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Best & Worst ETF Zones of 2019

Sweta Killa

This has been a banner year for the global stock market, with more than $10 trillion piled up in equities. Notably, U.S. stocks registered most impressive performances with all the three major U.S. indices climbing to record highs. Notably, the S&P 500 is on track for the strongest year since 2013 (read: Wall Street to See Best Year Since 2013: Will ETF Rally Last?).

Trade and Fed are the two major forces that drove the stock market this year. This is especially true as trade fears abated after the phase one deal was agreed upon by the world’s two largest economic powers. Additionally, the central bank across the globe went on an easing spree with the Fed slashing the interest rates three times this year. 

Given this, a few corners of ETF investing have performed exceptionally well while some areas are lagging. Below we have highlighted the best and worst zones of 2019 and their ETFs in detail:

Best Zones

Currency


The overlooked Market Vectors-Indian Rupee/USD ETN INR has emerged as the biggest winner, skyrocketing nearly 80% this year. The surge came as it is structured as an exchange traded note (ETN) and was traded at a very high price above its net asset value. However, the easing measures adopted by the Reserve Bank of India have erased some gains in recent months made by the ETN. The product tracks the performance of the S&P Indian Rupee Total Return Index and has accumulated $1 million in its asset base. The ETN charges 55 bps in annual fees and trades in average daily volume of 3,000 shares. It has a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: Top & Flop Currency ETFs of 2019).

Semiconductor

Semiconductors are shining and leading the broader technology sector on trade optimism as chip stocks have a lot of exposure to China. They derive a large portion of their revenues from China since it is the world’s biggest chip market and have supply chains in the country. While all the semiconductor ETFs have risen, VanEck Vectors Semiconductor ETF SMH is the biggest winner having gained 68%. This fund provides exposure to 25 semiconductor companies by tracking the MVIS US Listed Semiconductor 25 Index. It has managed assets worth $1.5 billion and charges 35 bps in annual fees and expenses. The ETF trades in average daily volume of 4.4 million shares and has a Zacks ETF Rank #2 (Buy) with a High risk outlook (read: Semiconductor Outperforms in 2019: 5 Best ETFs & Stocks).

Solar

The solar industry has been growing on a rebound in global solar demand, competitive pricing and potential Chinese subsidies. Additionally, California’s push to make solar panels indispensable to all new homes built in 2020 and beyond is bolstering the solar industry. The strongest-ever solar installation and the exemption of tariff on one type of solar panels also added to the upside. As such, Invesco Solar ETF TAN, which offers global exposure to 22 solar stocks, is up about 66% in 2019. American firms dominate the fund’s portfolio with nearly 46.7% share, followed by China (23.2%) and Germany (8.1%). The product has amassed $443.6 million in its asset base and trades in average daily volume of 230,000 shares. It charges investors 70 bps in fees per year and has a Zacks ETF Rank #2 with a High risk outlook (read: 9 ETFs at the Forefront of 2019 Market Rally).

Worst Zones

Volatility


Though the stock market witnessed bouts of volatility throughout the year, volatility products were the biggest losers. In particular, iPath Series B S&P 500 VIX Short-Term Futures ETN VXX shed the most by 66.5%. It focuses on the S&P 500 VIX Short-Term Futures Index, which reflects implied volatility in the S&P 500 Index at various points along the volatility forward curve. It provides investors with exposure to a daily rolling long position in the first and second months of VIX futures contracts. This ETN is unpopular and illiquid with AUM of $853.4 million and average daily volume of 34.4 million shares. The note charges 89 bps in annual fees (read: Best & Worst ETFs of Fourth Quarter).

Natural Gas

Natural gas price was on a downtrend on a supply glut. iPath Bloomberg Natural Gas Subindex Total Return ETN GAZ delivers returns through an unleveraged investment in the natural gas futures contract plus the rate of interest on specified T-Bills. It follows the Bloomberg Natural Gas Subindex Total Return Index. The product is unpopular and illiquid with AUM of $3.1 million and average daily volume of 2,000 shares. Expense ratio comes in at 0.45%. GAZ is down 38% this year.

Marijuana

The hype regarding marijuana stocks faded in 2019 with a slew of disappointing earnings. The U.S. Food and Drug Administration warned that cannabidiol can cause liver injury and other damage that has taken away the sheen from cannabis-related stocks. While all the marijuana ETFs declined, ETFMG Alternative Harvest ETF MJ lost the most, with a 33.6% fall. It tracks the Prime Alternative Harvest Index, designed to measure the performance of companies within the cannabis ecosystem, benefiting from global medicinal and recreational cannabis legalization initiatives. The fund holds 37 securities in its basket with Canadian firms making up 55% of the portfolio, while American firms comprise 27%. The ETF has AUM of $679.9 million and trades in a solid volume of around 679,000 shares. It charges 75 basis points in annual fees (read: What's Ahead for Marijuana ETFs After a Dismal Show in 2019?).

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iPath Series B Bloomberg Natural Gas Subindex Total Return ETN (GAZ): ETF Research Reports
 
VanEck Vectors Semiconductor ETF (SMH): ETF Research Reports
 
iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX): ETF Research Reports
 
Invesco Solar ETF (TAN): ETF Research Reports
 
ETFMG Alternative Harvest ETF (MJ): ETF Research Reports
 
Market Vectors-Indian Rupee/USD ETN (INR): ETF Research Reports
 
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