With the fourth quarter set to start next week, it's a good time
to review the top-performing equity ETFs so far this year.
At the top of the list is the Market Vectors Egypt ETF
(NYSEArca:EGPT) which returned 66 percent year-to-date through
Total Return Year-To-Date %
Expense Ratio (bps)
||Market Vectors Egypt
||Equity:Egypt - Total
||iShares Dow Jones U.S.
||Market Vectors Biotech
||SPDR S&P Homebuilders
||First Trust NYSE Arca Biotechnology
||iShares MSCI TurkeyInvestable Market
||Equity:Turkey - Total
||SPDR S&P Biotech
||Guggenheim China Real Estate
||iShares NASDAQ Biotechnology
||iShares FTSE EPRA/NAREITDeveloped
Admittedly, EGPT's ride hasn't been a smooth one. In February,
Egypt's credit rating was downgraded by Standard & Poor's,
which cited a plunge in foreign reserves and continued instability
as the reasons.
Still, Egyptian stocks have rebounded, with the prospects of
foreign aid packages as well as the return of tourism. Those two
variables are crucial, because Egypt can do well if it's not
starved of foreign investment and tourism.
Earlier this month, Qatari officials pledged to invest $18
billion in tourism and industry along Egypt's Mediterranean
coastline. Meanwhile, the Obama administration has cobbled together
a $1 billion aid package and is openly supporting the $4.8 billion
loan being negotiated between Egypt and the International Monetary
Despite its amazing performance in the past few months, EGPT
isn't very popular, judging from its $58 million in assets. This
can perhaps be explained by the fact that the fund isn't
particularly liquid or cheap.
The only other country-specific ETF to make our top 10 list is
the iShares MSCI Turkey IM Index Fund (NYSEArca:TUR). At No. 6, it
has returned 40 percent since the beginning of the year. The fund
itself is cheap and liquid. Its concentrated portfolio offers heavy
exposure to Turkish financial stocks.
Despite its proximity to Europe, Turkey has done well during the
eurozone meltdown. George Friedman, the geopolitical consultant and
founder of Stratfor, has been championing Turkey for many years,
calling it 'an island of stability in a region of chaos.'
Before EGPT knocked it down from the top spot, the iShares Dow
Jones U.S. Home Construction Index Fund (NYSEArca:ITB) was the
best-performing fund in the first half of 2012. ITB returned 63
percent year-to-date, while the SPDR S&P Homebuilders
(NYSEArca:XHB), No. 4 on the list, jumped 45 percent.
Both funds have benefited from rising homes prices in recent
months. ITB offers more exposure to homebuilders, at 65 percent of
its portfolio vs. XHB's 30 percent, with the remainder of ITB is
scattered among various subindustries such as home improvement and
XHB meanwhile has a strong focus on home furnishings-companies
such as Pier 1 Imports and Williams Sonoma grace its top 10
Although homebuilders have had a good run so far, advisors like
Rick Vollaro of Pinnacle Advisory Group believe this industry has
even more upside potential.
It would be hard to miss the strong presence of biotech ETFs on
this list. In fact, four out of five of the Top 10 list offers
exposure to biotech:
- Market Vectors Biotech (NYSEArca:BBH), +47 percent
- First Trust NYSE Arca Biotechnology (NYSEArca:FBT), +41
- SPDR S&P Biotech (NYSEArca:XBI), +39 percent
- iShares Nasdaq Biotechnology (NasdaqGM:IBB), +35 percent
Individually the companies in these funds are generally more
volatile than, say, large drug companies. But owning many such
companies in a fund offers inexpensive diversification that
minimizes such risks.
This year's bull market has helped riskier health care
investments, and so have an aging global population; the prospect
of Obamacare fueling demand growth; and a spike in mergers &
Although FBT was ahead of BBH earlier this year, BBH with its
global exposure has gained ground. BBH returned over 46 percent,
whereas FBT, XBI and IBB returned 41 percent, 39 percent and 35
Last but not least, two ETFs focused on real estate in Asia-the
Guggenheim China Real Estate ETF (NYSEArca:TAO) and the iShares
FTSE EPRA/NAREIT Developed Asia Index Fund (NasdaqGM:IFAS)-squeezed
into our top 10 list, returning 35 percent and 32 percent,
Government incentives and low interest rates have been strong
incentives for homebuyers in Chinese and Japanese real estate
It's possible that many of the funds on the year-to-date top
returns list will still be on it at the end of the year. I'll
circle back to have another look when the final 2012 numbers are
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