The third quarter started off pretty solid, but soon saw a burst of volatility to finish up the period. A surprise 'no taper' announcement from the Fed and now the government shutdown and debt ceiling debacles to open up 2013’s final quarter look to make the next few months a bit more volatile.
Still, global markets performed admirably in the third quarter, with U.S. stocks rising modestly in the time period. Foreign markets were much more mixed, as emerging markets staged an impressive comeback after facing severe weakness, while broad developed markets like Europe saw strength throughout the quarter.
While many European funds saw strong performances for the third quarter, there were a few ETFs that were even more impressive in the time frame. While some leveraged and inverse ETFs which were properly positioned showed strong gains, there were plenty of unleveraged equity ETF winners too (also read 4 Unbeatable ETF Strategies for Q4).
In fact, a handful of equity ETFs actually saw gains of at least 30% for the third quarter alone. Below, we highlight a few of these strong momentum plays, which may be worth keeping an eye on here in the fourth quarter to see if they can keep up their winning ways heading into the home stretch of 2013:
Thanks to solid earnings reports, social media stocks were on fire in the third quarter. Companies like Facebook (FB) posted great results and bullish outlooks for the future while a move to high beta names helped as well (see Social Media ETF on Fire After String of Earnings Beats).
This trend was great news for the Global X Social Media ETF (SOCL) which is arguably the best ETF barometer for the social media industry. The ETF is well spread among large and mid cap stocks, while the U.S. (50%), China (30%), and Japan (7%) take the top spots from a country look.
In terms of performance, SOCL added just over 33% in the third quarter, putting its YTD gain at just over 52%.
Although China had a rocky start to the year, the nation is on much more solid footing now. GDP growth is expected to remain above 7%, industrial and consumer sentiment numbers have been much better, while key trading partners like Europe and the U.S. are seeing more favorable trends as well.
The trends in China have also been especially favorable in the technology market, much like what we saw in SOCL. This strong tech performance has made an ETF like the PowerShares Golden Dragon China Portfolio (PGJ) a top performer as of late (see 3 Emerging Market ETFs Surviving the Slump).
This ETF allocates over 55% of its portfolio to technology, with consumer discretionary and health care each taking up, respectively, 19% and 8% of the fund. This sector allocation has helped PGJ outperform other China ETFs in the third quarter, pushing the gain in the time period to 36.6%, and the YTD performance to 50.5%.
The biggest winner of the third quarter though was undoubtedly the alternative energy space. Companies in this segment—particularly in the solar world—saw incredible gains as better earnings forecasts and outlooks (along with a firm oil price) has rekindled interest in this corner of the market (read 5 Clean Energy ETFs Leading the Sector’s Surge).
While KWT was definitely a solid play in this segment (up 35.9% in Q3), the real winner was the Guggenheim Solar ETF (TAN), which added 45.3% in the quarter, and over 120% so far in 2013. This fund benefited from the aforementioned trends in the space, as well as its small cap focus, and its heavy international exposure (just one-quarter was in the U.S.).
While it is important to remember that solar still has a long way to go until it can back to pre-recession prices, the magnitude of this recent move is astounding. As an example of just how far the space has come, consider that, of the top four U.S. listed holdings in TAN, three have seen their prices double in Q3, suggesting that the space might finally be back on track in a big way.
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