Biggest Gainer ETFs For The Week Ended 22 Nov

Each week, I like to publish the past week’s hottest ETFs to share some new trends and niche ETFs (and ETNs) out there (check out this full ETF List of ~800 - every exchange traded fund I could find) and give investors some new investing/diversification ideas. Last week, it was metals, metals, metals. I made sure to include both conventional and leveraged ETFs in this week’s hot list:

Hot List Leveraged ETFs

AGQ - Ultra Silver ProShares - Up 13% - This is a 2X daily leveraged ETF tracking the return of silver. This one’s been a regular on the hot list several times recently, as silver is more volatile than gold, hence, the runups have been even more pronounced. You’ll want to check out how silver and other precious metal ETFs are doing in comparison to gold - much better! It’s primarily one of many weak dollar ETF plays, but gold tends to get all the press. If you’re only investing in the play, silver and other ETFs may actually do much better for you. AGQ is up 119% YTD.

BDD - PowerShares DB Base Metals Dble Long ETN - Up 8% - Aligned with the overall trend in metals strength last week this broader double long ETN for base metals turned in a strong week flat equities market. BDD is up 177% vs. a 21% return for the S&P500 YTD incidentally. As you can see, base metals have been outperforming precious metals.

UGL - Proshares Ultra Gold - Up 6% - Essentially the same play as AGQ, but it’s a gold ETF. While the prospects of a 2x return sound appealing, make sure you’re familiar with the ins and outs of leveraged ETFs and the fact that over long periods of time, the shares of these ETFs tend to perform at less than 2x as value is eroded due to daily balancing in volatile markets. In the case of silver and gold ETFs, the leveraged type have been able to maintain their gains over time due to a steady upward trend which overcomes daily degradation in value. However, if the trend breaks or even just goes flat, you’ll see the decay I cited over time.

Hot List - Sector ETFs (no leverage)

PGM - iPath DJ AIG Platinum TR Sub-Idx ETN - Up 8% -This Platinum ETN continues to run. For a non-leveraged play on precious metal strength/weak dollar trending, PGM is up 52% YTD vs. 31% for GLD, the predominant gold ETF.

PPH - Pharm Holders ETF - Up 4% - For a break from the metals sector, I noted that the large cap pharma index was up on the week. While it may seem counter-intuitive that as we’re on the eve of the passage of healthcare reform legislation which is anything but beneficial to healthcare companies at large, it appears as though certain segments of the healthcare economy will be impacted in different ways. It is generally believed that while pharmas may see some price reductions, they’ll likely see increased volumes given the universal coverage, so it may be roughly a wash at the end of the day, which is a sigh of relief for an industry wrought with lawsuits, threats of imports from overseas and generic competition. With one major wildcard potentially mitigated, analysts are starting to like the sector a bit more than when the initial healthcare debate began.

UGA - United States Gasoline - Up 3% - Gasoline prices were on the rise last week. Since this product uses futures contracts and attempts to track the prices, it may not exactly match the changes in price as reported by AAA, but it is surely the best proxy for US prices at the pump. Personally, I’ve used this ETF before to hedge energy prices for our family’s finances. I had previously sold puts on the Oct 28 strike contract (which just expired last month as desired) and I rolled a new one this month.

With metals stealing the stage of late due to the continued weak dollar trend, another interesting investment you’ll want to check out is the flex CD that derives its return from currency strength of BRIC economies vs. the US dollar (which has been in the cellar in recent months).

Disclosure: As noted, the only active holding is a naked UGA call to hedge energy prices.

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Comment by Roger Berlind

2009-11-23 10:18:15

Investors should be aware that PGM is trading at a high premium (over 15% as of 11/20/2009) above its indicative value. The premium is even higher today since the ETF is up 9% even though platinum futures are only up 2.4% today. The problem is that Barclays recently stopped allowing institutional investors to create new blocks of shares. This took away their ability to do arbitrage when the premium got too high. If Barclays were to reinstate block creation, the premium would collapse.

Investors who want to invest in platinum and avoid the risk of premium collapse are better off purchasing the PTM ETF which does the same thing as PGM but only had a 2.8% premium on 11/20/2009.

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