GMET - GMET And Commodities Are A Decent Approach To ESG

Summary

• What's nice about GMET is that it takes a more oblique and potentially successful approach towards the ESG matter.
• Copper prices are quite important for the ETF, and relative to the trailing PE, copper is keeping it at a nice level for the future thanks to the commodity's resilience.
• Otherwise, exposures are more miscellaneous but still focused on EV and renewable energy.
• China's reopening helps keep this commodity-focused ETF on track.
• Still, we think that with a commodity approach to renewables, investors would be better served by Anglo American Platinum.

The VanEck Green Metals ETF ( GMET ) is a way for investors to make a more oblique bet on the EV and renewable energy industry. Weighted towards companies with exposures that are more supported by renewable energy trends like copper, it gets you in a position for secular growth at a commodities' multiple. While the opportunity with copper and EV is well documented, we think there are more aggressive ways to get exposure to the trends in renewable energy at even cheaper multiples with Anglo American Platinum ( ANGPY ), but for thematic and high-level investors, GMET gets you in with pretty low expense ratios.

GMET Breakdown

As always, let's start with a look at the top holdings :

The top-4 holdings account for about 30% of the total ETF's allocations. Quite a lot of this exposure is in copper. Freeport-McMoRan ( FCX ) is highly copper exposed, Anglo American ( NGLOY ) is around 20% copper exposed . Glencore ( GLCNF ) is less copper exposed, with half of its business in dirty products like oil and coal, with the other half being partially exposed to copper, but also a host of other metals that all hit the GMET mark, because not just copper lies behind renewable technologies. Albemarle ( ALB ) fails a bit in being a metals company, but the majority of their business is exposed to energy storage.

The next 30% of the portfolio is a lot of lithium, cobalt and mixed bulk and copper exposures that stay pretty on target.

Bottom Line

The trailing P/E is 10.8x and expense ratios are 0.59%, which is slightly above average for broad-based but thematic ETFs. Of course, 10x is a low ratio for a reason, which is that commodity exposures are generally considered past their prime. However, copper is sustaining the average levels from 2022. Moreover, Lithium remains above average levels for 2022. Cobalt is weaker, as well as some of the other metals like aluminum and steel which have retracted considerably, but a fair amount of this ETF's exposure is still to the minerals that have remained high. Lithium is closer to 20% of the portfolio, and copper exceeds easily the 20%, and together they account for half of the commodity exposure in this portfolio and have sustained their levels. The rest of the commodities have given back gains, but the 10x multiple shouldn't lift too much, especially if a China reopening starts to reflate typical industrial commodities.

The downside of GMET is that there's no yield to speak of - it's low at 2.3%.

Moreover, we think that while GMET is a smarter way to play renewables than buying an EV stock, whose prices are so inflated, there are still better ways to get exposure to renewable like with Anglo American Platinum. The PGMs remain a more stealthy way to play the hydrogen angle, where copper and these other commodities are already priced with the green revolution in mind. It shows in that ANGPY is still trading at a pretty low multiple, of course also reflecting commodity concerns, but also offers a much higher yield at 9%, although ANGPY has variable dividends.

Still, the commodity angle on renewable is good and is the way to play the sector rather than going downstream to more popular cousins in the market.

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