These Materials ETFs Have A Period Of Seasonal Strength In The Spring

seasons“The U.S. materials sector has a period of seasonal strength in spring. Will the sector again move higher and outperform the S&P 500? The U.S. materials sector consists of equities in the mines and metals, forest products, steel and chemical industries. Chemical stocks represent about 60% of the sector. Top weighted stocks in the sector include Alcoa Inc. (AA/NYSE), Dow Chemical Co. (DOW/NYSE), E.I. du Pont de Nemours & Co. (DD/NYSE), Freeport McMoRan Copper and Gold Inc. (FCX/NYSE), Monsanto Co. (MON/NYSE), Newmont Mining Corp. (NMC/NYSE), Nucor Corp. (NUE/NYSE) and International Paper Co. (IP/NYSE). Seasonal influences Thackray’s 2010 Investor’s Guide notes the sector has a period of strength from Jan. 29 to May 6. The trade has been profitable in 16 of the past 20 periods; the average return per period was 8.0%. The sector outperformed the S&P 500 by 4.5% per period,” Don Vialoux Reports From The Vancouver Sun.

Vialoux continues to say, “Fundamental influences Earnings prospects for the materials sector in 2010 are exceptional. Demand for basic materials is expected to accelerate as infrastructure projects funded by economic stimulus programs get under way. Prices of basic materials including copper, zinc, lumber, steel, iron ore and chemicals already are recovering from depressed 2009 levels and are poised to move higher. Fourth-quarter earnings reports have been substantially lower than the same period last year, but in line or better than consensus estimates. Monsanto fell more than 10% after its release and Freeport McMoRan Copper &Gold dropped over 19% from its recent high.”

“A preferred investment strategy is to wait until after fourth-quarter reports for most companies in the sector have been released. The Bottom Line The seasonal trade in the sector is lining up nicely this year. A refined technical entry point has yet to appear, but likely will arrive shortly. Liquid ETFs in the sector are top candidates for purchase. They include Materials Spdr ETF (XLB), iShares Dow Jones U.S. Basic Materials Sector (IYM) and Vanguard Materials ETF (VAW),” Vialoux Reports.

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Here Are some details on the 3 ETFs mentioned above:

The investment (XLB) seeks to correspond generally to the performance, before fees and expenses, of the materials economic sector. The fund invests at least 95% of assets in companies of the materials sector, as classified by the S&P Composite Stock Index. The fund’s sector includes companies from the following industries: chemicals, construction materials, containers and packaging, materials and mining and paper and forest products. It is nondiversified.

TOP 10 HOLDINGS ( 67.51% OF TOTAL ASSETS)  
 
Company Symbol % Assets
AIR PRODUCTS CHEM (APD) 4.4
ALCOA INC (AA) 4.5
DU PONT E I DE NEM (DD) 8.51
FREEPORT MCMORAN B (FCX) 9.66
INTL PAPER (IP) 3.35
MONSANTO COMPANY (MON) 12.47
NEWMONT MIN CP (HLDG (NEM) 4.69
NUCOR CP (NUE) 4.2
PRAXAIR INC (PX) 6.89
DOW CHEMICAL (DOW) 8.84

Chart for Materials Select Sector SPDR (XLB)

The investment (IYM) seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Dow Jones U.S. Basic Materials index. The fund generally invests at least 90% assets in securities of the underlying index and depositary receipts representing securities of the underlying index. It may invest the remainder of its assets in securities not included in the underlying Index but which BGFA believes will help the fund track the underlying index, and in futures contracts, options on futures contracts, options and swaps as well as cash and cash equivalents. The fund is nondiversified.

TOP 10 HOLDINGS ( 53.68% OF TOTAL ASSETS)  
 
Company Symbol % Assets
AIR PRODUCTS CHEM (APD) 4.12
ALCOA INC (AA) 4.04
DU PONT E I DE NEM (DD) 7.35
FREEPORT MCMORAN B (FCX) 8.53
INTL PAPER (IP) 2.74
NEWMONT MIN CP (HLDG (NEM) 5.82
NUCOR CP (NUE) 3.44
PEABODY ENERGY CORP (BTU) 3.12
PRAXAIR INC (PX) 6.38
DOW CHEMICAL (DOW) 8.14

Chart for iShares Dow Jones US Basic Materials (IYM)

The investment (VAW) seeks to track the performance of a benchmark index that measures the investment return of materials stocks. The fund employs a passive management investment approach designed to track the performance of the MSCI U.S. Investable Market Materials index. This index consists of all capitalization of stocks within the materials sector. The sector includes companies that manufacture chemicals, construction materials, glass, paper, forest products, and related packaging products, as well as metals, minerals, and mining companies. It is non diversified.

TOP 10 HOLDINGS ( 51.93% OF TOTAL ASSETS)  
 
Company Symbol % Assets
AIR PRODUCTS CHEM (APD) 3.7
ALCOA INC (AA) 2.9
DU PONT E I DE NEM (DD) 6.6
ECOLAB INC (ECL) 2.48
FREEPORT MCMORAN B (FCX) 6.42
MONSANTO COMPANY (MON) 9.6
NEWMONT MIN CP (HLDG (NEM) 4.79
NUCOR CP (NUE) 3.36
PRAXAIR INC (PX) 5.71
DOW CHEMICAL (DOW) 6.37

Chart for Vanguard Materials ETF (VAW)

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