There’s always a bull market somewhere? Perhaps.
Until recently, the only bull market had been in the commodity arena. That seemed to change when oil dropped 15% in a matter of days.
Yet a quick perusal of the YTD results (through 7/25/08) show that a handful of ETFs have bucked the bear trend. Collectively, they comprise a rather eclectic grouping.
Biotech, broadband, transports, cardio devices and environmental services? None of these areas are traditional recession-free zones let alone inflation-fighters. And yet, each has produced 2008 gains in a year when most economic sectors… as well as the broader market… have returned a deplorable -15%!
For my part, I did not see strength in biotech or broadband. And when it came to environmental services, I have spoken more favorably about clean technologies via the Powershares CleanTech Fund (PZD).
On the flip side, I have been on the side of transports via the iShares Dow Jones Transportation Fund (IYT) as well as medical devices through the iShares DJ Medical Devices Index (IHI). (Read more about "med devices" here, or speed up your knowledge of transportation stocks here.)
So let’s take a closer look at the fistful of 2008 winners:
1. The iShares Biotechnology Fund (IBB). If I had been willing to "bottom fish" this one back when I wrote about its historically low P/E back on January 30, I’d have been eating caviar. But its rare when bottom fishing pays off… since you never know when the bottom is really in! Nevertheless, IBB is actually reporting less volatility than the S&P 500 with a low beta reading of 0.7%. And with re-surging interest in Amgen, Teva and Gilead, biotech has 6%+ gains on 2008.
2. The Merrill Lynch Broadband HOLDRs (BDH). Transmitting information over a wide band of frequencies allows more info to be transmitted simultaneously. The king of info-carrying capacity technology is Qualcomm… and therein lies the Broadband HOLDRs success. 50% of its movement is attributed to Qualcomm alone, as the stock recently launched to a 52-week high. (In fact, other prominent players like Corning and Motorola have led BDH to achieving only fractional percentage gains here in 2008.)
3. The iShares Dow Jones Transportation Fund (IYT). I’ve said it before… but IYT will be one of the best indicators of a true rebound in domestic stock assets. Railroad companies like Burlington Northern and American Railcar profit from infrastructure needs here in the U.S., as they deliver the coal and the metals and our agricultural products. UPS and FedEx may be hurt by high oil prices, but they are also expanding abroad. Moreover, most of the Dow Jones Transportation Fund’s woes have been felt since the summer of 2007. These are just a few of the reasons for a 10% gain for IYT this year.
4. Market Vectors Environmental Services (EVX). The number "23." That’s the number of companies that EVX tracks — companies that manage, remove and store consumer waste or industrial by-products. It’s up a percentage point in 2008 and is currently above its 200-day moving average (long-term trendline). I have mentioned in previous posts that EVX is expensive at 1.4%, but that it certainly targets an attractive sub-segment of the "go green" movement. Again, I’ve been more attracted to another business services fund, the PowerShares Cleantech Fund (PZD).
5. HealthShares Cardio Devices (HHE). Only 22 companies in this fund. Indeed, it seems the more narrow the focus, the more chance for victory in the bear. Cardio Devices (HHE) invests in medical equipment companies that manufacture and/or distribute devices for the treatment of cardiac, vascular, and endovascular disorders and diseases. HHE is up approximately 5% YTD. It is beating the broader Dow Jones Medical Devices Fund (IHI), yet IHI has been plenty safe with just a -2% loss in 2008. I think I’d rather get exposure to more than heart-health alone on this one.
Disclosure Statement: ETF Expert is a web log ("blog") that makes the world of ETFs easier to understand. Pacific Park Financial, Inc., a Registered Investment Advisor with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.