Our goal in this profile is to help investors wade through the many competing ETF offerings available. Using our long experience as an ETF publication, we can help select those ETFs that matter and may or may not be repetitive. The result is a more manageable list of issues from which to view and make selections.

There are currently more than 14 ETFs oriented to the materials sector, with more on the way. The following analysis features a fair representation of ETFs available. We believe that from these, investors may choose an appropriate ETF to satisfy the best index-based offerings individuals and financial advisers may utilize.

We're not ranking these ETFs favoring one over another so don't let the listing order mislead you. Although we may use some of these in ETF Digest portfolios, it's not our intention to recommend one over another.

ETFs are based on indices tied to well-known index providers including Russell, S&P, Barclays, MSCI, Dow Jones and so forth. Also included are some so-called "enhanced" indices that attempt to achieve better performance through more active management of the index.

Where competitive issues exist and/or repetitive issues available at a fee cost saving,we mention those as other choices. New issues are coming to market consistently (especially globally) and sometimes these issues will need to become more seasoned before they may be included, at least in our listings.

For traders and investors wishing to hedge, leveraged and inverse issues are available to utilize from ProShares and Direxion, and where available these are noted.

XLB (SPDR Materials Sector ETF) follows the Materials Select Sector Index. The fund was launched in December 1998. The expense ratio is .20%. AUM (Assets under Management) equal $2.8 billion and average daily trading volume is over 13.6M shares. As of July 2011 the annual dividend was $.49 making the yield 1.20%. The YTD performance equaled 4.75%.

There are leveraged inverse and long ETFs available for hedging or speculation from ProShares and Direxion Shares.

Data as of July 2011

XLB Top Ten Holdings & Weightings

  1. E.I. du Pont de Nemours & Company (DD): 11.39%
  2. Freeport-McMoRan Copper & Gold B (FCX): 11.37%
  3. The Dow Chemical Co (DOW):  9.61%
  4. Monsanto Company (MON):  8.82%
  5. Praxair, Inc. (PX):  7.45%
  6. Air Products and Chemicals, Inc. (APD): 4.60%
  7. Newmont Mining Corporation (NEM): 4.59%
  8. Alcoa Inc. (AA): 3.89%
  9. PPG Industries, Inc. (PPG): 3.32%
  10. Cliffs Natural Resources Inc. (CLF): 3.10%

 

IYM (iShares DJ Basic Materials ETF) follows the Dow Jones U.S. Basic Materials Index. The fund was launched in June 2006. The expense ratio is .48%. AUM is nearly $1 billion and averaged daily trading volume is 900K shares. As of July 2011, the annual dividend is $.68 making the yield roughly .85% with an YTD return of 4.42%.

Data as of July 2011

IYM Top Ten Holdings & Weightings

  1. E.I. du Pont de Nemours & Company (DD): 9.17%
  2. Freeport-McMoRan Copper & Gold B (FCX):  9.16%
  3. The Dow Chemical Co (DOW):  7.77%
  4. Praxair, Inc. (PX): 6.06%
  5. Newmont Mining Corporation (NEM):  4.80%
  6. Air Products and Chemicals, Inc. (APD): 3.49%
  7. Alcoa Inc. (AA): 3.10%
  8. Peabody Energy Corporation (BTU): 2.93%
  9. PPG Industries, Inc. (PPG): 2.64%
  10. Ecolab, Inc. (ECL): 2.42%

 

 

MXI (iShares Global Materials ETF) follows the S&P Global Materials Index. The fund was launched in September 2006. The expense ratio is .48%. AUM is $766 million and average daily trading volume is nearly 95K shares. As of July 2011 the annual dividend is $1.44 making the yield roughly 1.94%. The YTD return over the same period was 1.61%.

Data as of 2011-07-06

MXI Top Ten Holdings

  1. BHP Billiton Limited (BHPLF): 7.43%
  2. Rio Tinto PLC (RIO): 5.28%
  3. BASF SE (BFFAF): 4.49%
  4. BHP Billiton PLC (BLT): 4.13%
  5. Anglo American PLC (AAL): 3.19%
  6. Vale S.A. ADR (VALE.P): 3.06%
  7. E.I. du Pont de Nemours & Company (DD): 2.48%
  8. Freeport-McMoRan Copper & Gold B (FCX): 2.40%
  9. Potash Corporation Inc. (POT): 2.39%
  10. Barrick Gold Corporation (ABX): 2.19%


VAW (Vanguard Materials ETF) follows the MSCI US Investable Market Materials 25/50 Index consists of wide range of constituents from small, mid to large cap securities within the overall materials sector. It was launched in January 2004. The expense ratio is .25%. AUM equal $700 million and average daily trading volume is 75K shares. As of July 2011 the annual dividend was $1.80 making the yield just over 2%. The YTD return for the same period was 6.54%.

