Sweeping macroeconomic turmoil and looming marketplace doubts have created a treacherous environment for commodity investors over the past few months.
Whilst the risk of an upheaval remains present, as we have seen in latest days, the fog can be lifting on hard assets.
At the start of the week, commercial giant Caterpillar(CAT) injected a welcomed dose of confidence into commodities. The firm noted that its mining branch had been a major contributor to its analyst-beating quarterly earnings numbers.
In addition, hunting ahead CAT appeared confident that demand for mined resources will stay strong. Iin the middle of the summer, the company expanded its reach into the mining industry, spending over $8 billion to acquire Bucyrus International, an equipment firm.
Investment experts are optimistic regarding hard assets too. On Monday, Bloomberg reported that the number of bullish bets on commodities from the hedge fund industry had increased to levels last seen in August. According to the report, waning concerns regarding a double-dip recession combined with improving sentiment towards emerging markets are helping to restore these investors' appetites for energy and agricultural products.
In the past I have pointed to futures-backed money like the PowerShares Commodity Fund(DBC) as an attractive how to gain exposure to commodities.
While long-only products such as DBC are attractive during periods of strength, I additionally directed investor attention towards the WisdomTree Managed Futures Fund(WDTI) during the opening half of the month. This pseudo active ETF casts a web over a broad collection of commodity- and currency-tracking futures contracts, taking long as well as short positions. This strategy allows the fund to navigate any kind of market environment.
These money have proven to be effective for resource-hungry investors in the past. However, definitely not all people are comfortable with the idea of targeting their favorite commodities using futures contracts. Those wary of these instruments can would like to consider taking aim at hard assets using an equity-backed ETF.
The growth of the ETF industry has led to the creation of a vast collection of funds designed to provide investors with exposure to single commodity-related industries. For example, investors can use products such as the Marketplace Vectors Agribusiness ETF(MOO), Market Vectors Coal ETF(KOL) or the First Trust ISE Revere Natural Gas Index Fund(FCG) to gain exposure to leading companies in the agriculture, coal, as well as natural gas industries respectively.
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