Its been more than four years since financial markets took their unprecedented nose dive, and yet some investors still cringe at the mere mention of the year that most wish they could forget. The crash of 2008 shook markets around globe, hammering down prices in nearly every corner of the investable universe. On March 9th 2009, investors were finally able to see the light at the end of the tunnel as rock-bottom markets prepared to make their turnaround. The pickup spurred investors’ appetites for riskier asset classes, luring many to the lucrative world of commodity investing. For the most part, commodities can find a place in almost everyone’s portfolio; the asset class can provide uncorrelated returns and diversification benefits, as well as serve as a potential hedge against inflationary pressures [see also 12 High-Yielding Commodities For 2012].
Thanks to the tremendous growth of the ETF industry, the average investor can now easily tap into an asset class that had previously been virtually unreachable. There are currently over a 100 commodity ETPs for investors to choose from, some of which have posted spectacular gains since their inception. In particular, single commodity ETPs have proven to be a bright spot in the commodities space, outshining some of the more popular broad-based products. Below we highlight 5 of the best performing commodity ETPs over the last three years [see also Three Reasons Why Gold Is Overvalued]:
United States Gasoline Fund LP (UGA): Up 149.11%
UGA invests in one of the most widely-known and used commodities worldwide: gasoline. As gasoline prices have skyrocketed over the last three years, investors in UGA perhaps aren’t so irritated every time they are at the pump since this fund has gained more than 149% over the last three years. UGA’s portfolio primarily consists of RBOB gasoline futures traded on the NYMEX. RBOB stands for “Reformulated Blendstock for Oxygenate Blending”, the raw ingredient used to make different blends of gas, and as such prices on RBOB futures roughly line up with what drivers see at their local gas stations [see also Brent Crude vs. WTI: The Best Performing Commodity].
E-TRACS UBS Bloomberg CMCI Silver ETN (USV): Up 140.69%
Although most people would consider gold the king of the precious metals category, silver has been getting a lot of attention from investors as it has outperformed gold by a huge margin over the last few years. As the markets continue to experience volatility, investors have rushed to this shiny metal to help protect their portfolios from weakness in both bonds and equities. Unlike gold, silver is used in a wide array of industrial applications, meaning the demand for the product will remain relatively high. The futures based USV along with DBS and SLV have all had strong performances, with USV at the top of the list with its gain of more than 140% over the last three years [see also 25 Ways To Invest In Silver].
Dow Jones-UBS Tin Total Return Sub-Index ETN (JJT): Up 118.15%
This ETN offers pure play exposure to tin, another highly versatile metal that is used in a number of industrial applications. Nearly half of the tin produced in the world is used in soldering, while the remainder is divided among tinplates, chemicals, brass/bronze, among other products. As many emerging market countries continue to grow and expand their infrastructure, the demand for this industrial metal has skyrocketed. Over the last three years, Barclays iPath’s JJT has had a stellar performance, gaining more than 118%.
Dow Jones-UBS Cotton Total Return Sub-Index ETN (BAL): Up 117.57%
BAL is one of only two products in the ETP industry that offers investors a pure play approach to cotton, a crucial commodity for textiles around the world. Cotton prices have hit record-breaking highs throughout the last couple years as strong demand from China, India, and other emerging markets have pushed the soft commodity skyward. Since inception, BAL has accumulated more than $40 million in assets and currently maintains a three-year return of over 117% [see also 50 Ways To Invest In Agriculture].
Dow Jones-UBS Copper Total Return Sub-Index ETN (JJC): Up 110.88%
JJC invests in one of the most abundant metals in the world: copper, a commodity that is estimated to have millions of years worth of supplies trapped inside the earth’s crust. Copper is widely used in a number of applications, from wiring systems and circuit boards, in roofing and plumbing products, and in high tech industrial machinery. Generally, copper futures prices reflect the residential and commercial housing industry as well as the overall condition of the economy. The continuing recovery of the housing market combined with China’s skyrocketing demand for raw materials has pushed JJC’s 3-year return to just under 111% [see also 13 Ways To Invest In Copper].
Disclosure: No positions at time of writing.