Why Commodity Producer ETFs Are Stirring Bullish Feelings

Where can you find some relative bargains when it comes to commodities? Exchange traded funds (ETFs) that hold the stocks of commodity producers could be one place to start.

The decline in the price-to-earnings ration is such companies is the biggest of any group in the benchmark index, and it has the companies 23% less expensive than their historical average, Michael Tsang and Lynn Thomasson for Bloomberg report.

Hedge funds are finding it hard to stay away, finding that the opportunity is too good to watch from the sidelines.

Analysts expect that the 29 commodity producers in the S&P 500 will earn an adjusted $10.26 per share in 2010. This 87% increase is substantial and the largest of any S&P 500 industry. A number of factors are at play, but the biggest one is an expected improvement in global demand that could lead to profits for these producers.

Watch the trend lines to see what materializes as the global economy recovers.

• Market Vectors Agribusiness (MOO): up 38.6% year-to-date

• Market Vectors RVE Hard Assets Producers (HAP) up 26.7% year-to-date

• iShares Dow Jones U.S. Oil & Gas Ex Index (IEO): up 21.9% year-to-date

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