While 2012 has proven to be a surprisingly impressive year thus far, odds are that some investors have gotten seriously burned by certain underperforming corners of the market. Volatile trading combined with lackluster economic reports and a slowing global economy have hit a number of investments in one asset class particularly hard: commodities and commodity producers. Although spotty trading is certainly expected for these investments, certain segments, such as solar energy, coffee and platinum mining, have not been able to weather the storm. Below we outline three ETFs with rather terrifying performances thus far in 2012 [see Free Report: How To Pick The Right ETF Every Time]:
1. Market Vectors Solar Energy ETF (KWT)
It wasn’t that long ago that the solar power industry seemed like a “can’t miss” investment opportunity. Now, it appears as if the sun is setting on this corner of the alternative energy market. The global economic slowdown has exacerbated the industry’s struggles, as cash-strapped countries from around the world have been forced to scale back or cut off subsidies to the industry. Moreover, development of more viable alternative energy sources (such as natural gas) have clouded the outlook for solar power.
As such, this ETF, along with the Solar ETF (TAN), has seemingly fallen into the abyss once again in 2012. KWT is a brutal 42.69% year-to-date, while TAN has fallen 40.36%. The funds’ three-year returns are even more horrific, with KWT and TAN both logging losses amounting to over 80%. For those who can stomach the risk, however, these two ETFs have provided some surprisingly high dividend yields; KWT shelled out $3.50 per share last year, while TAN paid out dividends of $2.11 (both payouts are split adjusted) [see also The Sky Is Falling ETFdb Portfolio].
2. Dow Jones-UVS Coffee ETN (JO)
Arabica coffee bean inventories have surged to their highest levels since 2010, with the world’s largest producer, Brazil, expecting to export 23% more this October from a month earlier. Analysts predict that world production may reach 160 million bags in the 2012-2013 season. Ample supplies combined with eroding demand prospects due to the global economic slowdown continue to put significant downward pressure on prices.
Alongside a dramatic decline in coffee futures, this ETF, as well as the Pure Beta Coffee ETN (CAFE), has suffered dramatic losses thus far in 2012. Year-to-date, JO has plummeted 34.75%, while CAFE has lost 33.44%. While the outlook for these two ETFs, as well as coffee futures prices, is rather grim for the next year, it is important to remember that like all commodities, coffee’s inherent volatility may still give traders and investors several short-term opportunities to profit.
3. ISE Global Platinum Index Fund (PLTM)
While platinum generally receives less attention from investors than other precious metals, the rare metal has recently been thrown into the spotlight as violent labor strikes across South African platinum mines have wreaked havoc on the industry. And although labor problems have significantly impacted platinum prices, South Africa’s volatile currency, a slowdown in Europe, low platinum prices and exponentially rising operational costs have hurled the platinum mining industry into a tailspin [see also How To Invest Overseas (Without Currency Risk)].
This ETF, which is designed to track public platinum mining companies, has shed 23.87% thus far in 2012. Over the trailing one-year period, PLTM is down 36.69%. A turnaround for this ETF will be quite difficult in the near future, since rising platinum prices will likely not be enough to cushion the industry’s overwhelming and growing costs.
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Disclosure: No positions at time of writing.