Due in large part to soaring energy prices, investors holding basic energy sector ETFs are being rewarded this year. However, oil isn’t the only commodity setting a torrid pace.
The benefits of diversification in the commodities equity complex are highlighted by the (CCNR ). Actively managed and home to nearly $390 million in assets under management, CCNR is up 24% year-to-date, confirming investors can potentially reap rewards when embracing unique approaches to commodities-intensive sectors.
CCNR turns two years old in July and attempts to beat the Bloomberg Commodity Index. The ETF is showing advisors and investors the value of an unconstrained approach to investing in commodities stocks. As just one example, the ALPS fund allocates nearly 74% of its weight to energy and materials stocks, which is benefiting investors because those are two of this year’s best-performing sectors.
Energy commodities, namely oil, are capturing plenty of headlines this year. An obvious byproduct of the Iran war, the energy crisis is benefiting CCNR because 42% of its portfolio is devoted to energy stocks. However, prospective investors shouldn’t sleep on the fund’s materials exposure.
In the U.S., materials stocks represent small percentages of widely followed equity gauges, but on a global basis — relevant because CCNR is a global ETF — the sector is massive and one with important economic implications.
“The Materials Sector is a cornerstone of the global economy, encompassing industries that discover, develop, and process raw materials into finished goods,” noted Interactive Brokers. “This sector is vast, ranging from mining and metals to chemicals and construction materials, playing a crucial role in industrial and infrastructural growth worldwide. While the sector only comprises only 3% of the S&P 500 index, it has a total of 268 stocks with a combined market cap of $2.106 trillion and a total revenue of $1.168 trillion.”
One of CCNR’s key selling points is its heavy exposure to materials — a sector that benefits from the AI boom while offering the ‘hard asset’ security of low obsolescence (HALO).
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All of those data centers that are being built require massive amounts of copper and aluminum. The International Energy Agency (IEA) estimates data center demand for copper could double by 2030. Of course, data centers also need power to function and that too, is good news for CCNR investors. The active commodities ETF allocates almost 9% of its portfolio to the utilities sector.
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