Exchange Traded Funds (ETFs)

Gain Diversified Exposure to Commodities with This Fund

VanEck Vectors Natural Resources ETF (HAP) is a fund that tracks an index of companies involved in the production and distribution of commodities and commodity-related products.

HAP tracks companies in the following six sectors: Agriculture, Alternatives (Water & Alternative Energy), Base and Industrial Metals, Energy, Forest Products and Precious Metals. Within each sector, HAP weights companies by their market caps and the fund takes sizable positions in the oil and gas industry, as well as the metals and mining space, while still offering decent overall exposure.

For a sector breakdown, HAP is 34% invested in basic materials, 25% in oil and gas, 21% in consumer goods and 13% in industrials. HAP is considered by many analysts to be a good guard against inflation, thanks to the nature of commodities and the fund’s capabilities to often generate better returns than fixed-income investments.

HAP has an expense ratio of 0.50% and pays an annual dividend, with a dividend yield of 2.04%. The last dividend of $0.75 was paid was in December 2017.

After rising 25% in 2016 and 17% in 2017, HAP started 2018 off on a strong note but experienced a sharp pullback in February before recovering and holding steady at around the $37 level. Year to date, HAP has returned down 0.32%. HAP has returned 10.34% over the last 12-month period.

As of Sept. 18, HAP is trading above both its 50-day and 200-day moving averages. Based on this and other technical indicators, several investment sites, such as investing.com, have rated HAP as a “buy.” However, at least one site also has indicated that HAP is in an overbought state, advising “caution” for investors who are considering going long in the fund.

Chart courtesy of Stockcharts.com

HAP’s total assets of $94 million are invested in nearly 300 different holdings. Top holdings are Deere & Co (DE), 8.34%; Nutrien Ltd (NTR), 6.54%; Archer-Daniels-Midland Co. (ADM), 5.05%; Tyson Foods Inc (TSN), 3.35%; and ExxonMobil Corp. (XOM), 3.08%.

An exposure breakdown by country shows that HAP is fairly diversified as well. Aside from having 47% of the fund’s assets invested in the United States, HAP is invested in many regions in the world. Currently, some of the fund’s other top exposures are: 12% of assets are invested in Canada, 5.5% in Australia, 5% in the United Kingdom, 4% in Japan and 3.5% in Norway.

Investors interested in a more diversified approach to commodities can do their diligence on VanEck Vectors Natural Resources ETF (HAP) to see whether it is a suitable fit for their portfolios.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Intelligence Report, Investing Edge, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.