Hottest ETFs of the Week

by ETF Base on September 11, 2010

With September historically being the worst of the 12 months for equities investors, this September is bucking the trend, with the S&P500 (SPY) up 5.23% month to date.  For the prior week, the S&P500 gained 1.8% and Treasury Bonds lost ground following this week’s Treasury auctions, with mortgage rates coming off their historic lows and breaking a 7 week streak.  There appears to be some strain in China, with inflation jumping 3% and home prices there popping 9.3% on the year.  Investors there can expect more volatility and perhaps the inevitable crash by year end given the continued reports of a massive housing bubble slowly coming to an end. Elsewhere, oil gold lost some ground this week to the tune of 0.5% and oil prices were up a bit gaining 1.5%.  With this backdrop, here are some of the top performing conventional ETFs/ETNs and leveraged ETFs of the prior week so you can view each in the appropriate context:

Traditional ETFs:

SGG – iPath DJ-UBS Sugar TR Sub-Idx ETN – Up 10% – Sugar prices have been surging of late, but honestly, routine retail investors should probably avoid dabbling in this individual commodity unless they have some sort of need to hedge for their own business purposes.  Sugar tends to be quite volatile, not to mention, this is an exchange traded note which also subjects the investor to solvency risk of the issuer.  If looking to exploit some planned secular trend upward in soft commodities, you may want to consider MOO, the Market Vectors Agribusiness ETF.

IDX – Market Vectors Indonesia Index – Up 5% -The Jakarta Composite Index continued to rally this week due to some individual stock rallies from upgrades like Indosat and Surya Citra Media, as well as perceived economic strength from western markets on the week.  Year to date, IDX is up 31%, completely decoupled from US equities, which are flat on the year.

PPH – Pharma Holders – Up 3% – It’s been a slow news cycle for large pharmas after last year’s major merger and acquisition announcements.  Stocks like Pfizer (PFE) and Johnson & Johnson (JNJ) gained on the week and as major components of the ETF, drove PPH higher.  Presumably, investors are starting to catch on to the incredibly high dividend yields in the sector with the realization that dividends account for almost half the total returns of stocks over long periods of time (Study Shows 43% over Prior 20 Years) and we may be looking at a deflationary environment moving forward.

Leveraged ETFs:

DAG – PowerShares DB Agriculture Dble Long ETN – Up 9% – For the same reasons mentioned above, agricultural commodities and stocks were up strongly, so this 2X ETN amplified the returns.  With droughts in Russia and this week’s US agricultural report showing shortages in certain soft goods, it was a strong showing.  It’s been a steady trend for DAG, up 16% in the prior month and an astounding 51% in the prior 3 month period.

EDC – Direxion Daily Emr Mkts Bull 3x – Up 4% – Several of conventional emerging markets as well as Frontier Markets, like Colombia now up over 50% on the year.  This drove shares of EDC up 4%, which is actually a rather small weekly move for this extremely volatile 3X daily reset ETF.  For perspective, for the prior 3 month period, EDC is up 26%while year to date, it is down 11%.  This is illustrative of the effects of leveraged ETF decay which is a mathematical effect of reseting prices daily rather than over longer periods of time.  As such, investors should avoid holding leveraged ETFs for long periods of time, if at all.

Disclosure: No position in any ETFs reviewed in this article.

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