Top 10 Materials Sector ETFs

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.

The materials sector represents the well-springs of industrial growth given whatever the demand is for raw materials found in base metals and even petroleum. Weak stocks in this sector equate well with the state of manufacturing conditions.

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 from these investors may choose an appropriate ETF to satisfy the best index-based offerings individuals and financial advisors 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 indexes tied to well-known index providers including Russell, S&P, Barclays, MSCI, Dow Jones and so forth. Also included are some so-called "enhanced" indexes 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 $1.8 billion and average daily trading volume is over 15.6M shares. As of late September 2011 the annual dividend yield is 2.61%. and YTD performance is -21.27%.

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

Data as of September 2011

XLB Top Ten Holdings & Weightings

  1. E.I. du Pont de Nemours & Company (DD): 11.34%
  2. Freeport-McMoRan Copper & Gold B (FCX): 11.30%
  3. Monsanto Company (MON): 9.35%
  4. The Dow Chemical Co (DOW): 8.46%
  5. Praxair, Inc. (PX): 7.58%
  6. Newmont Mining Corporation (NEM): 5.91%
  7. Air Products & Chemicals Inc (APD): 4.39%
  8. Alcoa Inc (AA): 3.50%
  9. CF Industries Holdings Inc (CF): 3.39%
  10. Ecolab, Inc. (ECL): 3.21%

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 $550 million and average daily trading volume is 900K shares. As of late September 2011 the annual dividend yield is 1.43% and YTD return -24.40%.

Data as of September 2011

IYM Top Ten Holdings & Weightings

  1. E.I. du Pont de Nemours & Company (DD): 9.14%
  2. Freeport-McMoRan Copper & Gold B (FCX): 9.12%
  3. The Dow Chemical Co (DOW): 6.86%
  4. Newmont Mining Corporation (NEM): 6.22%
  5. Praxair, Inc. (PX): 6.15%
  6. Air Products & Chemicals Inc (APD): 3.34%
  7. Alcoa Inc (AA): 2.80%
  8. Peabody Energy Corporation (BTU): 2.71%
  9. CF Industries Holdings Inc (CF): 2.67%
  10. Ecolab, Inc. (ECL): 2.57%

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 $550 million and average daily trading volume is nearly 93K shares. As of September 2011 the annual dividend yield was 1.61% and  The YTD return over the same period was 1.61%.

Data as of September 2011

MXI Top Ten Holdings & Weightings

  1. BHP Billiton Limited (BHPLF): 7.53%
  2. Rio Tinto PLC (RIO): 5.07%
  3. BHP Billiton PLC (BLT): 4.02%
  4. Basf SE (BFFAF): 3.67%
  5. Vale S.A. ADR (VALE.P): 3.05%
  6. Anglo American PLC (AAL): 3.01%
  7. Barrick Gold Corporation (ABX): 2.75%
  8. Potash Corporation of Saskatchewan, Inc. (POT): 2.71%
  9. E.I. du Pont de Nemours & Company (DD): 2.48%
  10. Freeport-McMoRan Copper & Gold B (FCX): 2.39%

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 $533 million and average daily trading volume is 60K shares. As of late September 2011 the annual dividend yield was 2.55%% and YTD return -19.55%.

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 September 2011

VAW Top Ten Holdings & Weightings

  1. E.I. du Pont de Nemours & Company (DD): 7.58%
  2. Freeport-McMoRan Copper & Gold B (FCX): 7.57%
  3. The Dow Chemical Co (DOW): 6.40%
  4. Monsanto Company (MON): 5.92%
  5. Praxair, Inc. (PX): 5.00%
  6. Newmont Mining Corporation (NEM): 3.99%
  7. Air Products & Chemicals Inc (APD): 3.12%
  8. Mosaic Co (MOS): 2.84%
  9. Alcoa Inc (AA): 2.56%
  10. PPG Industries, Inc. (PPG): 2.22%

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 $325 million and average daily trading volume is 322K shares. As of late September 2011 the annual dividend yield 2.35% and YTD return -20.24%.

Data as of September 2011

FXZ Top Ten Holdings & Weightings

  1. Rockwood Holdings Inc (ROC): 3.40%
  2. Celanese Corporation (CE): 3.22%
  3. LyondellBasell Industries NV (LYB): 3.19%
  4. Huntsman Corporation (HUN): 3.15%
  5. Temple-Inland, Inc. (TIN): 3.14%
  6. Polypore International, Inc. (PPO): 3.12%
  7. Carpenter Technology Corporation (CRS): 3.10%
  8. Kronos Worldwide, Inc. (KRO): 3.06%
  9. Owens-Corning, Inc. (OC): 2.96%
  10. Eastman Chemical Company (EMN): 2.94%

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 $65 million and average daily trading volume is around 22K shares. As of late September 2011 the annual dividend yield was 2.60% and YTD return -19.53%.

