Checking In: A Forgotten Global Materials Play

For all the beta and sexiness involved with materials stocks, it's surprisingly easy for some of the ETFs that track this economically sensitive sector fly under the radar. That sentiment is especially true when factoring in ETFs that track non-U.S. materials companies and that's even more surprising when considering non-U.S. materials companies include BHP Billiton BHP, Vale VALE and Rio Tinto RIO, the world's three largest mining companies This is a plight we have lamented before regarding the iShares S&P Global Materials ETF MXI, one of our favorite materials ETFs, and it is an issue that certainly afflicts MXI's kissing cousin, the iShares MSCI ACWI ex US Materials Sector Index Fund AXMT. Frankly, MXI isn't all that American in its tenor, but Freeport McMoRan FCX, DuPont DD, Dow Chemical DOW and Monsanto MON account for about 9% of the ETF's weight. That's a story for another day as we look at AXMT, which made its debut just over a year ago as part of a suite of nine iShares ex-U.S. sector funds. Like many of those ETFs, AXMT has struggled to gain traction with investors as volume remains slack and assets under management total about $6.9 million. Not a terrible haul for a one-year old ETF, but not stellar by any means and certainly far less than one would expect from a new iShares fund. Home to 184 stocks and a fair 0.48% expense ratio, AXMT does exactly what one would expect and that is offer solid exposure to BHP, Vale and Rio Tinto. Those mining giants, which are also the three largest iron ore producers in the world, account for 21% of AXMT's weight. Sprinkle in some Potash POT, Barrick Gold ABX and a slew of other companies that aren't carbon copies of the aforementioned mining trio and you've at least got an interesting, yet undiscovered ETF. While AXMT does offer exposure to myriad solid mining and materials plays, a good thing if the risk trade comes back in vogue, the undiscovered theme here has to be acknowledged. That's often a good thing with ETFs, but that's not the case with AXMT. In evaluating the ETF, the Professor went to three different sources of stock quotes and found the last time AXMT traded was July 20. The last bid/ask spread was a dozy at 76 cents. These are not good signs, but they do say that investors wanting global materials exposure have options. One has the ticker MXI.