GUNR: A highly cyclical investment target

The Global Upstream Natural Resources ETF (GUNR) tracks the Morningstar Global Upstream Natural Resources Index, essentially covering globally outstanding upstream resource and raw material companies.

From an industry distribution perspective, most are primary industrial products like crude oil, minerals, and energy. A small portion is invested in real estate and industrial sectors. It can be said that the GUNR index, to some extent, reflects the market conditions of primary industrial products.

Looking at the index's holdings, the top four holdings of GUNR largely reflect the product's style.

GUNR's largest holding is ExxonMobil, one of the 'Seven Sisters' of the U.S. oil industry. For those familiar with U.S. business history before World War I, this company is impossible to overlook. The U.S. antitrust laws targeting trusts were aimed at oil and mining giants like ExxonMobil. These laws now also apply to large internet companies like Microsoft and Google.

Next is the mining giant BHP. If we recall the dramatic fluctuations in iron ore prices around 2010, BHP must have left a deep impression.

The third holding may be unfamiliar to many—Canada's PotashCorp, the world's largest potash producer. It can be said that PotashCorp's production expansion or contraction significantly impacts the global potash market and even the food market.

The fourth-largest holding is Corteva, the 'C' among the global ABCD 四大粮商 (Archer Daniels Midland, Bunge, Cargill, and Louis Dreyfus). The product also holds shares in ADM.

Markets for these primary industrial or raw materials are often oligopolistic. Thus, these upstream companies usually possess significant pricing power, exerting considerable influence on the market.

However, as these basic industrial products have relatively mature markets, they exhibit cyclicality like commodities. These cycles sometimes operate independently and sometimes overlap, so from an ETF valuation perspective, they still display notable volatility. $Flexshares Global Upstream Natural Res(GUNR.US)

Therefore, this ETF may be more suitable for swing trading rather than long-term holding. After all, products with higher volatility offer greater speculative returns.