Lagging ETFs in 2013 that are Worth a Look

by Wayne Ferbert on April 25th, 2013

On Tuesday, we wrote about the best performers of the year so far in the ETF space in 2013. And we said we would examine the biggest losers so far in 2013 – with one thought in mind: Would we rotate money in to these losers with an expectation that they might catch up? 

Let’s start with the biggest losers in the ETF space so far in 2013. It really is a very short conversation: Gold, silver, and the miners that mine them are the biggest losers. It isn’t even close. Try to find another index category that has lost anywhere near as much as that category in 2013. You can’t!
However, we look at the Gold and Silver play as currency plays – which we tend to avoid as investors. So, if I focus on just the largest ETF categories that are equity in make-up, we find some clear losers and clear laggards in 2013.
The clear losers that have actually lost value in 2013:
  • The BRIC countries
  • Emerging markets
The clear laggards (meaning they are lagging the US Broad Equity markets):
  • Europe
  • Technology
  • Materials
Of these, which do I like the most? Well, let me start where I wouldn’t put new money to work: Materials. Despite being such a laggard because of commodity pricing, I don’t see a lot of relief in site. And while we like technology and invest in it regularly with new money, we think the International opportunities on this list are still the best.
Emerging Markets and the BRIC countries offer the best opportunities for rotation. Even Europe is not a bad investment based on recent pull backs. We just expect the emerging and BRIC countries to show growth and price appreciation for the coming years.
So, the EEM, BIK, and BKF all offer meaningful volume to invest in. And they have given you a nice pullback to be a buyer.

Remember that the broad index international ETFs all still trade at a 20-30% discount to their late 2007 highs. Meanwhile, the US equity markets are back at those highs this week. I’d think about taking some (stress “some”) of those winnings off the table from US and rotate to these still under-valued international stories.

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