The New Year has ushered in a new crop of ETF leaders. Here's an overview of five nonleveraged ETFs making the most headway in the past month and what may be driving prices.
These all sport stellar IBD Accumulation-Distribution Ratings, which is on an A to E scale with A being highest and E being lowest. That means institutional investors are heavily buying shares and very few are selling, boosting the odds of further price appreciation.
All of them are trading above their 50- and 200-day moving averages, indicating strong uptrends.
1.Guggenheim Solar ( TAN )
One-month change: +37.4% vs. 2.8% for the SPDR S&P 500 ( SPY ).
2012 change: -30.74% vs. +15.99% for SPY.
Relative Strength Rating: 48.
Accumulation-Distribution Rating: A+.
Solar ETFs may evolve into the biggest turnaround story of 2013 after they slumped an average of 42% the past three years owing to a perfect storm of government subsidy cuts globally and Chinese oversupply.
Standard & Poor's analysts believe low prices will spark demand for solar systems over the next few years. In an equity report S&P wrote: "We continue to maintain a positive outlook on the solar industry for the longer term, as lower solar system prices should increase demand and make the industry more competitive with traditional sources of energy.
"In addition, the catastrophic events in Japan in March 2011 -- the earthquake and tsunami, followed by the accident at the Fukushima nuclear plant -- will likely have a notable long-term positive impact on the solar industry. This can already be seen in recent actions taken in countries such as Germany and China that previously had been big supporters of nuclear power.
"Germany announced in May 2011 that it plans to close all of its nuclear power plants by 2022, while China raised its long-term solar system installation targets. Although global incentives are declining, this can be seen as a positive, as the removal of subsidies illustrates the health of the industry.
"We anticipate that other nations will eventually follow this trend and ramp up investments in safer energy sources such as solar and wind."
IBD covered solar ETFs in its Monday edition.
2.Market Vectors Solar Energy ETF ( KWT )
One-month change: +30.1%.
2012 change: -32.83%.
Relative Strength Rating: 37.
Accumulation-Distribution Rating: A+.
KWT is very similar to TAN. Both charge an annual management fee of 0.65% of assets. TAN, with $57 million in assets, is more liquid than KWT, with $13 million under management.
3.Market Vectors Vietnam ETF ( VNM ).
One-month change: +21.8% vs. +4.7% for iShares MSCI Emerging Markets ( EEM ).
2012 change: +26.35% vs. 19.10% for EEM.
Relative Strength Rating: 79.
Accumulation-Distribution Rating: A-.
Only investors with strong stomachs should venture to this very volatile Southeast Asian nation. This 32-stock portfolio is 70% weighted in Vietnamese companies and 30% in ones that do substantial business in the country. Even after such a strong run-up, VNM trades at lower valuations than Asian and emerging markets.
It carries a price-earnings ratio of 10.6 vs. 12.3 for emerging markets, according to Morningstar. It has a 1.19% price-to-book, 1.63% price-to-cash flow and 0.75 price-to-sales ratios. By contrast emerging markets are trading with P/B of 1.58 and P/CF of 5.82 and P/S of 0.99.
SeekingAlpha.com featured an article by the ETF Professor of Benzinga.com about how the banking sector has led a turnaround for the ETF.
4.Global X FTSE Greece 20 ETF (GREK)
One-month change: +17.3% vs. +3.2% for iShares MSCI EAFE (EFA), tracking foreign developed markets.
2012 change: +29.07% vs. +17.3% for EFA.
Relative Strength Rating: 90.
Accumulation-Distribution Rating: B.
The Greek tragedy could turn into a fairy tale for investors. GREK is also a value play. It trades at a P-E ratio of about 9 vs. 11.7 for European stocks. It sports a 0.77 P/B; 0.34 P/S and 2.81 P/CF. European stocks have a 1.35 P/B, 0.81 P/S and 4 P/CF.
Standard & Poor's Ratings Services lifted its sovereign credit ratings on the country to "B" with a stable outlook from "selective default" in December. The B rating means the issuer is vulnerable if something goes bad but has the means to pay its debts.
S&P said its improved outlook was based on the eurozone's determination to keep Greece in the European Union and the government's commitment to carrying out austerity programs.
"We could raise our long-term rating on Greece if the government follows through fully on its steps to comply with the EU/IMF program, thereby restoring predictability to its policymaking as well as contributing to a sustained economic recovery and improved prospects of sustainable debt-servicing," S&P wrote. "We could lower the ratings if we believe that there is a likelihood of a distressed exchange on Greece's remaining stock of commercial debt."
5.Market Vectors China ETF (PEK)
One-month change: +17.3%.
2012 change: +15.36%.
Relative Strength Rating: 77.
Accumulation-Distribution Rating: A-.
Between March and November of last year, PEK corrected 25% peak to trough. China's stock market was one of the worst-performing last year until it staged a turnaround at year's end. PEK jumped 19% in December. Its shorter-term 50-day moving average crossed above the longer-term 200-day moving average last week, also known as a golden cross, indicating a strong uptrend.
The rally was sparked by incoming President Xi Jinping calling for a continuation of pro-growth policies and indicated he favored government support for more urbanization. China's leaders said in a statement they aim to increase imports and speed up urbanization to boost domestic consumption.
China's oil demand rose to a record 9.7 million barrels a day in November, according to Yardeni Research. Its PMI, purchasing manufacturers index, registered above 50 for a third-straight month in December, indicating manufacturing growth.
Investing in China is the No. 1 investing idea of 2013 for Dr. Thanh Bui, a portfolio manager at Camarda Wealth Advisory Group in Fleming Island, Fla., with $250 million in assets under management.
"Over the past two years, the Chinese equity market was negatively influenced by weak external demand for exports, slowing infrastructure spending and concerns about the negative potential impact of its emerging real estate bubble," Bui wrote in an email. "As a result, equities' valuations are currently near all-time lows, with a collective 2012 P/E (price-to-earnings ratio) of 10.4, making the market an attractive bargain.
"However, China's recent economic data suggest that a 'hard landing' scenario is relatively unlikely. Its 2012 GDP (gross domestic product) growth rate is expected to be near its bottom at 7.5% and increase to 8% in 2013 as the government prepares to launch policies to boost economic recovery, spurring growth in domestic consumption, (driven by) gradual appreciation of the Renminbi and rising wages."
The major risk is that slowing global growth will negatively affect China's exports, which accounted for 26% of 2011 GDP, Bui added.
China stock mutual funds took in more than $8 billion since the beginning of October, according to EPFR Global.
Follow Trang Ho on Twitter @TrangHoETFs .
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.