The accompanying chart compares the returns of exchange-traded funds [ETFs] representing a variety of commodities and stock indexes. The top performer in this group was the iShares Russell 2000 Small-Cap ETF (IWM), followed by the Healthcare SPDR (XLV) and US Dollar Index Bullish (UUP) which all had positive returns during the last three months. Thanks to a recent rally , the iPath Global Carbon ETN (GRN) cut some of its losses and moved ahead of the two laggards in this group – the SPDR Gold Trust (GLD) and the US Oil Fund (USO). Some other useful ETF benchmarks (listed from worst to best three month performance) not appearing on the chart include the following:
- Financial Sector SPDR (XLF): -19.9%
- iShares MSCI Emerging Markets Index (EEM): -19%
- iShares S&P 350 Index (IEV): -16.3%
- Energy Sector SPDR (XLE): -14.7%
- S&P 500 SPDR (SPY): -8.4%
- Technology Sector SPDR (XLK): -5.2%
- PowerShares DB Agriculture Fund (DBA): -2.6%
- Pharmaceutical HOLDRs (PPH): +2.5%
- HealthShares Enabling Technologies (HHV): +7.2%
- HealthShares Diagnostics (HHD): +9.3%
- iShares Nasdaq Biotechnology (IBB): +14.9%
- HealthShares Cancer (HHK): +15.7%
Healthcare is clearly outperforming all other market sectors and commodities over the past three months and I expect this to continue due to continued M&A activity in the space, underperformance of the sector over the past few years, and continued investor rotation for a source of consistent, defensive growth. The top three HealthShares funds which I recommended last month as a basket ETF approach to healthcare investing rather than the widely held Healthcare SPDR occupy three of the four top-performing spots in the list above. I expect the top three HealthShares ETFs (Cancer-HHK, Enabling Techs-HHV, Diagnostics-HHD) will continue to outpace both the overall market and the Healthcare Sector SPDR as they are more leveraged to consolidation due to their stock holdings, which are concentrated on small and mid-cap companies – avoiding both extremes of the market cap spectrum. In the interest of diversification, I also like the prospects for the iPath Global Carbon ETN and US Dollar Index Bullish ETF for a total of five fund holdings to beat the overall market for at least the remainder of 2008.
$23.6 (08/13/08)
