3-Year Review: Best & Worst ETFs In Each Sector

by on July 31, 2013 | ETFs Mentioned:

In the last few years, investors have slowly found their way back to equity markets as more lucrative opportunities continue to present themselves. And with more and more investors adopting higher risk tolerances, bullish momentum has undoubtedly become a dominant force on Wall Street, pushing equity markets into uncharted territory. And though across the board, most corners of the equity market have flourished in recent years, there have been certain sectors that have continuously outperformed while others have missed the mark [see 25 Wild ETF Charts From 1H 2013].

Below, we highlight a handful of ETFs across each sector that have performed well over the past three years, as well as those that have struggled to keep up with the equity market’s quick pace (note that inverse and leveraged ETFs are excluded from this list – data as of 7/29/13):

Consumer Discretionary: Retail, Leisure & Entertainment Soar; International Consumer ETFsFunds Struggle

In the consumer discretionary space, two retail ETFs (XRT and PMR) and a leisure and entertainment fund (PEJ, B-) came out on top, posting returns above 100% over the trailing three-year period. International consumer discretionary ETFs, however, posted lower returns, while the China Consumer ETF (CHIQ) slipped nearly 16%.

Consumer Staples: Small Caps & Alternative Weighting Methodologies Deliver; Foreign Exposure Ekes Out Small Gains

Alternative weighting methodologies have proved their worth in the consumer staples sector, with the AlphaDEX (FXG, B+), SmallCap (PSCC, B), and equal weight (RHS, A-) funds delivering returns of over 70%. The Brazil (BRAQ, B-) and international-targeted ETFs (IPS and AXSL), however, posted significantly lower returns.

Energy: Alternative Weighting Wins Again; Solar and Coal Struggle

As with the consumer staples sector, energy ETFs that utilized alternative weighting methodologies also came out on top. PXE, PSCE, and PXI all posted returns around 80%. The two solar funds (KWT and TAN) as well as the coal ETF (KOL, B) have struggled over the trailing three-year period, posting double-digit losses [see 3-Year Review: Best & Worst ETFs In Each Asset Class].

Financials: Small Cap, AlphaDex, and Regional Banks Come Out on Top; Emerging Market Funds Slump

Another small cap, (PSCF, A), and the AlphaDEX (FXO, A) fund delivered stellar returns in the financials sector, while a regional banking ETF (KRE, A) also performed well. Investors who parked their assets in financial equities from emerging markets, however, suffered losses over the past three years.

Healthcare: Biotechs and Pharma Skyrocket, Medical Devices and International Options Fall Behind

In the healthcare space, biotechnology-targeted funds have delivered stellar returns over the trailing three-year period; Van Eck’s Market Vectors Biotech ETF (BBH, B) has gained an incredible 161%. The medical devices (IHI) and international healthcare ETFs, however, have struggled to gain traction.

Industrials: Dynamic, Small Cap, and Aerospace Soar; Shipping and Chinese Funds Struggle

Besides the small cap and alternative weighting methodologies (which have proven to be great picks over the years), aerospace and defense equities (ITA, A-) have also posted compelling returns. The shipping  (SEA) and China-focused (CHII) ETFs, however, were the worst performers in the industrials sector.

Materials: Homebuilders and Construction Funds Catch Fire; Metal Miners Miss The Mark

With housing data showing significant uptrends in recent years, it perhaps is not surprising to see homebuilders and construction ETFs post stellar returns. Metal miners, however, have taken significant hits over the trailing three-year period [see Inside GLD's Fall From Grace].

Real Estate: Retail And Residential Funds Soar; Mortgage and Global Options Post Modest Gains

Every real estate fund delivered strong returns over the last three years, as the housing market continues to show encouraging signs. Coming out on top were the Retail (RTL), REIT (VNQ) and Residential  (REZ) funds. Chinese and global real estate, however, did not post as lucrative returns as their domestic counterparts [see Head-To-Head: Real Estate Industry ETFs]

Technology: Internet Funds Come Out on Top; Nanotech Slips

In the tech space, two internet funds (PNQI and FDN) as well as a small cap ETF (PSCT) were the top performers, logging in double digit returns. The nanotechnology-focused fund (PXN), however, lost over 17% over the last three years.

Telecom: Domestic Picks Post Stellar Returns

Across the board, telecom ETFs have delivered strong gains over the last three years, with Vanguard’s Telecom ETF (VOX, A+) rising more than 60%.

Utilities: Small Cap and Equal Weight Deliver; Emerging Market Funds Slip Into Negative Territory

Once again, small cap and equal-weight ETFs came out on top in the utilities sector, while funds with exposure to emerging market economies suffered losses.

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Disclosure: No positions at time of writing.