Checking In: A Platinum Hit?

We're going to tweak the rules a bit for this week's edition of “Checking In” and take a look at an ETF that is a little bit more than a year old. This week's candidate, the First Trust ISE Global Platinum Index Fund (Nasdaq: PLTM), made its debut in March 2010 and with precious metals seemingly always in the spotlight these days, PLTM makes for an intriguing candidate to evaluate.

As is the case with gold and silver, there is an ETF that offer physical exposure to platinum, that being the ETFS Physical Platinum Shares (NYSE: PPLT). And is the case with gold and silver, there is an ETF tracking platinum miners and that's the market PLTM currently has to itself.

Gold and silver mining ETFs have shown a tendency to diverge quite significantly from their physically-backed counterparts, but over the past year, PPLT has outpaced PLTM by just a couple of percentage points. There are probably dozens of theories as to why this is the case, but the facts are the facts: PLTM and PPLT don't show the wide gap in performance that is found with other metals and their equivalent mining ETFs.

Unheralded to a fair extent, especially when considering how much press gold and silver mining ETFs have gotten, PLTM has accumulated over $21.4 million in assets under management since making its March 2010 debut. Not bad, but not platinum star-worthy either.

Home to 23 stocks, investors should note that only four of PLTM's holdings are U.S.-listed. A couple of those names, Stillwater Mining (NYSE: SWC) and North American Palladium (AMEX: PAL), are well-known.

Making PLTM a tricky bet is the natural volatility found in any metals market, but platinum has been all over the map recently. Just look at the charts of PPLT and PLTM. Both were hammered following the March earthquake in Japan because that country is a major platinum consumer for auto production.

Both ETFs rebounded nicely into their late April/early May highs only to be hammered once again as risk appetite has diminished this month.

Still, the overall prognosis for platinum is bullish with some analysts and gurus seeing a run reminiscent of silver's (before the margin hikes) taking place for platinum. If that scenario materializes, PLTM won't be obscure for along and the dip that the ETF is in right now will have been the dip many late-comers will wish they had bought.

At the end of the day, PLTM fees of 0.7% are a tad high, but given its close correlation to PPLT and a price tag that is almost $150 below the physically-backed fund, PLTM could prove to be a sound way of adding platinum exposure to a portfolio.