Ron Rowland: Global X Fertilizers/Potash ETF (NYSE:SOIL) began trading last Thursday (5/26/11), as the first ETF targeting fertilizer producers. This narrow subindustry within the agricultural/commodity sector has attracted significant investor attention. The past four years brought a boom, a bust, and then another boom for the group.
The underlying Solactive Global Fertilizer/Potash Index tracks the stock price movements of companies active in the fertilizer industry. Components are weighted by free float market capitalization, and then capped at 4.75% as of each semiannual rebalancing.
The index currently has 29 holdings, 18 of which are capped. Therefore, the indexing methodology produces an equally-weighted structure for the largest 62% of the holdings. The nine largest holdings are the above average performers of the 18 stocks that were capped at the initial index construction.
Those top nine are CF Industries (NYSE:CF) 5.3%, Yara International (YARIY) 5.2%, Intrepid Potash (NYSE:IPI) 5.0%, Potash Corp. of Saskatchewan (NYSE:POT) 5.0%, Agrium (NYSE:AGU) 4.9%, Sociedad Quimica y Minera de Chile ADR (NYSE:SQM) 4.9%, Uralkali Spon GDR (URALL) 4.9%, Incitec Pivot (ICPVF) 4.8%, and Kali und Salz Beteiligun 4.8%.
Country representation is interesting. The U.S. is first and Israel has the second largest allocation. Current breakdown is U.S. 21.7%, Israel 13.9%, Canada 11.9%, Australia 9.4%, China 7.8%, Norway 5.0%, Chile 4.8%, Germany 4.8%, Switzerland 4.7%, Russia 4.5%, and others 11.6%.
SOIL has no direct competition. Several other ETFs hold fertilizer stocks but also have additional agriculture holdings beyond fertilizer. Those ETFs include Market Vectors Agribusiness ETF (NYSE:MOO), PowerShares Global Agriculture Portfolio (NYSE:PAGG), Jefferies | TR/J CRB Global Agriculture Equity Index Fund (NYSE:CRBA), and IQ Global Agribusiness Small Cap ETF (NYSE:CROP).
The new SOIL ETF has an expense ratio of 0.69%. The investment case (pdf) has data on fertilizer utilization by country/region along with global supply and demand. Global X provides its typical solid lineup of supporting documentation such as the summary page, press release, fact sheet (pdf), and prospectus (pdf).
Written By Ron Rowland From Invest With An Edge No positions in any of the securities mentioned.
Ron Rowland is the founder of Invest With An Edge and serves as the Executive Editor. He is also editor of AllStarInvestor.com and Chief Investment Officer of Capital Cities Asset Management (www.ccam.com). Quoted widely in the financial media, Ron is the industry go-to guy for sector rotation insight and investment strategies using ETFs and mutual funds.