Three ETFs Down Over 30% In 2011

by on September 2, 2011 | ETFs Mentioned:

This year started off with strong markets as the U.S. slowly worked through its recovery from “The Great Recession”. But as 2011 progressed, things quickly turned south. A number of factors all over the world have led to markets exhibiting high volatility, and prompted many analysts and investors to question if we can pull out of it anytime soon. For now, investors seem to be on the edge of their seats, as President Obama will make a key jobs speech next week and, later this month, Fed Chairman Ben Bernanke will address the nation about the central bank’s next move to boost the economy. The speculation over a third quantitative easing alone has already impacted many equities and could lead to more choppiness later in the month as well [see also August ETF Roundup: Launches, Filings, and Closures].

In a year where things have gotten so hectic, the stock market is bound to have clear winners and losers. Unfortunately, it seems like a number of securities have fallen on the losing side of 2011, as the market volatility has been too much to overcome. Below, we outline three ETFs that have lost more than 30% through the first eight months, giving investors ideas for possible bargains, short opportunities, or simply funds to keep a close eye on as we head in the final stretch of the year.

Egypt Index ETF (EGPT)

This ETF is designed to track companies that are domiciled and primarily listed on an exchange in Egypt or generate at least 50% of their revenues in the nation. It should be noted that the majority of EGPT’s holdings are mid and small cap companies, meaning that this fund will be more susceptible to market dips and jumps. About 91% of the companies in the ETF are stationed in Egypt, but there are a few others from Australia and Canada, so the fund is not a pure play from a geographic perspective [see also Middle East ETFs Under Pressure As Protests Intensify].

EGPT has dropped nearly 35% in 2011 as the Middle East has suffered from ongoing instability. When revolutions erupted in Tunisia and spread across the Middle East like wildfire, a number of stocks tumbled, including some U.S. equities. With rebellions uprooting a number of government systems, including Egypt’s, markets in the nation were actually closed for a short period of time, putting a damper on the ETF. And with continued uprisings in Libya, this fund has seen no relief as it has been virtually downhill since December of 2010.

Shipping ETF (SEA)

SEA is a unique fund which measures an index designed to measure the stock performance of high dividend-paying companies in the global shipping industry. The fund has just 31% of its assets in the U.S. while the rest are dedicated to countries like Japan, Singapore, and Greece. SEA has about 39% of its holdings in both small and large caps, meaning that it will be somewhat volatile, as the heavy allocation to small caps may or may not be balanced out by the more stable large cap segment. SEA pays out an annual dividend of just over 2% [see also Highlighting The PIIGS ETFs].

The ETF has tanked by roughly 36.6% in 2011, as the shipping industry has fallen on some hard times. Container shipments have slumped to their lowest rates in nearly 50 years thanks to global instability. “Commerce on the world’s second-busiest container route rose 4.2 percent in the second quarter, the weakest since the end of 2009, Woking, England-based Container Trade Statistics Ltd. estimates. Rates excluding fuel surcharges were “practically” zero in July and little changed this month, the worst run ever, said Menno Sanderse, an analyst at Morgan Stanley in London. For as long as the shipping industry continues to see these trends, this ETF will have a hard time doing anything but treading water.

Uranium ETF (URA)

This fund, from Global X, tracks the price movements in shares of companies which are active in the uranium mining industry. The fund allocates most of its assets to international companies, with just a 16.7% allocation to US-domiciled firms. Top holdings include names like Cameco, Uranium One, and Paladin Energy. The majority of URA’s holdings are based in either Canada or Australia, which should come as no surprise being that these two countries have a wide variety of powerful miners and huge deposits of the important nuclear fuel component. The fund pays out a great dividend yield of 3.53% [see also Nuclear ETF Meltdown: Four Funds Rocked By The Japanese Quake].

URA has seen its fair share of volatility on the year, forcing it down approximately 46.9%. The fund’s heavy losses came as a result of the devastating tsunami that swept Japan and caused the Fukushima crisis. Upon seeing the devastation at the Fukushima plant, a number of countries vowed to abandon nuclear power, including Germany, a major player in the nuclear space. Uranium is the key element in producing nuclear power, sending URA crashing as demand for this nuclear fuel sharply declined. Similar to EGPT, URA has been downward sloping for the majority of the year, creating an interesting short term opportunity for risk-hungry investors.

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Disclosure: No positions at time of writing.