Commodity-related ETFs remain among the leaders in 2022.
The broader stock market remains deeply in the red this year, with the S&P 500 index down 14% and the tech-heavy Nasdaq down about 23% through June 1. As we enter the summer months, however, it’s worth noting that there are some tactical bets that have actually done quite well so far in 2022. And furthermore, it’s important to acknowledge that past performance is never an indicator of future returns, and it’s possible the market leaders could come from a currently unloved corner of the market. The following seven exchange-traded funds, or ETFs, all offer different opportunities right now that could pay off based on recent dynamics on Wall Street.
Invesco Dynamic Energy Exploration & Production ETF (ticker: PXE)
If you’re not interested in fighting the trends on Wall Street, then you could do worse than this “dynamic” energy fund that is focused on the companies that drill for oil and gas. Right now, the fund includes about 30 positions including bigger stocks like the roughly $150 billion ConocoPhillips (COP), as well as lesser-known midsize players. The ETF is formulated to chase the stocks in the sector with the strongest price momentum and earnings momentum, among other metrics, and this dynamic approach has really delivered as the fund has tacked on an amazing 78% so far this year — including more than 20% in the last 30 days, hinting that sentiment is still moving in the right direction.
iShares Global Energy ETF (IXC)
If you want to go bigger on energy, in every sense of the word, then consider IXC as an alternative to the smaller and more boutique Invesco fund. This iShares fund boasts $2 billion in total assets, has almost 50 stocks, and takes a global approach that includes some of the largest energy stocks in the world regardless of location. The U.S. is still highly represented, with top holdings Exxon Mobil Corp. (XOM) and Chevron Corp. (CVX) part of a roughly 60% allocation to the region. And the international stocks like BP Plc (BP) are still very well known to domestic investors. So if you want a slightly more diversified and entrenched way to play the surge in energy, consider IXC right now.
Aberdeen Standard Bloomberg All Commodity Strategy K-1 Free ETF (BCI)
Looking beyond just oil and gas, this Aberdeen fund offers a diversified way to play commodity investments across the board including gold, corn, copper and other key raw materials. The fund’s roughly two dozen commodities are selected based on their trading volume as well as the overall production level of these goods around the world. What’s more, the $1 billion fund is structured in a way to avoid pesky K-1 tax forms that can sometimes plague commodities or futures investors. If you want a hedge against the broad trends of inflation, consider BCI. The fund is up more than 30% this year through June 1.
iShares MSCI Brazil ETF (EWZ)
A slightly different play on this theme of commodity investing is this roughly $6 billion iShares Brazil ETF that is comprised of the top 50 or so names in the region. These are stocks including metals and mining giant Vale SA (VALE), state-run oil giant Petroleo Brasileiro SA (PBR) and leading Latin American bank Itau Unibanco Holdings SA (ITUB). This resource-rich nation is on the rise thanks to surging commodity prices, but EWZ is also benefiting from a nice tail wind thanks to a broader economic recovery that began to take place in Brazil in the wake of the pandemic. This convergence of factors has added up to year-to-date returns of 25% for this country-specific fund.
Vanguard Value ETF (VTV)
If you’re not interested in going overboard on commodity-related stocks, then consider the broader rotation from growth to value that continues to take place on Wall Street and carve out a position in this Vanguard ETF. With more than $100 billion in assets, this leading index fund is a simple and affordable way to shift away from the usual large-cap tech stocks and into more value-oriented investments. With about 350 or so total positions, you get a stake in top U.S. stocks like Johnson & Johnson (JNJ) and Proctor & Gamble Co. (PG). However, with the top sector holdings being health care, at 21%, and financial services, at 19%, you’ll avoid the typical formulation of large-cap funds and instead rely on lower-risk value stocks in these areas.
Vanguard Mega-Cap Growth ETF (MGK)
The flip side is that while many stocks are hurting in 2022, the very long term is always good for investors who carve out a position in a down market. For those who believe the big winners will keep winning over the coming years, the Vanguard Mega-Cap Growth ETF may be a good option to add “wide moat” stocks with massive scale to your portfolio on the cheap. You get only the largest 100 U.S. stocks, led by favorites like Microsoft Corp. (MSFT) and Apple Inc. (AAPL) — with a median market cap of a staggering $540 billion or so among these holdings. If you want to play growth stocks with staying power as part of a long-term strategy, MGK could be worth a look this summer.
Vanguard Short-Term Bond ETF (BSV)
Of course, it’s worth noting that there are also investments beyond stocks that could be worth a look. One of the most widely held ETFs in this category is this short-term Treasury fund that has held tough even as other bond investments have been under pressure amid the rising interest rate environment. And though the payouts won’t set your hair on fire at a current yield of 2.9%, that’s much better than you would find in short-term Treasurys a year ago. And besides, if you’re concerned about continued volatility, the value of BSV comes from its potential for stability and capital preservation.
7 best ETFs to buy now:
— Invesco Dynamic Energy Exploration & Production ETF (PXE)
— iShares Global Energy ETF (IXC)
— Aberdeen Standard Bloomberg All Commodity Strategy K-1 Free ETF (BCI)
— iShares MSCI Brazil ETF (EWZ)
— Vanguard Value ETF (VTV)
— Vanguard Mega-Cap Growth ETF (MGK)
— Vanguard Short-Term Bond ETF (BSV)
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Update 06/02/22: This story was published at an earlier date and has been updated with new information.