ETFs That Topped & Flopped in Q1

Stocks across the globe witnessed an impressive journey in the first quarter of 2019, recouping all losses from the final months of 2018. Possibilities of a trade truce between the world’s two largest economies fueled the strong rally. Additionally, the raft of soft economic data worldwide fueled expectations that the world's most powerful central banks are likely to continue their stimulus plans, in turn providing a boost to investors’ sentiment.

Notably, the U.S. stocks recorded their best quarter in nearly a decade. The S&P 500 index climbed 13.1% in the first quarter, marking the biggest quarterly gain since the third quarter of 2009 and its best first quarter since 1998. The Dow Jones Industrial Average rose 11.2% in the first quarter while the Nasdaq advanced 16.5%. Small caps stocks, as represented by the Russell 2000 index, outperformed the S&P 500 with growth of 14.2%.

Coming to international markets, Irish stocks surged more than 30%, more than doubling the S&P 500 performance. Stocks in Greece climbed 17.6% while Italy and Canada also rose more than 13% each (read: 5 Top-Performing International ETFs of Q1).

However, global growth slowdown and Brexit continued to weigh on the stocks during the whole of the quarter. Further, the U.S. Treasury yield curve inverted for the first time since 2007, historically an indication of recession.

Given this, we have highlighted both the best and worst performing ETFs of Q1 from different zones or industries:

Best ETFs

ETFMG Alternative Harvest ETF MJ – Up 46.3%

This marijuana ETF has been surging on easing of rules and regulations imposed on the once highly guarded drug — marijuana — for recreational and medical usage. In fact, its popularity has been on the rise since Canada legalized recreational cannabis last year and became the second country in the world to do so on a national level. Notably, a number of US states joined the race to legalize marijuana. The White House, Congress and U.S. regulators have also softened their stance on the drug’s legalization. All these developments in turn, injected strong optimism into the emerging marijuana industry, spurring deal activities (read: Marijuana ETF Outperforms in Q1: 6 Stocks Leading the Rally).

MJ is the first and the only ETF focusing on the cannabis/marijuana industry. It tracks the Prime Alternative Harvest Index, designed to measure the performance of companies within the cannabis ecosystem, benefiting from the global medicinal and recreational cannabis legalization initiatives. The fund holds 37 securities in its basket with higher concentration on the top firms. Canadian firms make up half of the portfolio while American firms comprise 41%. The ETF has AUM of $1.2 billion and trades in a robust volume of around 935,000 shares. It charges 75 basis points in annual fees.

VanEck Vectors China SME-ChiNext ETF CNXT – Up 38.5%

China stocks were on a tear buoyed by the hopes of US-China trade deal and stimuli in the form of a wide range of reforms implemented by the government to revitalize its economic growth. The MSCI move to increase weightings of China stocks in its indices has instilled further confidence. Moreover, depressed valuations have also encouraged investors to charge up at lower levels. While most of the Chinese ETFs has been surging, CNXT stole the show.

This fund offers exposure to the largest and most-liquid China A-share stocks listed and trading on the Small and Medium Enterprise (SME) Board and the ChiNext Board of the Shenzhen Stock Exchange by tracking the SME-ChiNext 100 index. It holds 100 stocks in its basket with none accounting for more than 5.8% share. The product is unpopular with AUM of $36.4 million and average daily volume of around 22,000 shares. It charges 65 bps in fees per year and has a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: China Enters Bull Market, Outperforms in February: 5 Top ETFs).

ARK Genomic Revolution Multi-Sector ETF ARKG — Up 37.1%

The biotech sector has been on the mend amid the ongoing industry consolidation and attractive valuations. Particularly, the surge in demand for artificial intelligence in the advancement of diagnoses and treatment across the health care spectrum has been driving this ETF. This is an actively managed ETF, focusing on the companies likely to benefit from the extension and enhancement of the quality of human and other life by incorporating technological and scientific developments plus improvements and advancements in genomics into their business. The fund holds 33 stocks in its basket with none accounting for more than 10.8% share and has 0.75% in expense ratio. It has accumulated $393.9 million in its asset base and trades in average daily volume of 145,000 shares (read: 4 Market-Beating Sector ETFs of the First Quarter).

Worst ETFs

Breakwave Dry Bulk Shipping ETF BDRY – Down 49.1%

Freight movement has been uncertain this year owing to a plethora of fundamental and sentimental shifts. BDRY is an actively managed ETF that seeks to provide exposure to daily changes in the price of dry bulk freight futures by tracking the performance of a portfolio consisting of a three-month strip of the nearest calendar quarter of futures contracts on specified indexes that measure rates for shipping dry bulk freight. The fund has accumulated about $3.1 million in AUM. It trades in a paltry volume of about 4,000 shares per day on average and charges a higher annual fee of 1.85% (see: all the Industrial ETFs here).

ProShares VIX Short-Term Futures ETF VIXY – Down 37.8%

Though rounds of downbeat data across the globe escalated fears of a slowdown and pushed up volatility products, these turned out to be major losers in the first quarter. VIXY focuses on the S&P 500 VIX Short-Term Futures Index, measuring the returns of a portfolio of monthly VIX futures contracts with a weighted average of one month to expiration. It has amassed $203.5 million in AUM and charges 85 bps in fees per year. The fund trades in average daily volume of 2.2 million shares (read: Volatility ETFs Jump on Global Growth Concerns).

AdvisorShares Dorsey Wright Short ETF DWSH – Down 18.9%

With a strong run-up in the stock market, this ETF declined as it adds alpha to an investment portfolio, especially during a bear market. DWSH is an actively managed ETF that short sells U.S. large-cap securities with the highest relative weakness within an investment universe. It holds 100 stocks in its basket and chares higher annual fee of 99 bps. The product trades in lower average daily volume of 36,000 shares and has accumulated $14.9 million in its asset base (read: Top and Flop ETFs at Half-Way Q1).

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