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Best And Worst Performing ETFs Of September

September is historically considered as the scariest month for the stock market and this year particularly proved it to be true. A calculation carried out by moneychimp.com in the year range 1950 to 2014 revealed that September ended up offering negative returns in 36 years and positive returns in 29 years, leading to an average return of -0.65%. Thanks to the persistent China-led slowdown, a new climate of uncertainty triggered by Fed’s “no lift-off” announcement, outburst of the bizarre Volkswagen ( OTCQX:VLKAY ) scandal, tumbling commodity prices and the huge sell-off in biotech stocks, September was a witness to a lot of turbulence (read: 3 Hit and Flop Zones of Q3 and Their ETFs ). Both the major U.S. benchmarks – S&P 500 and the Dow Jones Industrial Average – continued its correction during the month. The S&P 500 lost 2.6% while the DJIA shed 1.5%. Let’s take a look at the three best and worst performing ETFs of this chaotic month (read: Top ETF Stories of September ). Top Performers iPath Dow Jones-UBS Sugar Total Return Sub-Index ETN (NYSEARCA: SGG ) – Up 12.61% Sugar prices recovered 15% at the end of September after hitting its seven-year low in August. The upsurge was driven by appreciation of the Brazilian Real against the U.S. dollar and the country’s decision to hike fuel prices. Sugar is greenback-priced in Brazil, the largest producer of the agricultural commodity in the world. Therefore, a stronger dollar encourages more sugar exports from the country, dampening its prices. As a result, SGG became the top performer of the month. SGG tracks the Dow Jones-UBS Sugar Subindex Total Return Index, which provides the returns that are in an investment in the futures contracts on the commodity of sugar. The note has garnered nearly $53 million in assets and trades in a daily volume of 48,000 shares. It charges 75 bps in fees and has a Zacks ETF Rank #3 (Hold) with a High risk outlook. iPath Dow Jones-UBS Tin Total Return Sub-Index ETN (NYSEARCA: JJT ) – Up 11.87% Tin was one exception among the commodities experiencing a bullish trend in prices amid fears of supply shortage. Solder used in electronics accounts for about half of the global demand for tin. In the past one month, tin prices rose 5.8% . Indonesia, the world’s largest tin exporter, imposed restrictions on tin exports in order to curb illegal mining. The country has mandated that all tins going out of the country must come from government-certified mines. Further, tin output from Myanmar, the new entrant in the tin market, has been declining due to falling ore grades. These took the ETN to new heights. JJT tracks the Dow Jones-UBS Tin Subindex Total Return index, consisting of one futures contract on tin. However, the note has not yet received enough attention gathering only $2 million in assets and trading in a paltry volume of roughly 300 shares per day. It charges 75 bps in fees and has a Zacks ETF Rank #4 (Sell) with a High risk outlook. ETFS Physical Palladium Shares ETF (NYSEARCA: PALL ) – Up 8.51% Palladium is another metal that is witnessing rising prices. It is actually a surprise gainer from the Volkswagen scandal, which has turned consumers away from diesel-engine vehicles toward gasoline-engine vehicles, where the precious metal is used in catalytic converters. Palladium prices rose 14.8% last month. As a result, this ETF was a top performing candidate in the month. The ETF tracks the spot price of palladium bullion and amassed roughly $223 million in assets. This fund charges 60 bps in fees and trades in an average volume of 34,000 shares. It has a Zacks ETF Rank #3 with a High risk outlook. Worst Performers AccuShares Spot CBOE VIX Up Shares ETF (NASDAQ: VXUP ) – Down 58.85% The presence of this volatility ETF among the worst performers is surprising when this asset class have been investors’ darling during the third quarter as they tend to outperform when markets are falling or fear levels over the future are high. VXUP offer direct “spot” exposure to the CBOE Volatility Index or ‘VIX’, also known as fear gauge and the best representative of volatility in the stock market. It is constructed using the implied volatilities of a wide range of S&P 500 index options. VIX was indeed down 13.8% in the last month, pointing to investors’ belief that market may not reach its bottom in the near term. This few-months old fund has market capitalization of $1.1 million and trades in an average volume of a meager 5,000 shares. It charges 95 bps in fees. Barclays Return on Disability ETN (NYSEARCA: RODI ) – Down 36.45% RODI is a thinly traded ETN, which exchanges only 50 shares in hand per day. Thinly traded assets are considered very risky due to its illiquidity and are not a proper choice of investors at turbulent times. This note seeks to track the performance of the Return on Disability US Large Cap ETN Total Return USD Index which zeroes in on companies that have very favorable policies towards the disabled, both as customers and workers. It charges 45 bps in fees and has a market capitalization of $26.8 million. InfraCap MLP ETF (NYSEARCA: AMZA ) – Down 22.06% Units of energy-based master limited partnerships or MLPs are trading in the south due to the continued slide in crude oil price. AMZA seeks total return through investments in equity securities of publicly-traded MLPs and limited liability companies taxed as partnerships. AMZA is highly exposed to MLPs engaged in the midstream oil and gas sector, which has been experiencing huge sell-off. This made the ETF one of the worst performing candidates in September. The fund has garnered only $16 million in assets and trades in an average volume of 22,000 shares. It charges a hefty 270 bps in fees. Link to the original article on Zacks.com