Data as of September 2011

PYZ Top Ten Holdings & Weightings

  1. Celanese Corporation (CE): 2.79%
  2. Freeport-McMoRan Copper & Gold B (FCX): 2.64%
  3. Lubrizol Corporation (LZ): 2.59%
  4. Cliffs Natural Resources Inc. (CLF): 2.58%
  5. CF Industries Holdings Inc (CF): 2.58%
  6. Praxair, Inc. (PX): 2.55%
  7. Walter Energy (WLT): 2.53%
  8. E.I. du Pont de Nemours & Company (DD): 2.52%
  9. The Dow Chemical Co (DOW): 2.52%
  10. Sigma-Aldrich Corporation (SIAL): 2.48%

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 $34M while average daily trading volume is 6.1K shares. As of September 2011 the annual dividend was $.1.37 making the current yield 2.60% and YTD return of -20.75%

Data as of September

RTM Top Ten Holdings & Weightings

  1. CF Industries Holdings Inc (CF): 4.76%
  2. Newmont Mining Corporation (NEM): 4.33%
  3. Monsanto Company (MON): 3.71%
  4. Cliffs Natural Resources Inc. (CLF): 3.64%
  5. International Paper Co. (IP): 3.60%
  6. Ecolab, Inc. (ECL): 3.52%
  7. Freeport-McMoRan Copper & Gold B (FCX): 3.50%
  8. Bemis Co Inc (BMS): 3.50%
  9. Titanium Metals Corporation (TIE): 3.48%
  10. Airgas Inc (ARG): 3.47%

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 $21 million and average daily trading volume is approximately 8.5K shares. As of late September 2011 the annual dividend yield was 1.89% and YTD return -26.37%.

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 September 2011

IRV Top Ten Holdings & Weightings

  1. BHP Billiton Limited (BHPLF): 8.69%
  2. Rio Tinto PLC (RIO): 5.06%
  3. BHP Billiton PLC (BLT): 4.67%
  4. Basf SE (BFFAF): 3.68%
  5. Potash Corporation of Saskatchewan, Inc. (POT): 3.40%
  6. Anglo American PLC (AAL): 3.40%
  7. Goldcorp, Inc.: 3.35%
  8. Barrick Gold Corporation (ABX): 3.12%
  9. Air Liquide (AI): 2.56%
  10. Syngenta AG (SYENF): 2.30%

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 equal $8 million and average daily trading volume is 3K shares. As of September 2011 the annual dividend yield was 1.07% and YTD return is -30.45%.

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 September 2011

EMMT Top Ten Holdings & Weightings

  1. Vale S.A. ADR (VALE.P): 9.87%
  2. Vale S.A. ADR (VALE): 9.31%
  3. POSCO ADR (PKX): 8.46%
  4. Sociedad Quimica Y Minera De Chile SA ADR (SQM): 3.70%
  5. MMC Norilsk Nickel ADR (NILSY): 3.62%
  6. AngloGold Ashanti Limited (AULGF): 3.04%
  7. Grupo Mexico, S.A.B De C.V (GMEXICO B): 2.68%
  8. Impala Platinum Holdings (IMP): 2.63%
  9. Sterlite Industries (India), Ltd. ADR (SLT): 2.54%
  10. Ptt Chemical Public Company Limited ADR (PTTCH-R): 2.41%

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 $6 million and average daily trading volume is less than 5K shares. As of late September 2011 the annual dividend yield was $.1.15% with a YTD return -22.04%.

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 September 2011

PSCM Top Ten Holdings & Weightings

  1. PolyOne Corporation (POL): 5.60%
  2. Balchem Corporation (BCPC): 4.88%
  3. Arch Chemicals, Inc. (ARJ): 4.63%
  4. Kraton Performance Polymers Inc (KRA): 4.45%
  5. H.B. Fuller Company (FUL): 4.37%
  6. OM Group, Inc. (OMG): 4.35%
  7. Eagle Materials, Inc. (EXP): 4.27%
  8. Texas Industries Inc (TXI): 4.16%
  9. Buckeye Technologies, Inc. (BKI): 4.15%
  10. Schweitzer-Mauduit International, Inc. (SWM): 3.81%

The materials sector remains as 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 particularly 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.

As stated with other sectors, remember ETF sponsors must issue and their interests aren't aligned with yours. They have a business interest and wish to have a competitive presence in any popular sector.

For further information about portfolio structures using technical indicators like DeMark and other indicators see www.etfdigest.com . You may follow us on Facebook as well and join our group conversations.

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

The ETF Digest has no current position in the featured securities.

 

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

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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