market Vectors Steel Index Fund(SLX Quote).

Another Market Vectors Steel holding jumping the gun on next week's opening ceremony, Olympic Steel(ZEUS Quote), earns a gold medal for reporting record second-quarter sales and profits.

The bullish version of the worst performer ranks in third place on our best-performing list. The Ultra Basic Materials ProShares(UYM Quote) climbed 9.48% on leveraged 200% to the Dow Jones U.S. Basic Materials Index. Its holding of U.S. Steel(X Quote) popped 17.89% for the week on a doubling of 2nd quarter profits. Alcoa(AA Quote) also added 7.90% for the five trading days covered.

Best Performing Basic Materials Sector Funds for the Week Ending Thursday July 31
Fund	Ticker	Rating	Fund Type	1 Week Total Return
SPDR S&P Metals & Mining ETF	XME	B+	ETF	9.53%
Market Vectors Steel Index Fund	SLX	C+	ETF	9.49%
Ultra Basic Materials ProShares	UYM	D	ETF	9.48%
PowerShares FTSE RAFI Basic Materials Sector Portfolio	PRFM	D+	ETF	8.72%
ProFunds UltraLatin America	UBPIX	U	Open-End	7.34%
ProFunds Basic Materials UltraSector ProFund	BMPIX	A-	Open-End	7.30%
First Trust Materials AlphaDEX Fund	FXZ	D	ETF	6.77%
Fidelity Select Materials Portfolio	FSDPX	A+	Open-End	5.05%
Fidelity Advisor Materials Fund	FMFAX	A+	Open-End	5.03%
iShares Dow Jones US Basic Materials Sector Index Fund	IYM	A-	ETF	4.85%
Source: Bloomberg & TheStreet.com Ratings

Worst Performing Basic Materials Sector Funds for the Week Ending Thursday July 31
Fund	Ticker	Rating	Fund Type	1 Week Total Return
UltraShort Basic Materials ProShares	SMN	E+	ETF	-10.09%
BlackRock EcoSolutions Investment Trust	BQR	U	Closed-End	-2.61%
JPMorgan Russia Fund	JRUAX	U	Open-End	-2.59%
OCM Mutual Fund - OCM Gold Fund	OCMGX	B-	Open-End	-2.05%
US Global Investors World Precious Minerals Fund	UNWPX	C	Open-End	-1.55%
World Funds Inc - Third Millennium Russia Fund	TMRFX	B	Open-End	-1.48%
Market Vectors Gold Miners ETF	GDX	B	ETF	-1.20%
Templeton Russia and East European Fund	TRF	C+	Closed-End	-1.17%
Fidelity Advisor Gold Fund	FGDAX	C-	Open-End	-1.11%
Fidelity Select Gold Portfolio	FSAGX	B+	Open-End	-1.10%
Source: Bloomberg & TheStreet.com Ratings

For an explanation of our ratings, click here.

1 What would best describe your stance heading into the coming week of trading? Bullish Bearish Neutral 2 Which of these sectors do you think is set to move up in the coming week? --Choose One--Aerospace and DefenseAirlinesAutomobilesBeverages and Food ProductsBiotechnologyCommercial BanksComputers and PeripheralsConsumer NondurablesEnergy Equipment & ServicesHMOs and HospitalsHomebuildingInsuranceIntegrated OilInternet, Software ServicesInvestment Bankers and BrokersMediaMultiline RetailPharmaceuticalsPrecious MetalsSemis, Semi EquipmentTelecom EquipmentTobacco and AlcoholWireless CommunicationsUtilities 3 Which of these sectors do you think is set to move down in the coming week? --Choose One--Aerospace and DefenseAirlinesAutomobilesBeverages and Food ProductsBiotechnologyCommercial BanksComputers and PeripheralsConsumer NondurablesEnergy Equipment & ServicesHMOs and HospitalsHomebuildingInsuranceIntegrated OilInternet, Software ServicesInvestment Bankers and BrokersMediaMultiline RetailPharmaceuticalsPrecious MetalsSemis, Semi EquipmentTelecom EquipmentTobacco and AlcoholWireless CommunicationsUtilities View the results without voting