Houston, Texas – Investors seeking opportunities in the materials sector may find potential in the Fidelity MSCI Materials Index ETF (FMAT). While tech investments have been in the spotlight, companies involved in natural resources have been overlooked. Investing in underinvested sectors can often lead to profitable returns, making FMAT an attractive option for those looking to diversify their portfolios.
FMAT is a passively managed fund that aims to mirror the performance of the MSCI USA IMI Materials 25/50 Index. With a low expense ratio of just 0.084%, it offers a cost-effective way to gain exposure to a variety of materials-related companies. The fund holds around 115 positions, with a significant portion of its holdings concentrated in the top 10 companies.
One of the major holdings in the FMAT portfolio is Linde PLC, a multinational industrial gases and engineering company. With diverse operations ranging from producing atmospheric gases to designing and constructing gasification plants, Linde PLC represents a key player in the materials industry. Other notable holdings include The Sherwin-Williams Company, known for its paint and coatings products, and Freeport-McMoRan Inc., a leading mining company specializing in copper, gold, and molybdenum production.
In terms of sector composition, FMAT has significant allocations in chemicals and gas industries. While some investors may expect more focus on solid commodities like steel and copper, the fund’s industry classifications align with typical materials funds. Comparing FMAT to the Materials Select Sector SPDR Fund ETF (XLB), both funds share similar top holdings, but with varying weightings. The performance of FMAT and XLB has shown relative stability over time, with no clear advantage favoring one over the other.
Investors considering FMAT should keep in mind the cyclical nature of the materials sector, which tends to perform well during economic recoveries. As economic growth accelerates, demand for construction materials and industrial chemicals is expected to rise, potentially benefiting companies within the materials industry. While near-term challenges such as increased interest rates and lingering recession fears may impact sector performance, long-term prospects for materials stocks remain promising.
In conclusion, for investors bullish on the economic outlook and anticipating an expansion, FMAT provides an efficient way to access the materials sector. With broad diversification and exposure to cyclical stocks, the fund offers a potential avenue for capitalizing on the sector’s growth. However, concentration risk remains a consideration, given the significant weight of the top 10 holdings in the fund.
