Wearin' of the Green By Commodity (Stock) Investors

Real-time Monetary Inflation (last 12 months): 2.3%

As a child, I remember being very careful to wear green on St. Patrick's Day to avoid pinches from schoolmates. Investors in greenery this year have managed to avoid some financial pain themselves.

The agricultural sector has been more generous to investors this year than gold. Bullion's flat for the year, basis the London morning fix, but ags—that is, ag stocks—are up nearly 3 percent. That's a spillover from last year's 57 percent run-up in the value of stocks held by the Market Vectors Agribusiness ETF (NYSE: MOO).

It's not that the agriculture sector itself is doing that well, at least as mirrored by the performance of the PowerShares DB Agriculture Funds (NYSE: DBA). The futures-based DBA portfolio, which tracks 11 commodities including wheat, corn, cattle, hogs, soybeans, sugar, coffee and cocoa, has actually slumped more than 7 percent this year. Granted, there's some loss attributable to contango in the futures market, but still, this isn't the healthiest of markets for bulls. Last year, the DBA portfolio couldn't quite eke out a 1 percent gain.

While the relative strength of MOO to the underlying commodity market has been building this year, another commodity stock portfolio, the Market Vectors RVE Hard Assets Producer ETF (NYSE: HAP), has seen its performance level off. Last year, HAP's 41 percent return skunked the 20 percent earnings of the broad-based GreenHaven Continuous Commodity Index Fund (NYSE: GCC). Now, GCC's down 4 percent to HAP's half-percent loss on the year.

 

Relative Strength: Commodity Stock ETFs vs. Futures-Based ETFs

 

Yes, there's negative roll yield embedded in the GCC return, but there's also a stronger dollar moderating HAP's performance.

You see, there's just something about agribusiness companies that investors like. They're stocks, for one thing, so they're easy to understand. More important, the stock market has been resurgent, so the fear level is relatively low. As long as it is, there'll likely be more green than gold on St. Patrick's Day.