At the final leg of 2016, the year which spelt gloom for the broader market initially and cheers later, we can safely spot a few sectors that did surprisingly well. Among the surprising winners, the metal and mining sector has outperformed the market (read: 5 ETFs Up Over 100% This Year).
The mining sector has been under pressure over the past few years on commodity market rout and unfavorable demand-supply dynamics. In particular, a stronger greenback amid the gradual Fed policy tightening in recent times marred the lure for commodity investing.
Still, metal and mining ETF investors enjoyed stellar gains in the initial phase of this year thanks to global growth worries and the resultant spike in volatility. Two precious metals – gold and silver – led the rally as these are known as safe haven assets.
If this was the story of the first half, the second-half rally was supported by Trump and China. U.S. president-elect Trump’s pledges to invest in infrastructure activities went in favor of some industrial metals, which are used as raw materials of infrastructural activities.
Plus, China's factory activity grew at its fastest clip in over two years in November. Since the Chinese economy accounts for about half of the global consumption of the industrial commodities, the surge in metal and mining stocks are self-explanatory. Investors should note that manufacturing activities are on an uptrend in various corners of the globe lately (read: Global Manufacturing in Growth Zone: ETFs to Watch).
Below, we thus highlight three ETFs and stocks from the metal and mining space that emerged as winners. These products are worth keeping an eye on to see if they can remain top performers going into 2017 (read: 6 Best Performing Leveraged ETFs of 2016).
ETF Outperformers
PureFunds ISE Junior Silver ETF SILJ – Up 133.1%
The 24-stock fund gives exposure to small-cap companies engaged in the silver industry. The fund charges 69 bps in fees. Coeur Mining, Pan American Silver and First Majestic Silver are the top three holdings of the fund (read: Will Silver ETFs Outshine Gold in 2017?).
PF ISE-JS SC ME Price | PF ISE-JS SC ME Quote
SPDR S&P Metals and Mining ETF XME – Up 108.5%
This metal and mining fund has a tilt toward smaller-cap stocks. Steel companies occupy major share of the fund. The product charges 35 bps in fees.
SPDR-SP MET&MIN Price | SPDR-SP MET&MIN Quote
VanEck Vectors Steel ETF SLX – Up 98.4%
The fund looks to track the NYSE Arca Steel Index which focuses on the performance of companies in the steel sector. The fund charges 55 bps in fees. Vale (12.96%), Rio Tinto (12.18%) and Arcelormittal (6.76%) are the top three stocks of the fund. Geographically, the U.S. takes the top spot with about 38.8% weight while Brazil (22.6%) and U.K. (12.2%) also get a double-digit allocation.