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Best And Worst Q3 2019: Basic Materials ETFs And Mutual Funds

The Basic Materials sector ranks seventh out of the 11 sectors in our Q3'19 Sector Ratings for ETFs and Mutual Funds report. Last quarter, the Basic Materials sector ranked fourth. It gets our Neutral rating, which is based on an aggregation of ratings of the 147 stocks in the Basic Materials sector as of July 11, 2019. See a recap of our Q2'19 Sector Ratings here.

Figures 1 and 2 show the five best and worst rated ETFs and mutual funds in the sector. Not all Basic Materials sector ETFs and mutual funds are created the same. The number of holdings varies widely (from 25 to 199). This variation creates drastically different investment implications and, therefore, ratings.

Investors seeking exposure to the Basic Materials sector should buy one of the Attractive-or-better rated ETFs or mutual funds from Figures 1 and 2.

Our Robo-Analyst technology empowers our unique ETF and mutual fund rating methodology, which leverages our rigorous analysis of each fund’s holdings. We think advisors and investors focused on prudent investment decisions should include analysis of fund holdings in their research process for ETFs and mutual funds.

Figure 1: ETFs with the Best & Worst Ratings



*Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity.

Four ETFs (SLX, PYZ, PSCM, JHMA) are excluded from Figure 1 because their total net assets (TNA) are below $100 million and do not meet our liquidity minimums.

Figure 2: Mutual Funds with the Best & Worst Ratings


*Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity.

PICK is the top-rated Basic Materials ETF. There are no mutual funds that receive a Neutral-or-better rating. PICK earns a Very Attractive rating.

IYM is the worst rated Basic Materials ETF and FMFAX is the worst Basic Materials mutual fund. They both earn a Very Unattractive rating.

147 stocks of the 2800+ we cover are classified as Basic Materials stocks.

The Danger Within

Buying a fund without analyzing its holdings is like buying a stock without analyzing its business and finances. Put another way, research on fund holdings is necessary due diligence because a fund’s performance is only as good as its holdings’ performance.

PERFORMANCE OF HOLDINGS = PERFORMANCE OF FUND

Analyzing each holding within funds is no small task. Our Robo-Analyst technology enables us to perform this diligence with scale and provide the research needed to fulfill the fiduciary duty of care. More of the biggest names in the financial industry are now embracing technology to leverage machines in the investment research process. Technology may be the only solution to the dual mandate for research: cut costs and fulfill the fiduciary duty of care. Investors, clients, advisors and analysts deserve the latest in technology to get the diligence required to make prudent investment decisions.

Figures 3 and 4 show the rating landscape of all Basic Materials ETFs and mutual funds.

Figure 3: Separating the Best ETFs From the Worst ETFs

Figure 4: Separating the Best Mutual Funds from the Worst Mutual Funds