The Week’s Hottest ETFs (3/21/10)

by ETF Base on March 20, 2010

While broad market indices continued their ascent for the week, stocks took a breather on Friday in anticipation of the historic healthcare vote this weekend.  Since it’s unclear specifically whether the legislation will even pass and if so, exactly what it will mean for equities, markets could continue to be choppy while this plays out.  For instance, Caterpillar came out and said the healthcare bill would cost them over $100 Million in the first year alone (WSJ).  However, there are dozens of large industrials of similar size and with similar retiree benefits and they’re not coming forward with the same complaints so it’s anyone’s guess what kind of impact it will have on corporate America and Americans alike.

For the week in ETFs, Real Estate and Financials continued to run along with emerging markets ETFs.  Healthcare actually did alright given the uncertainty facing the sector.  The US Dollar also gained strength for the week against a broad basket of currencies.  Following an incredible 2009 with double digit yields to boot, high yield corporate bonds took a breather last week and Tech finally took a rest as well with a rare week where the S&P500 gained more than the Nasdaq.  With that, the hottest ETFs in standard representation as well as leveraged ETFs were the following:

Non-Leveraged ETFs

THD – MSCI Thailand – Up 6% – Thailand has been faring quite well this year, even in comparison to its major emerging market peer (EEM).  YTD, THD is up 10% vs. a flat EEM and over the prior 1 year period, THD is up 120% vs. 95%.  Many view Thailand’s proximity to China as a key driver of future growth moving ahead regardless of what happens to China itself.

IHF – iShares Healthcare – Up 4% – While there is still confusion over exactly what’s in the healthcare bill and whether it will pass, surprisingly, the healthcare sector is taking it in stride.  While insurers are expected to take the brunt of both the public rhetoric and financial pain as well, evidently, some of the share price declines they’d seen earlier were viewed as overdone.  It will certainly be interesting to see how IHF fares on Monday should the legislation advance over the weekend.

KRE – SPDR KBW Bank – Up 3% – As evidenced by the continued advance in the leveraged brethren UYG and FAS, the underlying banking index continues to rally.  From such a poor base, it didn’t take much to move upward, and that’s essentially what KRE has done virtually non-stop from last year’s pivot bottom.  While doomsayers are warning of another financial collapse and another round of mortgage meltdowns, it’s unlikely the US government is going to let the large banks that prevent “systemic risk” fail now.  Sunk costs aren’t well received by the taxpayer, as much as main street is unhappy with the prior bailouts.

Leveraged ETFs

DRN – Direxion Daily Real Estate Bull 3X – Up 6% – Like Financials, real estate stocks have come off such a low base that any sign of life was a home run for investors who got in early in 2009.  DRN is keeping up nicely with FAS of late, up 27% YTD and up 195% on the year (not quite as nice as FAS’s 600% return [below]).

FAS – Direxion Daily Financial Bull 3X – Up 4% – Large Financials have continued to outperform the market at large, as well as subsets of the sector like last year’s hot Preferred Stock ETF (PFF) that sports an 8% yield and pays monthly, but can’t keep up with the capital appreciation of the big banks.  FAS is now up 24% on the year and 600% year over year as Financials returned from the abyss in early March 2009.

EOU – ProShares UltraShort Euro – Up 3% – The Euro has continued to take it on the chin primarily as fallout from the situation in Greece.  There is still much uncertainty over the morale hazard created and ire to be felt elsewhere in the Union if other member states are forced to bail out Greece, even though the net amount required at this time is rather marginal.  What is also lurking in the background is what the situation looks like in countries like Spain and Portugal as well and whether this is simply the first shoe to drop.

{ 1 comment… read it below or add one }

Daddy Paul March 31, 2010 at 2:35 pm

When and if these funds get traded heavily enough to diminish the spreads, they could be excellent vehicles.


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