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After completing a year of uncertainty, the U.S. economy entered 2012 on a more positive note. In fact, 2012 has so far been a pretty good year so far for the broader equity market, leading the S&P 500 to higher levels (Build a Complete Portfolio with These Three ETFs).
Now, Europe appears to be on the brink once again while the American economy could teeter back into a low growth environment as well. Beyond these important economies, events aren't going very well in emerging markets either, as worries over inflation and growth are plaguing a variety of important developing nations.
With this backdrop, a number of market sectors have performed quite poorly in the first part of the year, mostly in the wake of a dull second quarter. This resulted in six of the nine main sectors of the S&P 500 posting a loss in the past three-month period, suggesting that the negative sentiment is pretty widespread throughout the equity world.
Despite the overall gloomy tone in the marketplace heading into the second half of the year -- and weakness in a number of segments -- some ETFs have been able to perform quite nicely and are actually posting double-digit gains (Three Biggest Mistakes of ETF Investing).
In fact, a handful of unleveraged products are actually up more than 30% YTD despite the shaky environment, each of which we have briefly highlighted below:
Market Vectors Egypt Index ETF (EGPT - ETF report)
The ETF performed disastrously last year due to the intense political turmoil. The fund rebounded this year on hopes of a peaceful election process, but the run has been far from smooth (Can the Vietnam ETF Continue Its Run?).
The political situation now seems to be stabilizing in Egypt (somewhat), with the election of Mohamed Morsi of the Muslim Brotherhood, as the first democratically elected leader of the country.
For investment exposure to this volatile region, investment in Market Vectors EGPT could be an interesting play. The fund tracks The Market Vectors Egypt Index which is comprised of companies that are domiciled in Egypt or generate at least 50% of their revenues in Egypt. This produces a fund which is home to 26 Egyptian stocks, manages an AUM of $58.3 million and trades with a volume of 38,500 shares a day.
The performance of the fund has been quite impressive till date as it delivered a return of 44.81%. This is by way much better than a return of 8.38% in the trailing one year.
All the 26 constituents in the portfolio are either small cap or mid cap companies. Among sector holdings, financials enjoys the heaviest weighting in the fund (43.3%), followed by materials (15.2%) and telecommunication services (12.8%). For this, the ETF charges an expense ratio of 94 basis points annually.
Dow Jones U.S. Home Construction Index Fund (ITB)
For investors seeking for a pure play in the building & construction ETF space, ITB could be an interesting pick (Three Construction ETFs for an Economic Recovery). The product tracks the Dow Jones U.S. Select Home Construction Index which is a broad benchmark of firms which construct residential homes including mobile and prefab domiciles.
The fund has gained 41.91% so far this year which is especially good considering that the fund lost nearly 9% last year. Clearly, the shift of investor confidence at the start of the year in the housing sector has had a very positive impact on this fund (Top Zacks Ranked Construction ETF- ITB).
In fact, prices have seemingly started to bottom out in a number of markets around the country, while low rates are helping to push some back into homes, even with the sluggish economic situation.
Thus, most homebuilding companies are witnessing better year-over-year growth in revenues, driven by an increase in new home orders and average selling prices.
The fund manages an asset base of $1,361.4 million. It trades in volumes of more than 4 million shares a day. However, the fund is neither devoid of company specific risk nor sector specific risk. From a sector perspective, homebuilders make up 65% of the total exposure with the building materials segment holding 17.23% of total assets while home improvement firms taking up 13%.
From an individual holding perspective, the fund assigns more than 65% of its asset base to the top 10 holdings. Among the top 10, DR Horton Inc. (DHI) takes the top spot, closely followed by Lennar Corp. (LEN) and PulteGroup Inc. The fund charges an expense ratio of 47 basis points.
SPDR S&P Homebuilders ETF (XHB)
For another ETF in the homebuilders’ space, investors can look to put their money in SPDR’s XHB. XHB tracks the S&P Homebuilders Select Industry Index.
This fund has also displayed outstanding performance although not at par with its counterpart ITB. The fund has been able to gain 38.9% so far this year (Two ETFs that Have Surged from Their Lows).
37 companies from the homebuilders’ space have helped the fund to deliver such impressive returns. In these 37 constituents the fund invests its asset base of $2,009.8 million and trades with a volume of more than 13 million shares a day.
The 10 largest weightings among the holdings occupy a combined share of 35% while the fund does not appear to invest more than 3.74% in any of the top 10 holdings. Among sector allocation, all the sectors get double-digit allocation except household appliances. The fund charges an expense ratio of 35 basis points annually.
Market Vectors Biotech ETF (BBH)
Investors looking for exposure in the biotech space can invest in BBH. Earlier named as Merrill Lynch Holder, and then converted into Market Vectors Biotech ETF, the fund tracks the Market Vectors US Listed Biotech 25 Index. This produces a fund with total holdings of 26 biotech stocks (Forget Big Pharma, It Is Time for A Biotech ETF)
By providing exposure to 26 companies, the fund has been able to deliver a remarkable return of 46.5% so far this year, the highest on the list.
The fund appears to be quite concentrated in its top 10 holdings with 65.3% of the asset base going towards them. Among individual holdings, Amgen takes the top spot with a share of 15.1% closely followed by Gilead Sciences and Biogen with respective shares of 9.38% and 8.03%.
For this, the fund charges an expense ration of 35 basis points annually.
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