New to the scene as of March 2011 is FBM (Focus Shares Morningstar Basic Materials) which follows the Morningstar Basic Materials Index with a low fee of .19% and free commissions for Scottrade clients.

Data as of July 2011

VAW Top Ten Holdings & Weightings

  1. Freeport-McMoRan Copper & Gold B (FCX): 8.27%
  2. E.I. du Pont de Nemours & Company (DD): 7.94%
  3. The Dow Chemical Company (DOW): 6.93%
  4. Monsanto Company (MON): 6.13%
  5. Praxair, Inc. (PX): 4.92%
  6. Newmont Mining Corporation (NEM): 4.26%
  7. Air Products and Chemicals, Inc. (APD): 3.06%
  8. Alcoa Inc. (AA): 2.85%
  9. PPG Industries, Inc. (PPG): 2.45%
  10. Nucor Corp. (NUE): 2.30%

FXZ (First Trust Materials AlphaDEX ETF) follows the StrataQuant Materials Index which is an enhanced index which employs the AlphaDEX stock selection methodology making the index more active. The fund was launched in May 2007. The expense ratio is .70%. AUM equal $610 million and average daily trading volume is 198K shares. As of July 2011 the annual dividend is $.60 making the yield 2.35%. The YTD return for the same period was 7.24%.

Data as of July 2011

FXZ Top Ten Holdings & Weightings

  1. Ashland Inc (ASH): 3.89%
  2. Domtar Corp (UFS): 3.67%
  3. Eastman Chemical Company (EMN): 3.50%
  4. Owens-Corning, Inc. (OC): 3.49%
  5. Lubrizol Corporation (LZ): 3.30%
  6. Allegheny Technologies, Inc. (ATI): 3.25%
  7. Timken Company (TKR):3.24%
  8. Alcoa Inc. (AA): 3.13%
  9. Celanese Corporation (CE): 3.08%
  10. Cliffs Natural Resources Inc. (CLF): 3.03%

PYZ (PowerShares Dynamic Basic Materials ETF) tracks the Dynamic Basic Materials Sector Intellidex Index which is another enhanced index designed to outperform more static indexes and using quantitative measures to select constituents.  The fund was launched October 2006. The expense ratio is .60%. AUM equal $86 million and average daily trading volume is around 25K shares. As of July 2011 the annual dividend was $.36 or less than 1% while the YTD return was an impressive 13.70%.

Data as of July 2011

PYZ Top Ten Holdings & Weightings

  1. Celanese Corporation (CE): 2.95%
  2. Lubrizol Corporation (LZ): 2.88%
  3. Ecolab, Inc. (ECL):2.64%
  4. Sigma-Aldrich Corporation (SIAL): 2.60%
  5. International Paper Co. (IP): 2.58%
  6. CF Industries Holdings, Inc. (CF): 2.55%
  7. Ball Corporation (BLL): 2.54%
  8. Sherwin-Williams Company (SHW): 2.50%
  9. Air Products and Chemicals, Inc. (APD): 2.42%
  10. Newmont Mining Corporation (NEM): 2.41%

RTM (Rydex Equal Weight Materials ETF) follows the S&P Equal Weight Index Materials. The index is unique with the equal weight feature which under a variety of circumstances can favor smaller cap issues over large. The fund was launched in November 2006. The expense ratio is .50%. AUM equal roughly $50M while average daily trading volume is only 7.5K shares. As of July 2011, the annual dividend was $.61 making the yield .90% and an YTD return of 5.79%.

Data as of 2011-07-06

RTM Top Ten Holdings

  1. Cliffs Natural Resources Inc. (CLF): 3.56%
  2. AK Steel Holding Corporation (AKS): 3.49%
  3. Titanium Metals Corporation (TIE): 3.49%
  4. International Paper Co. (IP): 3.47%
  5. United States Steel Corporation (X): 3.47%
  6. Freeport-McMoRan Copper & Gold B (FCX): 3.45%
  7. Monsanto Company (MON): 3.43%
  8. Sigma-Aldrich Corporation (SIAL): 3.42%
  9. E.I. du Pont de Nemours & Company (DD): 3.39%
  10. Allegheny Technologies, Inc. (ATI): 3.37%

IRV (SPDR International Materials ETF) follows the S&P Developed Ex-U.S. BMI Materials Sector Index. The index captures both developed and emerging market issues with market capitalizations of at least $100 million. The fund was launched in July 2008. The expense ratio is .50%. AUM equal nearly $34 million and average daily trading volume is approximately 16K shares. As of July 2011, the annual dividend was $.10 making the yield .32% with an YTD return of .36%.

