Investors gulped down coffee while unfriending social-media
ETFs during a volatile April in which the stock market sold off
at the beginning of the month and bounced back just as
The roller coaster is expected to continue in May as the
enters its historically weakest period of the year.
IPath DJ UBS Coffee ETF (
), with $114 million in assets, heated up 16% in April as drought
destroyed Brazil's crops. The exchange-traded note tracking
coffee-bean futures floated to the top of the leaderboard this
year, firing up 87% year to date after dripping for three years
Global coffee supplies are approaching a 40-year low, says
Shawn Hackett, president of Hackett Financial Advisors in Boynton
Beach, Fla. Drought, affecting 70% of crops in Brazil -- the
world's largest producer -- has prevented coffee trees from
growing new branches from which the cherries grow.
Hackett forecasts the country's 2015/2016 production will fall
short by at least 10 million bags, and supplies could run out in
the first half of 2015 if demand isn't rationed. The global
shortage could worsen if Vietnam experiences El Nino-related
"If Vietnam production gets threatened later in the year, I
shudder to think about how high
could go," Hackett wrote in his newsletter April 20. "So far it
has been very dry, and the onset of the rainy season has not yet
dumped Global XSocial Media Index ETF (
), which dropped 12% for the month and 19% year to date. The
29-stock portfolio, led by Tencent Holdings,Facebook (
) andLinkedIn (
), was the worst-performing nonleveraged ETF in April.
After being one of the most liked ETFs last year, with a gain
of 64%, SOCL was bound to fall back to earth. Stocks in SOCL
trade at nearly 25 times forward earnings, nearly 4 times book
value and 4.4 times sales. By contrast, SPDR S&P 500 (
) carries a price-earnings ratio of 16, price-to-book value of
2.25 and price-to-sales of 1.58.
LinkedIn shares plunged 29% this year after rocketing 89% in
2013 and 82% the year before. Bank of America Merrill Lynch
analyst Justin Post expects earnings to decline 7.5% this year as
the online professional networking site adds new products and
expands to China.
Facebook's shares are up 9% year to date. In late March, it
acquired virtual-reality goggles maker Oculus. BofA Merrill
analysts believe that the world's largest social-media firm will
surpass Wall Street estimates with 36% year-over-year sales
growth in 2014.
"We remain (positive) on underlying usage trends and
advertising trends due to improving targeting capabilities, more
advertisers on the platform, and growing adoption of App Install
and Custom Audiences advertising programs," BofA Merrill analysts
wrote in a note April 8.
SPY ended April ahead 1%.PowerShares QQQ (QQQ), tracking the
100 largest nonfinancial stocks on the Nasdaq, was nearly
flat.IShares MSCI EAFE Index (EFA), tracking developed foreign
markets, rose 2%.IShares MSCI Emerging Markets Index (EEM) added
May traditionally kicks off the worst six months of the year
for the stock market. Since 1997, the Dow rose in May only six
out of the past sixteen years, while the Nasdaq fell five Mays in
a row between 1998 and 2001, according to the Stock Trader's