Global commodity prices are rising sharply following Russia’s invasion of Ukraine, owing to aggravated supply chain disruptions due to multiple sanctions imposed on Russia. Russia is a leading supplier of commodities, including oil, gas, grains, fertilizers, and metals. Russia and Ukraine account for more than 30% of global wheat exports. Further, Russia accounts for 10% of global oil production and more than one-third of Europe’s natural gas.

As the supply chain crisis intensifies with the West sanctioning major Russian exports, inflation rates are expected to rise further, rising commodity prices. Due to the supply fears, the U.S. oil price benchmark increased more than 6% and hit $116-plus per barrel. Because the U.S. imposed sanctions on Russian oil imports, domestic oil prices are expected to rise further. In addition, wheat prices rose almost 40% this month. And the price of thermal coal used in power plants climbed to more than $400 per ton.

Investing in commodity ETFs could hedge spiraling supply chain and inflation risks. Furthermore, because equities remain under pressure due to surging market volatility, we think investing in commodity ETFs Invesco DB Commodity Index Tracking Fund (DBC), First Trust Global Tactical Commodity Strategy Fund (FTGC), and iShares S&P GSCI Commodity-Indexed Trust (GSG) could be profitable now.

Invesco DB Commodity Index Tracking Fund (DBC)

DBC invests in 14 commodities from the Energy, Industrial Metals, Precious Metals, and Agriculture sectors through futures contracts. This ETF has the potential to add valuable return enhancement and diversification benefits to stock and bond portfolios.

DBC tracks the DBIQ Optimum Yield Diversified Community Index. It has a 0.87% expense ratio, compared with the 0.76% category average. The ETF has $4.47 billion assets under management. DBC’s fund flows came in at $605.69 million over the past month and 1.09 billion over the past year. It has a 1.21 beta.

DBC has gained 35.1% year-to-date and 63.9% over the past year and closed the last trading session at $25.84. It had an NAV of $25.64 as of March 9.

DBC’s strong fundamentals are reflected in its POWR Ratings. The ETF has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

DBC has a Trade grade of A, and a B for Buy & Hold grade and Peer grade. Among the 116 ETFs in the A-rated Commodity ETFs group, it is ranked #36. Click here to access all the DBC ratings.

First Trust Global Tactical Commodity Strategy Fund (FTGC)

FTGC is an actively managed fund that provides broad exposure to commodities through futures contracts. The fund gains its exposure to commodities through its holdings in Cayman Islands-based subsidiary. FTGC shorts futures contracts and invest in other commodities ETFs and other structured vehicles tied to commodities.

FTGC has a 0.95% expense ratio compared with the 0.76% category average. It has $4.12 billion assets under management. It has a total of three holdings. FTGC’s major holdings include the U.S. Dollar, with 74.50% weighting, followed by Mutual Fund (OTHER) and Morgan Stanley Institutional Liquidity Funds Treasury Portfolio Institutional (MISXX) with 25.37% and 0.13% weightings, respectively. FTGC’s fund flows came in at $1.06 billion over the past month and 1.58 billion over the six months. FTGC has a 0.96 beta.

FTGC has improved 36.4% year-to-date and 58.5% over the past year to close the last trading session at $28.78. It had a NAV of $30.76 as of March 8.

FTGC’s strong outlook is reflected in its POWR Ratings. The ETF has an overall rating of A, which translates to Strong Buy in our proprietary rating system.

FTGC has an A grade for Trade, Buy & Hold, and Peer. Among the 116 ETFs in the Commodity ETFs group, it is ranked #3. To get all FTGC ratings, click here.

iShares S&P GSCI Commodity-Indexed Trust (GSG)

GSG gains exposure to a production weighted index of front-month commodities through index futures contracts. The commodities, which include crude oil, natural gas, and other energy, make up 70% of index’s exposure. It offers excellent coverage of plain vanilla broad commodities.

GSG tracks the S&P GSCI(R) Total Return Index. It has an 0.85% expense ratio, compared with the 0.76% category average. GSG has assets under management that total $2.43 billion. And over the past month, GSG’s fund flows came in at $127.60 million and 371.19 million over the past year. It has a 1.65 beta.

GSG has gained 31.7% over the past month to close yesterday’s trading session at $23.08. It has gained 56.4% over the past three months. It had a NAV of $23.23 as of March 9.

It is no surprise that GSG has an overall grade of A, which equates to Strong Buy in our proprietary rating system.

GSG has a Trade grade and Peer grade of A and a Buy & Hold grade of B. The fund is ranked #7 among 116 ETFs in the Commodity ETFs group. To get GSG POWR Ratings, click here.

DBC shares were trading at $25.67 per share on Thursday afternoon, down $0.17 (-0.66%). Year-to-date, DBC has gained 23.53%, versus a -10.96% rise in the benchmark S&P 500 index during the same period.

About the Author: Mangeet Kaur Bouns

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions. More...

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