Just Because A Sector Is Down Does Not Mean Its Cheap

housingupdownIf the Dow Jones Industrial Average(INDEXDJX:.DJI) were to suddenly shed 6,000 points and was about 30% cheaper than it is today, it’s safe to say that a lot of investors would be taking a very close look and eyeing it as a cheap buying opportunity.

And yet, that is exactly what has happened to gold SPDR Gold Trust (ETF)(NYSEARCA:GLD) and some of the broad based commodity indexes PowerShares DB Com Indx Trckng Fund(ETF)(NYSEARCA:DBC), PowerShares DB Precious Metals Fd (ETF) (NYSEARCA:DBP) over the past year, although the rush back in has yet to materialize. And that is not really a bad thing says Jeff Saut, chief investment strategist at Raymond James.

“Just because they’re down in price does not mean they are necessarily cheap,” Saut says in the attached video. “I still think it’s a bit early. I think you’re 12 to 18 months early on both emerging markets as well as commodities,” he says, before conceding that on a P/E basis, “some of them look pretty cheap.”

This marks a big change for Saut who has advocated owning commodities and what he calls “stuff stocks,” since China joined the World Trade Organization in 2001 on the (correct) belief that rising per capita incomes would cause Chinese people to consume more stuff, and not just oil, gas and coal, but water, electricity, steel, aluminum, copper, fertilizer and cement.

The SPDR Gold Shares is an investment fund incorporated in the USA. The investment objective of the Trust is for the Shares to reflect the performance of the price of gold bullion less the Trust’s expenses. The Trust holds gold and is expected from time to time to issue Baskets in exchange for deposits of gold and to distribute gold in connection with redemptions of Baskets.

ETF TYPE ETF
ASSET CLASS Commodity
MARKET CAP 31463.540 Million
EXPENSE RATIO 0.4%
LEVERAGED N
PROSPECTUS Click Here For Prospectus

The PowerShares DB Commodity Index Tracking Fund is an investment fund incorporated in the USA. The Fund’s objective is to reflect the performance of the DBIQ Optimum Yield Diversified Commodity Index Excess. The Fund invests in commodities such as Light Sweet Crude Oil Heating Oil Aluminum Gold Corn and Wheat.

ETF TYPE ETF
ASSET CLASS Commodity
MARKET CAP 5591.140 Million
EXPENSE RATIO 0.93%
LEVERAGED N
PROSPECTUS Click Here For Prospectus

The PowerShares DB Precious Metals Fund is an exchange-traded fund incorporated in the USA. The Fund’s objective is to track the DBIQ Optimum Yield Precious Metals Index Excess Return.

ETF TYPE ETF
ASSET CLASS Commodity
MARKET CAP 184.830 Million
EXPENSE RATIO 0.79%
LEVERAGED N
PROSPECTUS Click Here For Prospectus

Leave a Reply

Your email address will not be published. Required fields are marked *