Checking In: Top 5 Equity ETFs Of 2009

by on December 24, 2010 | ETFs Mentioned:

Last year, the U.S. hit the bottom of one of the worst recessions in its history. Though the year started out on a sour note–stocks plunged for the first two months of 2009–markets finally bottomed out in early March, and then began a furious rally that saw many asset classes reclaim some of the ground lost during the 12 months. Markets trended steadily higher for the remainder of the year, and some of the assets hit the hardest on the way down turned in some huge gains on the way back up (through many still finished the year well below their pre-recession highs).

The big gainers of 2010 have differed greatly from those who profited in 2009. Last year, emerging markets and commodity producers led the way. While foreign markets have continued to grow in popularity, their gains in 2010 have paled in comparison to 2009, and emerging markets have been outshined by numerous commodities that have surged to new highs over the last 12 months. Below, we check in on the top five performing equity ETFs of 2009, to see how they have fared this past year in comparison [see also Top Ten Equity ETFs Of 2009].

5. Market Vectors Steel Index ETF (SLX)

This ETF tracks an index that provides exposure to publicly traded companies primarily involved in a variety of activities that are related to steel production. The fund holds just over 60% of its assets abroad, though the U.S. (40%) receives the highest single country weighting. SLX pays out a healthy dividend of close to 3%, while exhibiting a high beta of 1.78.

Last year marked a major turning point for the U.S. economy, and demand for raw materials–which disappeared during the recession–finally returned. As dormant industrials woke up, the need for steel surged, sending this ETF to the top of the charts. In 2009, SLX gained an impressive 104%, ranking it as the fifth best equity performer in the ETF industry. So far 2010 has been another strong year for SLX, but it was no match for the triple digit gains last year. This steel ETF gained almost 20%, an impressive result but still only a fraction of 2009′s banner returns [see also Five ETFs Heavily Dependent On China].

4. iShares MSCI Brazil Index Fund (EWZ)

EWZ, issued by iShares, measures the performance of the Brazilian equity market. Oil giant Petrobras accounts for nearly 18% of the fund, though industrial materials (26%) takes home the highest sector weighting. This ETF pays a dividend of 1.1% with a beta of 1.49.

Brazil had an active 2009, as the country was awarded the coveted 2016 Olympic Games, beating out other major cities like Chicago. From an investment standpoint, the nation had a very successful year. “The impact of the global economic slowdown on Brazil’s economy was shorter and less severe than in many other parts of the world,” writes Alastair Stewart, noting that consumer demand was driving the economy. In 2009 EWZ shot up 111%, making it among the top emerging market performers. This year, Brazil has been overshadowed by big gains in neighboring stock markets; Colombia, for example, is among the year’s best-performing economies. As the year comes to a close, EWX is clinging to positive territory; it was recently up less than 1% to date in 2010.

While this is still a positive year, investors had hoped for more from one of the cornerstone members of the BRIC [see also Harvard Endowment Hearts ETFs]. The likely culprit seems to be Petrobras, which accounts for over 18% of this fund. Petrobras has had a rough year after making a controversial deal with the Brazilian government, in which it purchased the rights to drill at what many believe was an overvalued amount due to heavy costs of drilling these hard-to-reach areas. Also, the Brazilian government now owns roughly 50% of this oil giant, which has investors skeptical if it can reverse its weak 2010 [see Brazil ETF (EWZ) In Focus After Puzzling Petrobras Deal].

3. Market Vectors Russia ETF (RSX)

RSX provides exposure to publicly traded companies that are domiciled in Russia, and traded in Russia and/or on leading global exchanges. Not surprisingly, this fund is heavy on exposure to oil and gas companies, with the energy sector accounting for close to 40% of assets.

Typically, an investment in Russia is considered risky, as the nation has a heavy dependence on the energy sector. But with these risks comes potential for big returns, and as the global economy bounced back and oil prices firmed in 2009, RSX gained over 120% in 2009. That showed the prowess of emerging markets, as another member of the BRIC flexed its muscles. So far, 2010 has been another strong year for this ETF–surprising some who had warned that the economy is excessively risky. RSX is up close to 21% this year, outperforming many of its fellow BRIC ETFs.

2. Market Vectors Coal ETF (KOL)

KOL tracks the Stowe Coal Index, which provides exposure to publicly traded companies worldwide that derive greater than 50% of their revenues from the coal industry. The fund focuses its assets on the U.S. (48%) and China (25%), the two largest producers (and users) of the coal in the world.

Coal is used heavily in power generation and steel production, so when the economy did a 180 in 2009, so too did the coal ETF. As industrial demand picked up and orders from emerging markets soared, demand for coal–which had plummeted during the downturn–rebounded sharply. KOL gained over 130% in 2009, as it benefited from surging economies around the globe. And 2010 has been kind to this ETF yet again, though this year’s gains are no match for those of 2009. So far this year, KOL has grown another 28%, continuing an impressive two year run.

1. Market Vectors Indonesia Index ETF (IDX)

IDX provides exposure to publicly traded companies that are domiciled and primarily listed in Indonesia, or that generate at least 50% of their revenues in Indonesia. Like many large-cap emerging market ETFs, this fund gives financials (26%) its highest sector weighting.

IDX was the top-performing equity ETF in 2009, as the fund brought in a jaw-dropping 160% return. Indonesia is now home to one of the world’s fastest-growing economies; he nation has thrived in part thanks to its resource wealth (ten highly-prized commodities such as coffee, palm oil, rubber, and rice are produced there). As markets break for Christmas, 2010 has been yet another solid year for Indonesia; IDX is up another 37%, making it among the best performers of 2010 as well [see also Indonesia ETFs Head-To-Head: IDX vs. EIDO].

Disclosure: Photo courtesy of Gunkarta Gunawan Kartapranata. No positions at time of writing.