It's been a great year for stocks. For gold, too. And plenty of corners of the bond market as well.
When it comes to equities, the S&P 500 is on pace for its best annual showing since 1997.
With that in mind, this year's equity market bullishness means the laggards, be they individual stocks or exchange trade funds, stand out for all the wrong reasons.
In the world of ETFs, there were some laggards to be sure, many of which provide exposure to niche market segments or industries that are imperiled. Still, some of this year's worst ETFs may offer investors rebound potential in 2020.
In searching for this year's worst offenders among ETFs, we used a similar methodology as we did with this year's best ETFs list, stripping out leveraged funds. Here, we started with a universe of ETFs that lost at least 20% this year.
The following are five of this year's worst-performing ETFs.
VanEck Vectors Coal ETF (KOL)
The VanEck Vectors Coal ETF (NYSE: KOL) is lower by 21.57% this year, while the S&P 500 Materials Index is higher by 21%. Making matters worse for coal equities is that their ongoing weakness is accruing while alternative energy stocks are surging.
Compounding KOL's woes is that many institutional investors, namely endowments and pension plans, are ditching fossil fuel equities.
“Environmental groups have targeted major firms and asset managers to end fossil fuel investment in a bid to help combat global warming,” according to S&P Global Market Intelligence.
“Asset manager Octopus Group wrote in an October report that 100 institutional investors globally are planning to increase their renewable energy investments to 5.2% within 12 months and by 10.9% by 2029. They are expecting to nearly triple their divestment from fossil fuels during that period.”
ETFMG Alternative Harvest ETF (MJ)
There are now eight cannabis exchange traded products listed in the U.S. and, excluding the pair that debuted earlier this month, any of the remaining six would qualify to be on the list of 2019's worst ETFs. That's saying something, because five of those six funds debuted in April or later.
The ETFMG Alternative Harvest ETF (NYSE: MJ) is the legacy U.S.-listed cannabis ETF. Like its rivals, its technicals are weak at the moment. MJ hasn't closed above its 50-day moving average since April and its 200-day line hasn't been surpassed since May.
The fund is down 33.08% year-to-date, and some investors have recently thrown in the towel on MJ, as highlighted by a fourth-quarter loss of 22.18%.
AdvisorShares Pure Cannabis ETF (YOLO)
The AdvisorShares Pure Cannabis ETF (NYSE: YOLO) was the first competitor to MJ and the first actively managed marijuana ETF in the U.S. Management style — be it active or passive — hasn't mattered with cannabis ETFs this year, and YOLO affirms as much with a 54% loss since its inception.
YOLO's managers have recently been avoiding some Canadian marijuana names and emphasizing domestic equivalents, a strategy that could pay off in 2020.
Should the U.S-Canada divergence continue among cannabis stocks, it's feasible that YOLO's managers could continue reducing Canadian exposure, leading to the fund adding some upside in 2020.
Amplify CrowdBureau Peer-to-Peer Lending & Crowdfunding ETF (LEND)
Broadly speaking, fintech stocks and ETFs have performed well this year, but the Amplify CrowdBureau Peer-to-Peer Lending & Crowdfunding ETF (NYSE: LEND) has struggled since its May debut, sagging by 25.5%.
Much of LEND's woes are attributable to U.S. peer-to-peer lenders and fintech lenders such as Lendingtree Inc (NASDAQ: TREE) and LendingClub Corp (NYSE: LC). Those stocks combine for over a quarter of LEND's weight and have either recently struggled (TREE) or have been duds all year (LC).
LEND follows the “CrowdBureau Peer-to-Peer (P2P) Lending & Equity Crowdfunding Index (the Index). The Index is comprised of companies that 1) operate the platforms that facilitate P2P lending and investment-based crowdfunding, and 2) provide the technology & software that enable the operation of these platforms,” according to Amplify.
Among this year's laggard ETFs, LEND offers some of the more credible 2020 rebound prospects, assuming the economy remains sound.
Cambria Cannabis ETF (TOKE)
The Cambria Cannabis ETF (CBOE: TOKE) is one of the newer cannabis ETFs, having debuted in July, and it is the second actively managed member of the fray.
TOKE “will target investing in approximately 20 to 50 of the top companies with exposure to the broad cannabis industry based on Cambria’s determination as to their exposure to the industry,” according to the issuer.
The same issuers that have plagued rival cannabis ETFs are hindering TOKE, but if smaller pot stocks — TOKE's point of emphasis — bounce back in 2020, the ETF should go along for the ride.
With an annual fee of just 0.42%, or $42 on a $10,000 investment, TOKE is the least expensive weed ETF, so it makes sense for investors committed to the marijuana story and those willing to wait for the industry to bounce back.
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