Looking at YTD winners in ETF space

by Wayne Ferbert on April 23rd, 2013

If you had Natural Gas, Japan, & Biotech plus the points, you easily covered so far this year! Coming in to 2013, I don’t remember a whole lot of analysts touting these picks – but so far this year they have been the big winners in the ETF realm.
Of course these three categories are sub-categories to wider asset class categories. Natural gas fits in to commodities, Japan fits in to International, and Biotech is part of the US Equity market. A rotation in to anyone of these would have worked out great. Take a look at the top 10 ETF performers thru April 19th below – courtesy of the IndexUniverse.com web site:
Of course the S&P500 is up 10% YTD so buying broad stock categories has worked for almost everyone who has done it – but these ETFs have really out-shined the rest. These ETFs, in some cases, have specific stock strategies around their specific category. In other words, they attempt to improve on the index with some stock picking strategy. But if you look at the broad index for Natural Gas, Japan, & Biotech, you see they are up YTD 23%, 16%, and 27%, respectively. So, these indexes did well regardless of their stock picking approach.
For natural gas and biotech, it has been more like a 12 month run. These are up over 40% & 50%, respectively, in that time frame. Needless to say, at Buy & Hedge, we have an Iron Rule: Harvest your Gains. It is time to start taking some of this gain off of the table.
As for Japan, well, all of its out-performance has been in the last month. And many investors have been pouring in to that space trying to catch the momentum. I don’t have a strong opinion on Japan except to say that I would rather be weighted towards other Asian countries like China or India, for the long haul anyway. But we are only one month in to a move for a country that has been a perpetual under-performer for a decade. Just tread carefully. If you get a sizable gain, think about shaving off some of that profit as you go long. 
But if you have been lucky enough to be invested in Biotech and/or Natural Gas, don’t be a pig. Take your profits. Think about rotation in to an under-performer. We'll examine all of the under-performers for potential rotation on Thursday.

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