Materials Sector Gains Steam In Q3: 5 Best ETFs & Stocks

The materials sector has become the hottest trade of this quarter. Though the sector tends to be the most sensitive to global economic growth expectations, it has been outperforming other sectors, just trailing the consumer discretionary. Notably, the S&P 500 Materials Sector Index climbed 12.4% compared with a gain of 13.2% for the S&P 500 Consumer Discretionary Index.

The strong performance came on the back of Fed’s super-dovish view. In its latest policy meeting, Chairman Jerome Powell kept U.S. interest rates near zero and pledged to keep rates at lower levels until the end of 2023. Lower rates have put pressure on the U.S. dollar that has made dollar-denominated materials cheap for foreign investors, raising demand for products that these companies sell. As the sector is heavily dependent on interest rates for capital expenditures, lower rates are a boon.

Additionally, greater demand from China, rising commodity prices, and improving industrial activities added to the strength of the sector. In particular, the industrial sector has been recovering from the pandemic though at a slower pace. Output increased in spring and early summer as factories reopened.

Further, the broad market sell-off early in the month, triggered by technology sell-off, has made the sector‘s valuation compelling. This has encouraged investors to buy at a bargain. However, the trade war continues to loom on the sector’s profitability, given its heavy dependence on international trade. Additionally, the dollar has shown some strength in the latest trading sessions on a safe haven demand amid market turmoil.

Given this, we have highlighted five materials ETFs and stocks that have outperformed so far this quarter:

Global X Lithium & Battery Tech ETF (LIT - Free Report) – Up 25%

The product provides global exposure to a broad range of firms engaged in lithium mining, refining and battery production by tracking the Solactive Global Lithium Index. It holds 42 securities in its basket with AUM of $752 million and expense ratio of 0.75%.

Sprott Junior Gold Miners ETF (SGDJ - Free Report) – Up 21.4%

This fund follows the Solactive Junior Gold Miners Custom Factors Index, which measures the performance of junior gold producers with the strongest revenue growth and junior exploration companies with the strongest stock price momentum. It holds 40 stocks in its basket with Canadian firms making the largest share at 46.9%, followed by United States (19.2%) and Australia (15.5%). The fund has amassed $106.1 million in its asset base and charges 50 bps in annual fees from investors.

Global X Copper Miners ETF (COPX - Free Report) – Up 21.2%

This ETF offers global access to a broad range of copper mining companies. It tracks the Solactive Global Copper Miners Total Return Index and holds 27 stocks in its basket. Canadian firms take the largest share at 33.9% while Britain and the United States round off the next two spots. The product has managed $105.6 million in its asset base while charging 65 bps in fees per year.

ETFMG Prime Junior Silver ETF (SILJ - Free Report) – Up 19.8%

SILJ provides direct exposure to the silver mining exploration and production industry by tracking the Prime Junior Silver Miners & Explorers Index. It holds 48 stocks in its basket with Canadian firms taking the lion’s share at 69%, while the United States and Peru have double-digit exposure each. The fund has managed assets worth $418.4 million and charges 69 bps in annual fees.

Amplify Advanced Battery Metals And Materials ETF (BATT - Free Report) – Up 16.7%

This fund is actively managed and provides exposure to lithium, cobalt, nickel, manganese, and graphite via publicly-traded stocks. It holds 34 stocks in its basket with AUM of $7.3 million and expense ratio of 0.72%.

Taseko Mines Limited (TGB - Free Report) – Up 146.5%

This mining company acquires, develops, and operates mineral properties. With a market cap of $300.4 million, it has a Zacks Rank #3 (Hold) and a VGM Score of A.

GrowGeneration Corp. (GRWG - Free Report) – Up 140.1%

This company owns and operates specialty retail hydroponic and organic gardening stores. It has a Zacks Rank #2 (Buy) and a Growth Score of A. The stock has a market cap of $793.8 million.

Great Panther Silver Limited (GPL - Free Report) – Up 88%

With a market cap of $335.3 million, this company is engaged in the production of silver in Mexico. It has a Zacks Rank #3 and a VGM Score of A.

Arch Coal Inc. (ARCH - Free Report) – Up 78.8%

It is one of the largest coal producers in the United States, operating nine mines across the major coal basins of the country. With a market cap of $758.5 million, the stock has a Zacks Rank #3 and a VGM Score of B.

Hecla Mining Company (HL - Free Report) – Up 60.9%

This company is a leading low-cost U.S. silver producer with operating mines in Alaska and Idaho and is a growing gold producer with an operating mine in Quebec, Canada. It has a Zacks Rank #2 and a Growth Score of B. Hecla Mining has a market cap of $2.8 billion.

Disclosure: contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any specific ...

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