Checking In On Best And Worst Performers From 2011

by on December 28, 2012 | ETFs Mentioned:

As 2012 draws to a close, we’ve been recapping some of the best and worst ETF performers over the past year. Today, we’re taking a look back at the biggest winners and losers of the previous year–2011– to see how they followed up their impressive (or depressing) years in 2012. 

Many of the asset classes that surged in 2011 posted another stellar year in 2012, and many of those that struggled mightily in 2011 continued their freefall in 2012. Of course, there are some that dramatically reversed course in 2012. Below, we highlight the ETFs profiled last year in our 10 Equity ETFs That Surged In 2011 and 10 Worst ETF Performers Of 2011 with an update on the 2012 performance [for more ETF ideas, sign up for the free ETFdb newsletter]:

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1. Dow Jones US Pharmaceuticals (IHE): +14.3% YTD

“Pharmaceutical companies have surged higher in 2011, as this corner of the market has benefited from a resurgence in M&A activity, some positive regulatory developments, and expectations for increased demand for prescription drugs as the U.S. population continues to age. The IHE portfolio consists of about 40 individual companies, including Johnson & Johnson, Pfizer and Merck.” – Best of 2011, up 19.9% by end of year.

IHE has only done better since January of 2012, doubling the returns of the S&P 500 over the last two years. It did, however, follow the same ups and downs of the general market, so from this year alone the fund is only a few points above the S&P.

2. HOLDRS B2B Internet (BHH): Closed

“This entry on the  list comes with an asterisk, as BHH is neither a true ETF nor is it expected to be around for much longer. In conjunction with the conversion of several HOLDRS to Van Eck ETFs, some of the less popular HOLDRS products are being shuttered. With only about $16 million in assets, BHH is headed for extinction shortly. That’s too bad for investors who had held this product: BHH has delivered cumulative returns of more than 400% over the last three years, and nearly 200% over the previous five years.” - Best of 2011, up 17.7% by end of year.

As predicted last year, this fund shut down early into 2012.

3. Market Vectors Biotech ETF / HOLDRS Biotech (BBH): +17.7% YTD

“This product isn’t a true ETF–at least, it wasn’t for the majority of 2011. BBH has historically been one of the HOLDRS offered by Merrill Lynch, and has only recently been converted into a Market Vectors ETF (the ticker remains the same). Prior to its conversion, BBH had big allocations to Amgen (35%), Biogen (29%) and Gilead (24%). Though the more balanced approach taken under the new structure will no doubt be appealing to many investors, those big concentrations served this fund quite well in 2011.” - Best of 2011, up 17.7% by end of year.

Like many biotech companies, at the end of 2011 BBH really took off, ending 2012 with a one-year return of 55%.

4. Utilities ETF (VPU): +17.7% YTD

“Continuing the trend of high-yielding, low volatility standouts in 2011 is VPU, which offers broad-based exposure to the domestic utilities sector. Utilities might not be quite as sexy as tech stocks or energy companies, but the high dividend yields and relative stability have been a boon to investors in 2011.” - Best of 2011, up 15.9% by end of year.

While VPU might have had a great 2011, utilities in general have shown an underwhelming performance in 2012, with VPU only returning 3% at the end of 2012. 

5. E-TRACS S&P 500 Gold Hedged ETN (SPGH) +21.3% YTD

“SPGH combines equal positions in the S&P 500 Total Return Index with long positions in near-term COMEX gold futures contracts, with a monthly rebalance (so it’s technically a hybrid ETN, and not a pure play equity product). The impressive delta relative to SPY is attributable primarily to the gold exposure, as the precious metal has performed quite well on the year.” - Best of 2011, up 14.9% by end of year.

After a very erratic end of year in 2011, SPGH enjoyed a very lucrative end of 2012, even while other gold funds did extremely poorly due to the lack of volatility in the market. 

6. Barclays ETN+ S&P VEQTOR ETN (VQT): +3.6% YTD

“VQT is ‘dynamic’ in the sense that it actually shifts exposure across various asset classes depending on market conditions. Basically, the exposure offered is a blend between equities and volatility futures, with the allocation to each depending on factors such as level of the VIX and recent volatility trends. That methodology has worked out quite nicely, as VQT held up during the chaotic stretches this year thanks to the position in VIX futures.” - Best of 2011, up 14.7% by end of year.

