After a disastrous 2013, mining stocks bounced back from their lows at the start of 2014 and are trending higher. Commodity prices, in particular gold and silver, have risen sharply this year, as concerns on global economic growth and Fed tapering plans once again increased the safe haven appeal.
This is especially true given signs of slowdown in China and depressed emerging markets. Trading in emerging markets has been rough of late on growing political and financial instability in many nations as well as sliding currencies. Further, falling equity markets are bolstering the demand for metals (read: 3 Sector ETFs Surging to Start 2014).
This turnaround has finally shifted focus on the mining space, leading to some strong performances in the broad commodity world. Given this broad rally, the miners, who are often leveraged to the price changes of their underlying commodities, have started gaining traction.
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In fact, many mining ETFs have lately seen a spike with several gaining nearly double digits from a year-to-date look, suggesting that the bullish trend could continue for at least in the near term. Below, we have highlighted three mining ETFs that are leading the way in 2014 but are rather unknown within the space.
Any of these could be excellent plays for investors seeking to ride this sudden move in the metal mining space even higher (see: all the materials ETFs here):
PureFunds ISE Junior Silver ETF (SILJ)
This product provides a true small cap play on the silver mining space. The fund has managed assets worth $1.7 million and trades in a paltry volume of less than 5,000 shares a day. The ETF charges 69 bps in annual fees. The product tracks the ISE Junior Silver Small Cap Miners/Explorers Index.
In total, the fund holds about 24 companies with the largest allocation going to top three firms – Fortuna Silver Mines (FSM), Endeavour Silver (EXK) and Silvercorp Metal (SVM) – which make up for nearly 12% each. In terms of country exposure, Canadian firms dominate the fund at 74% while U.S. securities make up for a 25% share. SILJ added over 18% in the year-to-date time frame.
Global X Gold Explorers ETF (GLDX)
This ETF provides exposure to the small basket of 19 gold mining firms by tracking the Solactive Global Gold Explorers Index. The product has $33.7 million in AUM and sees roughly 53,000 shares in average daily volume. Expense ratio came in at 0.65% (read: Can Gold Mining ETFs Dazzle in 2014?).
The product is highly concentrated on the top firm – B2Gold Corp. – making up for 15.28% of total assets. Other securities do not hold more than 7.7% share. The fund mainly consists of the small cap companies of Canada as these account for 82% of GLDX. Australia, U.S. and United Kingdom take the remaining portion. The ETF has gained nearly 16% so far this year.
Market Vectors Junior Gold Miners ETF (GDXJ)
GDXJ is also a small cap centric fund and follows the Market Vectors Global Junior Gold Miners Index, holding about 69 securities in its portfolio. Once again, Canadian firms take the lion’s share at 60.1%, though Australia (20.8%) and the U.S. (9.2%), round out the top three. Argonaut Gold, China Gold International Resources and Semafo Inc occupy the top three positions with a combined 13% share.
The fund amassed more than $1.4 billion in its asset base and sees solid trading of nearly 1.3 million shares a day. The ETF charges 55 bps in fees per year from investors and returned over 10.6% so far this year (read: 3 ETFs Surging on Weak Jobs Data).
The mining ETFs have shown an impressive comeback from its past year lackluster performance and is clearly outpacing the broad market funds and other sector funds by a wide margin (read: A Comprehensive Guide to Mining Industry ETFs).
Investors should definitely consider mining ETFs in their portfolio given the encouraging recent trends and global malaise.
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