Best & Worst Zones Of 1H19 And Their ETFs

Stocks across the globe are on track to record their best first-half performance in more than 20 years. This has been primarily driven by easy money policies by the central banks, with some signaling interest rate cut and some launching fresh stimulus to tackle global growth headwinds.

Hopes of resumption of trade talks between the world’s two largest economies, waves of mergers & acquisitions, and oil price rebound also fueled the rally. However, the still unresolved trade woes, Brexit uncertainty, rising Middle East tension, geopolitical issues and global growth slowdown continue to weigh on the stocks.

The decline in yields and global uncertainty has pushed Treasury bonds higher in the first half. Also, this has returned the demand for gold (read: Gold is Now the Hottest Trade: ETFs to Add More Shine).

Given this, most corners of ETF investing have performed exceptionally well while a few areas are lagging. Below, we have highlighted the best and worst zones of the first half and their ETFs in detail:

Best Zones

Solar

Solar ETF has emerged as the undisputed winner in the first half, jumping 48.4%. The rally has been driven by a rebound in global solar demand, California’s push to make solar panels, competitive pricing and the potential Chinese subsidies. The strongest-ever solar installation and exemption of tariff on one type of solar panels also added to this upside (read: 5 High-Flying Stocks of the Top ETF in 1H).

This ETF offers global exposure to the solar industry by tracking the MAC Global Solar Energy Index, holding 23 stocks in the basket. American firms dominate the fund’s portfolio with nearly 47.2% share, followed by China (26.5%) and Spain (7.6%). The product has amassed $349.7 million in its asset base and trades in a solid volume of around 157,000 shares a day. It charges investors 70 basis points (bps) in fees per year and has a Zacks ETF Rank #3 (Hold) with a High risk outlook.

Greece

Greece stock market has been on a tear backed by resurgent economy and the ongoing push to offload bad debt on banks’ balance sheets, which have weighed on the country’s recovery for years. Additionally, a big defeat of the ruling leftist coalition in regional and Euro elections has added to the strength. As a result, Global X MSCI Greece ETF GREK, which tracks the MSCI All Greece Select 25/50 Index, has climbed 37.5% in the first half.

It is home to a small basket of 35 companies and charges 59 bps in fees per year from investors. Financials takes the top spot at 26% in terms of sector holdings, followed by consumer discretionary (17%), energy (16%), and communication services (13%). The product has amassed $354.1 million in its asset base and trades in solid volume of around 430,000 shares per day. It has a Zacks ETF Rank #4 (Sell) with a High risk outlook (read: Top Performing Country ETFs of 1H).

Gasoline

Gasoline futures surged following the large explosion and fire at a Philadelphia refinery, disrupting the supply in the traditional summertime driving season. Rising supply concerns in the Middle East and dipping American refining capacity also added to the strength. As such, United States Gasoline ETF UGA has gained 37.3%.

This ETF provides investors with exposure to front-month gasoline futures, tracking RBOB gasoline for delivery to the New York harbor, which is traded on the NYMEX. The ETF trades in average daily trading volume of about 36,000, suggesting that investors have to pay extra beyond the annual fee of 75 bps per year. The fund has managed assets of $39.5 million.

Worst Zones

Volatility

Though the stock market witnessed bouts of volatility in the first half, volatility products were the biggest losers. In particular, ProShares VIX Short-Term Futures ETF VIXY has dropped 43.8%. It focuses on the S&P 500 VIX Short-Term Futures Index, measuring the returns of a portfolio of monthly VIX futures contracts with a weighted average of one month to expiration. It has amassed $254 million in AUM and charges 85 bps in fees per year. The fund trades in average daily volume of 2 million shares.

Shipping

Shipping stocks saw rough trading on fears that U.S.-China trade tensions could reduce the volume of cargo at sea. As a result, Breakwave Dry Bulk Shipping ETF BDRY has fallen 29.6% in the first half. This is an actively managed ETF that seeks to provide exposure to daily changes in the price of dry bulk freight futures by tracking the performance of a portfolio consisting of a three-month strip of the nearest calendar quarter of futures contracts on specified indexes that measure rates for shipping dry bulk freight. The fund has accumulated about $4.2 million in AUM. It trades in a paltry volume of about 4,000 shares per day on average and charges a higher annual fee of 1.85% (see: all the Industrial ETFs here).

Natural Gas

Natural gas price dropped to its lowest level since May 2016 thanks to supply glut. United States Natural Gas Fund (LON:UNG) shed 19.4% so far this year. This fund provides direct exposure to the price of natural gas on a daily basis through futures contracts. If the near month contract is within two weeks of expiration, the benchmark will be the next month contract to expire. It has AUM of $319.3 million and trades in volume of around 2 million shares per day. The fund has 1.28% in expense ratio (read: Will Natural Gas ETFs Recover in the Near Term?).

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