Monday, July 8, 2013

If you think a Brit winning Wimbledon is just the latest parallel to 1936, you might be interested in Quant’s top 10 today with 3 gold and silver mining funds.  Our old friend GDX is in 3rd place followed by the Global X Silver Miners Fund (SIL) in 6th and the iShares MSCI Global Gold Miners Fund (RING) in 9th place. The 8th place SPDR S&P Metals and Mining Fund (XME) tends to trade with that group but a closer look at its tear sheet suggests it is in fact very different.

We first highlighted the comparison of XME to GDX last year on October 23rd.  A cursory glance shows each devoted to the basic materials sector, accounting for at least 80% of AUM, but half of GDX is headquartered in Canada while XME is almost all US.  Most providers of information on ETFs stop there which may explain why these funds tend to trade similarly; although GDX looks like a 2X version of XME down almost 50% year to date while XME is down almost 25%.  Both have elevated Risk Ratings with GDX showing higher risk with 6.26 Red Diamonds compared to XME’s 5.67, but GDX also gets a higher Reward Rating.  If you think trouble like 1937 lies ahead you may want to stick with those gold funds because XME holds an economically sensitive group of companies.  Only ETFGsm shows sub industry exposure which reveals less than 20% of the miners in XME are mining precious metals.   Almost 35% are steel miners with another 17% mining coal and consumable fuels and 21% in the diversified metals and mining sub industry.  So you can see that XME is not a bomb shelter fund but could be a good choice if you think earnings and economic numbers will be surprising to the upside in the coming weeks.

Both funds get to the upper ranks on strong Fundamental Scores around 80, bearish sentiment which also scores well, but technical scores below 50 reflecting their poor performance this year.  Momentum players would probably not like either but value investors could like them both.  Bulls should prefer XME while bears may like GDX and those other precious metals mining funds.  We will let you decide as we try to dig out our old Fred Perry sneakers in honor of Andy Murray’s win on Wimbledon’s grass.  Thanks for reading and good luck this week.

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