Biotech ETFs Looking Attractive After Sell-Off

The biotech sector has long been the investors’ darling and the stocks saw an enormous run from late 2011 till this past summer, rising 340%. But the recent global market rout took away the sheen away from the sector, which faced a double whammy when Democratic Presidential candidate Hillary Clinton tweeted on drug price limits and increased regulatory scrutiny. The tweet led to a brutal seven-day sell-off, sending the Nasdaq Biotechnology index into a deep bear territory with a decline of more than 25% from its July highs. With this, the index wiped out all of its gain made this year. While investors may want to consider staying on the sidelines for the time being given the bearish trend, risk tolerant long-term investors could consider this slump a buying opportunity, should they have the patience for extreme volatility. Reasons to Buy Despite the current slide, the outlook for the sector is quite promising. This is especially true as the biotech sector is still clearly outpacing the broad market index from the year-to-date look. In fact, the sector enjoyed a strong rally over the past five years, gaining nearly 250% versus the gain of 64.8% for the S&P 500 index. This trend is likely to continue thanks to promising drug launches, cost-cutting efforts, an aging population, ever-increasing demand for new drugs, ever-increasing healthcare spending, a merger & acquisition frenzy, expansion into emerging markets and the Affordable Care Act or Obamacare. Additionally, biotech stocks provide a defensive tilt to the portfolio amid political or economic turmoil. Further, most of the stocks have sold off sharply, making their valuations immense attractive at the current levels (read: The 3 Key Factors in Biotech ETF Investing ). Given the promising long-term trends and the sector’s high growth potential, biotech stocks are due for a rebound and will likely move higher this fall. While individual stock investing is certainly an option, a look at the top ranked biotech ETFs could be a lesser risky way to tap the same broad trends. Top ETF Choices We have found a number of ETFs that have the top Zacks ETF Rank of 2 or ‘Buy’ rating in the space and that are expected to outperform in the months to come. These have gained the most from the sector’s surge in yesterday’s trading session and thus have superior weighting methodologies, which could allow them to continue leading the biotech space higher (read: all the Top Ranked ETFs ). ALPS Medical Breakthroughs ETF (NYSEARCA: SBIO ) This fund targets companies with one or more drugs in Phase II or Phase III FDA clinical trials by tracking the Poliwogg Medical Breakthroughs Index. It is a small cap centric fund, having amassed $143.2 million in its asset base since its debut late last December. The product holds 82 stocks in its basket with a well-diversified portfolio as none of the security holds more than 4.89% of assets. The product charges 50 bps in fees per year from investors and trades in good average daily volume of around 143,000 shares. It gained 5.2% in yesterday’s trading session and nearly 7% in the year-to-date timeframe. iShares Nasdaq Biotechnology ETF (NASDAQ: IBB ) This fund provides exposure to 144 firms by tracking the Nasdaq Biotechnology Index and charging 48 bps in annual fees. With AUM of nearly $7.5 billion and average daily volume of about 2.1 million shares, this is the largest and the most popular ETF in the biotech space. The product is slightly concentrated on the top five firms, which makes up for at least 8% share each. Other firms hold less than 4.10% of total assets. IBB gained 4.8% in yesterday’s trading session and is down 4.6% in the year-to-date time frame. SPDR Biotech ETF (NYSEARCA: XBI ) With AUM of $2 billion and average daily volume of 4.2 million shares, XBI is extremely liquid and an easily traded fund. It provides equal weight exposure across of around 1% to 103 stocks by tracking the S&P Biotechnology Select Industry Index. This suggests that the product has no concentration issue and offers huge diversification benefits. The product has a definite tilt toward small cap securities, as mid and large caps account for around 10% each. It charges a relatively low fee of 35 bps a year for the exposure. The ETF added 3.7% yesterday and is down 3.1% so far this year. BioShares Biotechnology Products ETF (NASDAQ: BBP ) This ETF follows the LifeSci Biotechnology Products Index, which measures the performance of biotechnology companies with a primary product offering that has received the U.S. Food and Drug Administration approval. Holding 38 stocks, the product has moderate concentration across components with each holding less than 5.5% share. Small caps dominate with 60%, followed by 25% in large caps and the rest in mid caps. The product has accumulated AUM of about $21.7 million since its debut last December and charges 85 bps in fees per year. Volume is light trading under 27,000 shares a day. BBP rose 3.5% yesterday and has returned about 2% in the year-to-date timeframe. Link to the original post on Zacks.com

