SPDR S&P Metals & Mining ETF

XME

Market cap $3.08B

The SPDR® S&P Metals and Mining ETF offers diversified, liquid exposure to rising metals prices, with a strong bullish trend since 2020. XME has rallied 471% from its March 2020 low, benefiting from substantial gains across gold, silver, copper, aluminum, zinc, and uranium. XME receives top ETF grades for price performance and liquidity, though it scores lower on dividend yield and risk due to metals volatility.

This article provides a top-down analysis of the materials sector based on fundamental metrics. The construction materials industry is slightly overvalued, while the chemicals industry has the worst value and quality scores. SPDR® S&P Metals and Mining ETF is best suited for tactical allocation in the metals and mining subsector, with value characteristics and recent XME outperformance.

Over the last 100 trading days, or roughly five months, the S&P 500 Index (SPX) has surged more than 25%.

Subscribers to  Chart of the Week  received this commentary on Sunday, July 13.

Rare earth metals are raw materials that you'll find in various tech gadgets and everyday resources.

Copper's surge and XME's 45% rally signal optimism, but I maintain a hold rating, due to mixed technicals and neutral valuation. XME's equal-weight structure and SMID-cap focus drive volatility, with a P/E above 18 making fundamentals less attractive after the recent run-up. Seasonal trends favor metals and mining in July, but resistance between $66-$71 and flat long-term moving averages temper my enthusiasm.

I rate XME a ‘Buy' due to its low valuation compared to gold and its potential to hedge against tariff-fuelled inflation and dollar depreciation. XME trades at a discount relative to the broader market with a P/B of 1.41, P/E of 14.1, and P/CF of 8.42. XME historically outperforms gold during recovery phases after being temporarily devalued relative to gold during broader market sell-offs.

The SPDR S&P Metals and Mining ETF has outperformed the broader materials sector recently, despite long-term underperformance. I believe this outperformance will continue, as the sub-sector is still cheaper by valuation than the broader sector fund. New executive orders compel many agencies and departments of the government to fast-track minerals production, and reduce barriers to entry.

The S&P 500's historic high suggests caution; investing in cheaper ETFs like SPDR S&P Metals and Mining ETF offers better value. XME, with significant exposure to steel and cyclical commodities, is positioned for potential gains as steel shows signs of recovery. XME's equal-weighted approach results in higher volatility and P/E ratios, but offers strong short to medium-term commodity appreciation potential.

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