Best Performing Sector ETFs This Year – TAN, BBH, IAI
It was another historic day on Wall Street as the Dow Jones Industrial Average rallied to close at an all-time high of 15,548.
Obviously, it didn’t take long for investors to get over their ‘taper tantrum’ and resume buying stocks.
Let’s take a closer look at what industry ETFs are benefiting the most from the historic bull market in stocks this year…
Guggenheim Solar (TAN)
TAN is up an eye-popping 77% so far this year. And the bullish uptrend hasn’t lost any steam lately… TAN is up 11% in the last month and it recently broke out to a new 52-week high.
What’s behind TAN’s huge gain?
Solar stocks were basically left for dead near the end of last year. TAN tumbled to an all-time low of $12.60 in November as more and more short sellers piled on.
The pessimism toward solar had clearly become overdone and the ensuing relief rally and short squeeze sparked the first leg of the rally.
Then industry bellwether First Solar (FSLR) issued a better than expected forecast in early April. It gave investors a reason to believe solar companies could be profitable businesses again.
A series of ‘less bad’ earnings reports in the industry helped fuel more gains in solar stocks throughout the first half of the year.
And just this week, China announced they’re expanding their installed solar capacity to over 35 gigawatts by 2015. That’s more than five times as much energy as they currently produce.
China’s clearly going to need a lot more solar panel in the next few years! And that’s good news for solar stocks.
Market Vectors Biotech ETF (BBH)
BBH is up nearly 60% this year. And it recently hit a 52-week high of $77.94.
It tracks a rules based index created by Market Vectors. It’s called the Market Vectors US Listed Biotech 25 Index. And it’s designed to track 25 of the largest biotech stocks listed in the US.
Why is BBH rallying?
The biotech industry has been awash in M&A activity the last few years. Large pharmaceutical companies and drug makers have been merging and buying up smaller companies in order to bulk up their pipeline of new drugs and treatments.
All of the wheeling and dealing has helped bolster valuations across the industry.
For instance, Onyx Pharmaceuticals (ONXX) rejected an offer from Amgen (AMGN) and put itself up for sale earlier this month. Shares of ONXX immediately jumped more than 50% in value.
What’s more, it caused the value of many other potential takeover targets to soar in value as well.
iShares Dow Jones US Broker-Dealers (IAI)
IAI has risen 54% year-to-date. This is one ETF showing a tremendous amount of relative strength. It’s outpacing other ETFs when the market rallies and it hardly gives up any ground when the market is selling off.
IAI tracks the performance of the US investment services sector.
What’s driving the gains in IAI?
I guess it shouldn’t come as a surprise to see stock brokers and other trading companies perform well when the Dow and the S&P 500 are all-time highs.
Specifically, IAI currently holds 22 stocks. Each stock makes up between 3% and 7.4% of the holdings. So each stock has meaningful impact on the performance of the ETF.
The top four holdings – Goldman Sachs (GS), Charles Schwab (SCHW), CME Group (CME) and Morgan Stanley (MS) – have all had nice gains this year.
Here’s the upshot…
Blue chip stocks have been pacing the stock market’s gains with a 25% gain so far this year. But digging into specific sectors and industries like solar, biotech, and brokers-dealers has delivered market beating results of 77%, 59%, and 54% respectively.
Needless to say, doing your homework and positioning yourself in the right ETF can deliver market beating results.
Good Investing,
Corey Williams
Category: ETFs, Sector ETFs