This ETN stayed very stable over 2012, especially after tracking its 2011 spike at the end of the summer. While VQT did stay above the market average, its return since 2011 were not very exciting.

7. FTSE NAREIT Residential Index Fund (REZ): +10.1% YTD

“Some investors have moved away from real estate in recent years, but this member of the Real Estate ETFdb Category has performed quite nicely in 2011. REZ, which focuses on real estate firms engaged in the ownership of apartment buildings, storage facilities and healthcare property, has thrived as rental prices have been surprisingly firm.” - Best of 2011, up 13.5% by end of year.

Over the last two years REZ has consistently stayed above the S&P 500, but its returns have been less than stellar in 2012. Real estate is not expected to pick up again until the global economy shows strong signs of recovery.

8. E-TRACS Alerian MLP Infrastructure Index (MLPI): +4.2% YTD

“Similar to some other products on this list, MLPI has likely benefited from the increased interest in high-yielding securities. Thanks to some unique tax advantages, MLPs generally make hefty dividends to shareholders. And because of the nature of revenues generated, this asset class also tends to be rather stable; it isn’t subject to movements in spot commodity prices in the same way traditional oil and gas companies are.” - Best of 2011, up 12.4% by end of year.

After enjoying a strong beginning of the year, MLPI ended up falling short of the market average, returning on 4.2% over 2012. 

9. Consumer Staples AlphaDEX Fund (FXG): +10.7% YTD

“This ETF comes from First Trust, utilizing the company’s AlphaDEX methodology to tap into a corner of the U.S. market that is generally known for stability. The FXG portfolio consists of about 35 consumer staples stocks, including food and beverage retailers, food manufacturers, household products companies and tobacco companies.”  - Best of 2011, up 12.4% by end of year.

Ending 2012 on a stronger note, FXG was generally less interesting to watch this year than it was in 2011. Consumer staples as a sector let a lot of investors down until the end of the year.

10. Morningstar Dividend Leaders Index Fund (FDL): +10.5% YTD

“This ETF performed quite well last year as investors flocked towards dividend-paying stocks in times of uncertainty. FDL is linked to an index comprised of companies that have shown dividend stability and consistency historically, a methodology that should result in more stable firms capable of weathering economic storms. FDL has a 30-day SEC yield of about 4%–a handsome current return in this environment.” - Best of 2011, up 11.7% by end of year.

While FDL did consistently stay above the s&P 500, the reelection of Obama and talks of the fiscal cliff created doubt and disorder among many dividend-centric funds that could be highly taxed in 2013.

In 2011, we saw some of the biggest loses ever in the ETF industry, but not all of these funds accepted defeat.

1. Market Vectors Solar Energy ETF (KWT): -31% YTD

“It wasn’t that long ago that analysts generally believed the solar power industry had a very bright future; now, it appears as if the sun is setting on this corner of the alternative energy market. Budget crises throughout Europe led to the reduction or elimination of badly-needed subsidies, and the technological advancements that were supposed to make the economics of solar power viable never really materialized.” - Worst of 2011, down 67% by end of year.

As alternative energy continues to be a low priority for governments and companies just trying to recover after our most recent economic crisis, funds like KWT are still doing poorly. 

2. Global X Uranium ETF (URA): -17.6% YTD

‘The aftershocks of the tsunami that ravaged Japan earlier this year were felt in the portfolios of investors with exposure to the global nuclear power industry. In the aftermath of the disaster, many countries began to reevaluate the relative merits and risks of nuclear power, with some concluding that the potential for disaster outweighed the potential to achieve cheap, clean supply of fuel. Those decisions hammered the valuations of stocks engaged in the production of uranium, many of which are found in URA.” - Worst of 2011, down 60% by end of year.

After the nuclear disaster in Japan, URA fell victim to not only failing alternative energy interest, but also public disinterest in the power source.

3. iPath Global Carbon ETN (GRN): -24.0% YTD

“GRN is one of the more bizarre products in the rapidly-expanding ETF universe; this ETN is linked to an index that consists of carbon-related credit plans. Currently, that index consists of only two: European Union Emission Trading Scheme (EU ETS Phase II) and Kyoto Protocol’s Clean Development Mechanism.” - Worst of 2011, down 56% by end of year.

Like KWT and URA, this green fund will just have to tough out the disinterest from the general market, and hope that when the dust settles from this last economic disaster investors will come back.