Risk Adjusted Sector ETF Performance: 3rd Quarter Update

Analysts often compare sectors for clues about the economy’s performance and future investments. The performance of these sectors must be adjusted for beta, or risk. What does this 2rd quarter adjusted performance tell us? Seeking Alpha readers know that I periodically analyze the performance of the nine S&P 500 sector ETFs to obtain clues about where the economy is going. Last years’ underperformance by the Materials Select Sector SPDR ETF (NYSEARCA: XLB ) was only the beginning of a very bad year (so far!) for those stocks. In contrast, after adjusting for risk, Consumer Discretionary (NYSEARCA: XLY ) stocks performed well late last year: and that outperformance has continued. (You can see the article on which this analysis is based here .) The most recent quarter was unpleasant for common stocks: so while all nine sectors fell, we must adjust this poor performance for the varying risk profiles of each sector before we compare it to the SPDR S&P 500 Trust ETF (NYSEARCA: SPY ). An illustration of how this is done will help, and point out a major red flag for the market going forward. Investors know that the healthcare sector has been one of the leaders in this bull market since it began in 2009. In the last three months the Health Care Select Sect SPDR ETF (NYSEARCA: XLV ) fell 12%, two and a half percentage points more than the 9.5% for SPY. So yes, the market has lost some of its leadership: always a source of worry for bulls. But after adjusting for risk, the situation is even worse than it looks! According to yahoo finance XLV has a beta of .59; in a down market we should expect it to fall less than the broad indices. Not more! Specifically we should expect it to fall only 5.6%: (S&P 500 change) x (Sector ETF beta) = (expected risk adjusted ETF return) so (-9.5%) x (.59) = (-5.6%) So the healthcare sector underperformed, not by 2.5%, but by 5.6%! The full results are shown below. You can see that along with healthcare, energy (NYSEARCA: XLE ) and basic materials performed much worse than the market in the last few months. Risk Adjusted ETF Performance 3rd Quarter 2015 Select Sector SPDR ETF beta Actual Return Expected Return +/- Discretionary .91 -3.0 -8.7 +5.7 Technology (NYSEARCA: XLK ) 1.35 -9.1 -12.8 +3.7 Industrials (NYSEARCA: XLI ) 1.00 -11.0 -9.5 -1.5 Basic Materials 1.13 -21.0 -10.7 -10.3 Energy 1.02 -22.0 -9.7 -12.3 Staples (NYSEARCA: XLP ) .49 -3.5 -4.7 +1.2 Health Care .59 -12.0 -5.6 -6.4 Utilities (NYSEARCA: XLU ) .44 -3.0 -4.2 +1.2 Finance (NYSEARCA: XLF ) 1.19 -8.0 -11.3 +3.3 S&P 500 Index 1.00 -9.5 -9.5 zero All three underperformers can turn to special situations as an explanation: Healthcare? Hillary Clinton’s drug company bashing . Energy? The continued weakness in oil and natural gas prices. Basic materials? Continued weakness in Asia , especially China. Even given the dour economic news in these sectors, investors should remember their underperformance signals that this bad news has signaled the market has still not completely discounted this poor outlook. Focusing on healthcare in particular, the failure of this sector’s leadership has ominous signals for the market going forward. While some market indexes have signaled a bear market is now in progress–an issue I shall address in an article tomorrow– I am willing to give the market a bit of slack here. Why? Notice the strength in consumer discretionary stocks. This suggests families are benefiting from lower energy prices: a case of one good cancels out the bad, perhaps? The strength in tech is encouraging. Surprisingly the best indication might be the belated showing of the financial stocks. Remember: this whole debacle began years ago in the financial sector! For them to perform well in a weak market which still may face an interest rate increase from the FED , is encouraging. Keep your long and short powder dry until the market gives us clearer signals. More on this in my next article.