Investors in Chicago, Illinois are keeping a close eye on the FlexShares Morningstar Global Upstream Natural Resources Index Fund ETF (NYSEARCA: GUNR). This exchange-traded fund, managed by Northern Trust Corporation, offers a diversified approach to investing in commodities across various industries, including energy, materials, metals, and mining, among others.
Approximately half of GUNR’s holdings come from the basic materials sector, with a significant portion also allocated to energy investments. While the ETF is not actively managed, it consists of 165 holdings, with the top 10 stocks making up a considerable percentage of its assets. However, the remaining 140 positions are spread across a diverse range of stocks, limiting the impact of any single stock on the fund’s overall performance.
Among the top 5 holdings of GUNR, three companies are involved in hard commodities, while two are linked to soft commodities. Despite displaying impressive profitability based on quant factor grades, these companies have experienced negative year-over-year revenue growth, indicating potential challenges in the market.
The natural resources sector plays a vital role in global economic development, encompassing resources like minerals, fossil fuels, water, forests, and agricultural land. Fossil fuels serve as primary energy sources for various industries, while minerals such as iron, copper, and aluminum are essential for manufacturing processes.
Going forward, the ETF faces the challenge of aligning with the shift towards sustainable resources and energy solutions. While GUNR may not heavily feature clean energy companies, the continued demand for fossil fuels like oil, coal, and gas suggests a stable outlook for these resources in the near future.
In addition to its exposure to hard commodities, GUNR holds investments in metals and mining companies. Analysts are closely monitoring commodity price forecasts, considering the potential for a new commodities supercycle driven by resurgent demand and supply constraints.
With a price-to-earnings ratio of around 13, GUNR presents value-oriented opportunities for investors, offering a dividend yield that surpasses that of the S&P 500 index. Despite underperforming some peers, recent gains and the prospect of a commodities supercycle position the ETF favorably for investors seeking global diversification and exposure to the natural resources industry.
