Commodities are certainly getting there fare share of media attention. In our opinion, it is about time. It isn’t until it starts hitting the pocketbooks that people realize how expensive things have become. Considering the $USD is close to approaching .70 against the Euro, investors might start looking elsewhere to invest there money, commodities being one of those places.
Commodities are trading at record levels so investing in them might be playing with fire. But surprisingly, many farmers are not benefiting from the record prices in commodity prices as there input costs such as feed have also risen. But while commodities have risen, the retail investor is barely getting interested in investing in the sector. But with so many options, which direction to take.
The first option is to invest in commodities through futures and options. Ideally, this would be the only way to get a pure exposure to the commodity market but unfortunately commodities markets have a steep learning curve that many individuals simply do not have the time to learn. Discount brokers have started to make a push into futures but its still a long ways before it is considered mainstream. Another option is to invest in commodity/agribusiness stocks. This option is valid and assumes you are a great security analyst. Finally, you could invest in commodity ETFs. This is quickly becoming the most popular option as commodity ETFs trade like stocks and usually invest in a diversified list of companies in the ag sector.
Agribusiness ETF
Market Vectors Agribusiness ETF (MOO)
- By far the most popular and the most liquid agribusiness ETF. The Market Vectors Agribusiness ETF tries to replicate as closely as possible the price and yield performance of the DAXglobal Agribusiness Index (DXAG). DXAG, calculated by Deutsche Borse AG, is a modified market capitalization-weighted index consisting of publicly traded companies engaged in the agriculture business that are traded on global exchanges. DXAG provides exposure to companies worldwide that derive at least 50% of their revenues from agriculture business. Companies eligible for inclusion in DXAG should have market capitalization exceeding $150 million; should have worldwide daily average trading volume of at least $1 million over past six months and in each of the past two months, and should have maintained monthly trading volume of 250,000 shares over past six months.
IQ Global Agribusiness Small Cap Fund (CROP)
As stated in its name, the fund invest in equities with a smaller capitalization stocks with a larger potential for growth. The IQ Global Agribusiness Small Cap ETF seeks investment results that correspond, before fees and expenses, to the price and yield performance of the IQ Global Agribusiness Small Cap Index. The Index provides important exposure to global small cap companies engaged in the agribusiness sector, including crop production and farming, livestock operations, agricultural supplies & logistics, agricultural machinery, agricultural chemicals, and biofuels. This small cap agribusiness segment is well positioned to benefit from rising food prices, increasing populations, and the growing demand for alternative fuels. (Source)
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April 26, 2011
Commodity ETFs