ETF Opportunity in the Undervalued Natural-Resources Sector
A low-cost, one-stop holding for diversified equity exposure to global natural resources.
Despite their volatility, stocks linked to natural resources can provide significant diversification benefits and inflation protection. Natural resources are key inputs whose prices inversely affect the profitability of companies in other industries. As the prices of the commodities they sell rise, natural-resources companies become more profitable, which also makes them a good inflation hedge. SPDR S&P Global Natural Resources (GNR) offers exposure to this emerging investment theme by tracking the world's 90 largest companies linked to natural resources in the energy, agriculture, and metals and mining sectors. The idea is that by combining exposure to these sectors, this exchange-traded fund can offer investors a smoother ride. A word of caution: The correlations between these sectors are higher today than they have been in the past, as weak global demand driven by the slowdown in China and sovereign debt crisis in Europe continues to depress commodity prices across the board. The fund is a suitable satellite holding for investors who are looking for a high-risk, high-reward way to position for renewed growth in emerging markets and a global economic recovery.
Alex Bryan does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.