3 ETFs That Tanked In April

| May 1, 2013 | 0 Comments

outflowsThe S&P 500 finished the month of April at an all-time high of 1,597.

But it wasn’t all sunshine and teddy bears.  Some ETFs aren’t enjoying the same success as the large cap index.

Understanding why these ETFs struggled in April will give you some insight into whether they’re a buy or sell at this point.  Let’s take a closer look…

Global Carbon ETN (GRN)

GRN was one of the worst performing ETFs in April.  For the month, the fund plunged 33%, which brings its year-to-date return to an eye-popping -50%.  That’s right…if you invested money in GRN at the beginning of the year, you’ve lost half of it!

As its name suggests, GRN is designed to measure the performance of the most liquid carbon-related credit plans.   The index currently includes two carbon-related credit plans: European Union Allowances (EUA) and Certified Emission Reductions (CER).

So what happened to GRN?

This unique and thinly traded ETN tracks the value of carbon credits.  These are tradable certificates representing the right to emit one ton of carbon dioxide.  They were created with the intent of slowing the growth of greenhouse gas emissions.

In short, the market for carbon credits has tanked.

The idea of lowering greenhouse gases is commendable.  But just like so many other ‘green’ ideas like solar and wind, they just don’t make good investments.  I’d continue to steer clear of GRN.

Market Vectors Junior Gold Miners ETF (GDXJ)

GDXJ fell flat on its face last month.  This ETF lost 21% of its value in April.  And it’s now down a total of 41% for the year!

GDXJ invests in small- and mid-cap companies that generate at least 50% of their revenues from gold and/or silver mining, hold real property that has the potential to produce at least 50% of the company’s revenue from gold or silver mining when developed, or primarily invest in gold or silver.

It’s no secret why GDXJ tanked in April…

Gold and silver miners are getting drilled because the price of gold and silver is falling.  In fact, gold prices fell 8% and silver prices tumbled 13% last month.  And that’s after the precious metals bounced off the lows for the month.

To make matter worse for the miners, they’re also seeing their cost of production go up.  Simply put, the low hanging fruit is gone.  And it takes more time, energy, and man-power to pull each additional ounce of the metal out of the ground.

It doesn’t take a genius to figure out rising costs of production and falling prices are bad for the bottom line.  What makes this really dangerous is the decade long bull market in precious metal prices has allowed these junior miners to flourish no matter how good or bad they’ve been run.  If gold and silver prices continue falling, we’ll likely see a number of junior miners go belly up.

Global X Uranium ETF (URA)

URA didn’t fare quite as badly as GRN or GDXJ.  However, it still stumbled to a 12% loss in April and it’s down 36% over the last year.  That’s not small potatoes…

URA offers exposure to uranium mining companies around the world.

The uranium they produce is primarily used in nuclear power plants. But nuclear power is being phased-out of existence because of the safety risks nuclear power plants pose.

In fact, through the entire three year existence of URA, it has done nothing but fall to new low after new low.  Given the strong opposition to nuclear power, demand for uranium will likely continue to fall and drag uranium mining stocks lower as well.  This is one ETF that I wouldn’t want to own at any price.

Good Investing,

Corey Williams

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Category: Commodity ETFs, ETFs, Sector ETFs

About the Author ()

Corey Williams is the editor of Sector ETF Trader, an investment advisory service focused on profiting from ETFs and the economic cycle. Under Corey’s leadership, the Sector ETF Trader has become one of the most popular and successful ETF advisories around. In addition to his groundbreaking service, Corey is the lead contributor to ETF Trading Research, where he shares his insights about ETFs and financial markets three times a week. He’s also a regular contributor to the Dynamic Wealth Report and the editor of one the hottest option trading services around – Elite Option Trader.

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