ETF Winners and Losers From Q1 2013

by Will Ashworth | March 28, 2013 1:50 pm

QuarterlyReviewOutlook185[1]The first quarter of 2013 has come to an end, and the results are nothing short of unbelievable. This time last year, the S&P 500 was up 3.1% — its best first-quarter gain since 1998. By any metric, 2013 has seen a first quarter like no other.

Whether it stays that way is the million-dollar question.

Given the Q1 results, one would assume that most non-leveraged, non-inverse ETFs did well the past three months. They did. However, like all markets, some did spectacularly, while others … not so much.

To present a wide variety of good and bad ETFs, I’ve separated my choices by volume, with “high” being anything over 1 million shares in average daily volume, “medium” being funds trading between 500,000 and 1 million, with “low” representing those with volume below 500,000. That said, here are some winners and the losers from the past quarter:

Best ETF (High Volume): iShares Dow Jones U.S. Home Construction Index Fund/SPDR S&P Homebuilders ETF

iShares185[2]YTD Performance: +12.5%

It’s impossible to avoid housing-related ETFs in the first quarter. Whether you’re talking about the iShares Dow Jones U.S. Home Construction Index Fund (NYSE:ITB[3]) or the SPDR S&P Homebuilders ETF (NYSE:XHB[4]), anything to do with the ongoing housing rebound did well in Q1.

With almost identical performance in the first quarter, the real difference between the two funds has come during the past 52 weeks, where the ITB achieved an annual return of almost 65%. The difference: the iShares fund is 65% invested in home construction, compared to 29% for the SPDR.

I’d expect the XHB to make up ground in the coming quarters as investors rotate out of home construction stocks.

Worst ETF (High Volume): Market Vectors Gold Miners ETF

VanEck[5]YTD Performance: -19%

Pick your poison. Gold had a bad start to the year any way you slice it. Whether you were buying the metal itself via SPDR Gold Shares (NYSE:GLD[6]) or the Market Vectors Gold Miners ETF (NYSE:GDX[7]), you were losing money.

Of course, you lost a lot more money via GDX. Year-to-date, the GDX was down 19% compared to a nearly 5% drop for the GLD.

More troubling than GLD’s decline in the first quarter is the fact it has seen net outflows of $6.6 billion in the first three months of the year. Billionaire George Soros has cut back his gold holdings, making it abundantly clear that the bloom is of the rose when it comes to gold’s 12-year bull market.

As for the GDX, I don’t know if it ever comes back to life.

Best ETF (Medium Volume): iShares Russell Mid-Cap Value ETF

iShares185[2]YTD Performance: +13.5%

Given the success of real estate investments in recent memory, it would be easy to choose the iShares FTSE NAREIT Mortgage Plus Capped Index Fund (NYSE:REM[8]), which returned 17% in the first quarter and 30% over the past year.

However, I’ve already chosen something housing related so I’ll go with the iShares Russell Mid-Cap Value ETF (NYSE:IWS[9]) instead, which is up 13.5% year-to-date.

Financials including SunTrust (NYSE:STI[10]) and Fifth Third Bancorp (NASDAQ:FITB[11]) represent 31% of the $4.7 billion in total net assets; it’s a good thing, then, when you consider that the banks are likely to stay on a roll through the remainder of 2013.

Worst ETF (Medium Volume): PowerShares DB Agriculture Fund

PowerShares185[12]YTD Performance: -7%

Last summer was one of the worst droughts on record. As a result, agricultural commodity prices skyrocketed. Since then, though, they’ve come back to earth, giving up almost all their gains.

The PowerShares DB Agriculture Fund (NYSE:DBA[13]) replicates the DB Agriculture Index, which invests in future contracts for commodities like corn, soybeans and sugar. The DBA is down 7% in the first quarter and roughly the same over the past year. Considering how badly investors panicked about prices last summer, it’s crazy where the fund sits almost a year later.

While I’m not a weather professional, I find it hard to imagine another summer like 2012. Therefore, it’s very possible the fund will endure more pain in the quarters to come.

Best ETF (Low Volume) db X-Trackers MSCI Japan Hedged Equity Fund

DeutscheBankDBXTrackers185[14]YTD Performance: +19%

Here we head to the land of the rising sun with the db X-Trackers MSCI Japan Hedged Equity Fund (NYSE:DBJP[15]), which is benefiting from Japan’s move to devalue its currency to extricate itself from deflation, an economic hardship that’s gripped the country for two decades. The 20% reduction in the value of the yen vs. the U.S. dollar has been a boon to both export manufacturers and the markets.

DBJP’s biggest holding is Toyota Motor (NYSE:TM[16]) with a weighting of 5.97%, and Honda (NYSE:HMC[17]) is third at 2.59%.

Considering China and other countries around the world are protesting Japan’s intentional devaluation or at least what they perceive to be intentional, it’s unlikely that we can expect similar results in the next three quarters. Nonetheless, it’s been a long time since Japanese stocks were lighting it up.

Worst ETF (Low Volume): SPDR S&P Emerging Middle East & Africa ETF

StateStreetSPDR185[18]YTD Performance: -9%

You would think it would be easy to find a loser from more than 1,000 ETFs. Surprisingly it isn’t, and not because there aren’t candidates. There are plenty, but most are either inverse funds, tied to the mining industry’s implosion or very low in volume.

Eventually I was able to decide on the SPDR S&P Emerging Middle East & Africa ETF (NYSE:GAF[19]), which replicates the performance of the S&P Mid-East and Africa BMI Index. Down 9.9% through March 27, its $72.9 million in total net assets are 93% invested in South Africa, whose economy suffers from crippling unemployment. It seems Oscar Pistorius isn’t the only South African having a bad year.

Long-term, the African continent will achieve greater economic prosperity. In the short-term, not so much.

As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.

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  3. ITB:
  4. XHB:
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  6. GLD:
  7. GDX:
  8. REM:
  9. IWS:
  10. STI:
  11. FITB:
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  13. DBA:
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  15. DBJP:
  16. TM:
  17. HMC:
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  19. GAF:

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