Zacks Top Ranked Platinum ETF in Focus - ETF News And Commentary
March 21 2013 - 6:47AM
Zacks
Platinum is one of the most popular niche commodities and is
increasingly finding its way into investor portfolios. However, the
price performance in 2012 wasn’t that great, as auto sales and
jewelry demand slumped.
But heading into 2013, the outlook for platinum prices appears
much better. The reason is that the metal is going through a supply
deficit attributable to the labor dispute in South Africa and other
factors in this important producing nation which makes running many
mines unprofitable (Palladium and Platinum ETFs to Soar?).
Stockpiles from another big producer of the metal, Russia, are
also diminishing, leading to a further deficit. Platinum production
outages may result in the highest supply deficit since 2000.
On the demand side, the automotive industry is a big driver of
usage in the platinum market. The metal is used specifically in
catalytic converters to manage vehicle emissions. With a rebound in
the auto industry, the demand for the metal remains steady.
With the need for platinum rising in the auto industry and
supply at an all-time low, the price of the metal is primed to
shoot up going forward. Given the favorable dynamics, this could be
the right time to invest in the metal and doing it through ETFs
makes it even more lucrative thanks to low bid/ask spreads and
minimal expense ratios. (Strong Auto Sales: Good News for Metal
ETFs?).
In fact, platinum related exchange traded funds have been
outperforming gold ETFs and gaining momentum on the back of an
improved economic outlook. Investors are now shifting their asset
base from safe havens like gold to riskier assets such as platinum
(Gold ETFs: Is the Sell-Off Overdone?).
In such a scenario, investors looking to capitalize on the
outperformance of the metal can consider investing in Zacks top
ranked ETFS Physical Platinum Shares ETF (PPLT).
PPLT is a Zacks #2 Rank (‘Buy’) ETF. Thus, we expect this ETF to
outperform its peers.
About the Zacks ETF Rank
The Zacks ETF Rank provides a recommendation for the ETF in the
context of our outlook for the underlying industry, sector, style
box, or asset class. Our proprietary methodology also takes into
account the risk preferences of investors. ETFs are ranked on a
scale of 1 (Strong Buy) to 5 (Strong Sell) while they also receive
one of three risk ratings, namely, Low, Medium, or High.
The aim of our models is to select the best ETFs within each
risk category. We assign each ETF one of five ranks within each
risk bucket. Thus, the Zacks Rank reflects the expected return of
an ETF relative to other products with a similar level of risk.
For investors seeking to apply this methodology to their
portfolio with the Platinum ETF, we have taken a closer look at the
top ranked PPLT below:
ETFS Physical Platinum Shares
(PPLT)
For a bullion-backed approach to platinum ETF investing,
investors can look to ETFS Physical Platinum Shares. PPLT is the
only ETF which is backed by the physical metal and holds the metal
in the form of bullion or ingots. The metal is securely stored in
London and Zürich on behalf of the custodian, JP Morgan Chase
Bank.
Investing in platinum through PPLT represents a cost-effective
and suitable mode for investors. It is expected that the
transaction costs for buying and selling the shares will be lower
than purchasing, storing and insuring physical platinum for most
investors (Invest Like Morgan Stanley with These 5 Commodity
ETFs).
This ETF is designed to track the spot price of platinum
bullion. PPLT is by far the most liquid option available in the
platinum ETF investing world, trading with volumes of 75,100 a day.
The fund trades with assets under management of $842.6 million.
The expense ratio of 0.60 basis points also appears to be much
lower than other ETFs in the space despite the relatively greater
costs associated with physically storing the metal.
While the metal has had a rocky road over the past year, it has
stabilized in 2013 and it is now flat for the YTD period. And if
the current trends in the important automotive and industrial
markets continue to take shape, this could put PPLT into the green
and make 2013 a great year to be invested in platinum ETFs.
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SPDR-GOLD TRUST (GLD): ETF Research Reports
ETFS-PLATINUM (PPLT): ETF Research Reports
SPDR-SP 500 TR (SPY): ETF Research Reports
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