4. India Small Cap ETF (SCIF): +29.3% YTD

“The consensus is that India still maintains a promising long-term outlook, as the massive consumer base is expected to continue its expansion over the next several decades. But 2011 has been a step back on what is believed to be a path towards becoming the largest economy outside of China, as worries about rising inflation, crumbling infrastructure and political corruption derailed the impressive growth story.” - Worst of 2011, down 53% by end of year.

Small cap investments in emerging markets skyrocketed when developed markets failed to show interesting returns, but after a terrible year for this Indian fund, 2012 finally showed some relief.

5. WilderHill Clean Energy Portfolio (PBW): -15.4% YTD 

“The track records of alternative energy ETFs are anything but clean. Once assumed to be “can’t miss” investment opportunities that were poised to thrive as oil dependence was eliminated, alternative energy has yet to deliver the returns many had hoped for. No corner of the market has been spared, as solar, wind and nuclear power stocks have all been hammered in a brutal sell-off in the alternative energy space.” - Worst of 2011, down 52% by end of year.

This is another green energy fund that continues to fall victim to poor market conditions.

6. ISE Global Platinum Index Fund (PLTM): -17.8% YTD

“This fund might be something of a surprise on this list; there is an expectation that mining firms have performed well thanks to the prolonged commodity rally that has continued even in a weak environment this year. But while gold and silver prices are way up, the other precious metals haven’t been quite as fortunate. Spot platinum prices have dropped about 20% on the year, and the value of the companies responsible for getting the metal out of the ground have been hammered as well.”- Worst of 2011, down 49% by end of year.

After poor returns in 2011, PLTM couldn’t catch a break in 2012, continuing its downward spiral, but not as bad as before.

7. Dow Jones-UBS Natural Gas Total Return ETN (GAZ): -24.9% YTD

“The odds of increased long-term usage of natural gas appear to be improving, thanks to some impressive technological breakthroughs that have made transportation more affordable and continued discoveries of new reserves. But prices haven’t held up–in large part because the supply of this fuel continues to grow at an astounding rate. Combine those fundamentals with persistent contango in futures markets, and the result is a dismal performance for this futures-based product.”- Worst of 2011, down 49% by end of year.

GAZ has never been a long-term fund, making investors who know when to hold and when to get out very wealthy people. Even with a spike in the beginning of 2012, GAZ lost all of its momentum by the end of the year.

8. Market Vectors Egypt Index ETF (EGPT): +44.8% YTD

“This year has been an eventful one for Egypt, where the Arab Spring first took root after the overthrow of the Mubarak regime. The elimination of the long-time ruler is expected to be a long-term positive for the north African country, paving the way for increased integration into the global economy after decades of mismanagement. But the short-term pains related to the political uncertainty have been dramatic, as EGPT’s losses have only deepened after post-revolution trading began.” - Worst of 2011, down 48% by end of year.

After overthrowing a dictator earlier in 2011, it’s no surprise that the fund did poorly, and since then EGPT has recovered remarkably, regaining 40% since the beginning of 2012.

9. C-Tracks ETN Citi Volatility Index Total Return (CVOL): -90.3% YTD

“This ETN from Citi has posted the most severe year-to-date decline in the Volatility ETFdb Category, the result of a unique methodology employed. The exposure offered by CVOL is multi-faceted; this ETN combines directional exposure to the implied volatility of large cap U.S. stocks through positions in third- and fourth-month futures contracts on the CBOE Volatility Index with short exposure to the S&P 500 Total Return Index.” - Worst of 2011, down 48% by end of year.

In 2011, what we saw was just a preview of the loses to come in 2012, as this fund fell almost 100%. Lack of market volatility in 2012 was positive for most funds, but definitely not for any with a VIX focus.

10. Guggenheim Shipping ETF (SEA): +10.9% YTD

“This targeted ETF has gone off course so far in 2011, as the second incarnation of the shipping ETF has lost close to half of its value. Generally speaking, the shipping industry serves as a leveraged play on the global economy; when times are good, demand for freight transportation is strong. But with raw materials demand from emerging markets slowing down and Europe going backwards, the need for shipping services has waned.” - Worst of 2011, down 46% by end of year.

This is another fund that made small waves at recovery; as the global markets start to pick up, shipping and exports will likely regain momentum. 

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Disclosure: No positions at time of writing.