An alternative choice is ASMT (iShares Materials Ex-U.S. ETF) which tracks the MSCI ACWI Ex-U.S. Materials Index which was launched in July 2010 with an expense ratio of .48%.

Data as of July 2011

IRV Top Ten Holdings & Weightings

  1. BHP Billiton Limited (BHPLF):8.62%
  2. Rio Tinto PLC (RIO): 5.31%
  3. BHP Billiton PLC (BLT): 4.81%
  4. BASF SE (BFFAF): 4.54%
  5. Anglo American PLC (AAL): 3.61%
  6. Potash Corporation, Inc. (POT): 3.03%
  7. Air Liquide (AI):2.53%
  8. Barrick Gold Corporation (ABX): 2.49%
  9. Goldcorp, Inc.: 2.40%
  10. Posco ADR (PKX): 2.32%

EMMT (iShares Emerging Markets Materials ETF) tracks the MSCI Emerging Markets Materials Index which as time passes this should be an interesting and potentially profitable sector. The fund was launched in January 2010. The expense ratio is .69%. AUM is only $13 million given the newness of the issue and the average daily trading volume is only 4.5K shares. As of July 2011 the annual dividend is $.18 with a yield of .68% and YTD return is -5.09%.

Another issue to consider in this sector is from EG Shares LGEM which has few assets but is quite new being issued in June 2011 and should be watched.

Data as of July 2011

EMMT Top Ten Holdings & Weightings

  1. Vale S.A. ADR (VALE.P): 9.49%
  2. Vale S.A. ADR (VALE): 8.96%
  3. Posco ADR (PKX): 7.61%
  4. Sociedad Quimica Y Minera De Chile SA ADR (SQM): 3.49%
  5. MMC Norilsk Nickel ADR (NILSY): 3.29%
  6. AngloGold Ashanti Limited (AULGF): 3.24%
  7. Impala Platinum Holdings (IMP): 2.76%
  8. Sterile Industries (India), Ltd. ADR (SLT): 2.59%
  9. Group Mexico, S.A.B De C.V (GMEXICO B): 2.52%
  10. Buenaventura Mining Company Inc. ADR (BVN): 2.44%

PSCM (PowerShares Small Cap Materials ETF) follows the S&P SmallCap 600 Materials Index. This is of course a more unique approach following the small cap sector including just those companies within the materials sector. The fund was launched April 2010. The expense ratio is .29%. As a new fund AUM is only $3 million and average daily trading volume is less than 2K shares. As of July 2011, the annual dividend is $.53 making the yield 1.75% with an YTD return of 4.71%.

Given the newness of the issue and low AUM it may be worthwhile for investors to let this issue season some before jumping in.

Data as of July 2011

PSCM Top Ten Holdings & Weightings

  1. PolyOne Corporation (POL):  5.77%
  2. Eagle Materials, Inc. (EXP):5.13%
  3. Balchem Corporation (BCPC): 5.00%
  4. Texas Industries Inc (TXI): 4.70%
  5. OM Group, Inc. (OMG): 4.64%
  6. RTI International Metals, Inc. (RTI): 4.63%
  7. H.B. Fuller Company (FUL): 4.41%
  8. Buckeye Technologies, Inc. (BKI): 3.96%
  9. Calgon Carbon Corporation (CCC): 3.92%
  10. AMCOL International Corporation (ACO): 3.77%

The materials sector remains the well-springs of manufacturing activity. Without chemicals, forest products and base metals for example there would be little industry.

Investors should note that in a rising market, ETFs linked to enhanced issues will tend to outperform conventional index-linked issues. I've not done enough analysis to determine their relative strength during down market periods.

New ETFs from highly regarded and substantial new providers are also being issued. These may include Charles Schwab's ETFs and Scottrade's Focus Shares which both are issuing new ETFs with low expense ratios and commission free trading at their respective firms. These may also become popular as they become seasoned. 

For further information about portfolio structures using this or other ETFs see www.etfdigest.com .

You may address any feedback to: feedback@etfdigest.com   


(Source for holding data is from ETF Database and from various sponsors.)

 
This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

Dave Fry is founder and publisher of ETF Digest, Dave's Daily blog and the best-selling book author of Create Your Own ETF Hedge Fund, A DIY Strategy for Private Wealth Management, published by Wiley Finance in 2008. A detailed bio is here: Dave Fry.

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