A new steel-sector-based exchange-traded fund that quietly debuted this week on the American Stock Exchange could prove useful in playing several roles within a diversified portfolio.The Market Vectors Steel ETF ( SLX) from Van Eck mimics the newly created Amex Steel Index but has more moving parts than just the obvious steel effect. First, more than 60% of the ETF is foreign stocks, of which roughly half come from emerging markets. Brazil has the largest country weight, accounting for just over 20%; South Korea, by virtue of a large position in Posco ( PKX), also has heavy weighting in the fund, as does Australia. The Van Eck Web site does a great job providing data to help investors get a feel for how volatile this fund could be. The volatility for the Amex Steel Index is around 30, which compares to 10.3 for the S&P 500. Due to the heavy exposure in emerging markets, the fund has what seems like a low price-to-earnings (P/E) ratio of 10.95. But emerging markets usually trade with lower P/Es than the levels we're accustomed to in the U.S. Even domestic steel companies usually trade with low P/Es -- Nucor ( NUE), which is the largest U.S. name in the fund, trades with a P/E of less than 12, for example, and US Steel ( X) trades at less than 10 times earnings.
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