September is historically considered as the scariest month for the stock market and this year particularly proved it to be true. A calculation carried out by moneychimp.com in the year range 1950 to 2014 revealed that September ended up offering negative returns in 36 years and positive returns in 29 years, leading to an average return of -0.65%.
Thanks to the persistent China-led slowdown, a new climate of uncertainty triggered by Fed’s “no lift-off” announcement, outburst of the bizarre Volkswagen (VLKAY - Free Report) scandal, tumbling commodity prices and the huge sell-off in biotech stocks, September was a witness to a lot of turbulence (read: 3 Hit and Flop Zones of Q3 and Their ETFs).
Both the major U.S. benchmarks – S&P 500 and the Dow Jones Industrial Average – continued its correction during the month. The S&P 500 lost 2.6% while the DJIA shed 1.5%. Let’s take a look at the three best and worst performing ETFs of this chaotic month (read: Top ETF Stories of September).
iPath Bloomberg Sugar SubTR ETN (SGG - Free Report) – Up 12.61%
Sugar prices recovered 15% at the end of September after hitting its seven-year low in August. The upsurge was driven by appreciation of the Brazilian Real against the U.S. dollar and the country’s decision to hike fuel prices. Sugar is greenback-priced in Brazil, the largest producer of the agricultural commodity in the world. Therefore, a stronger dollar encourages more sugar exports from the country, dampening its prices. As a result, SGG became the top performer of the month.
SGG tracks the Dow Jones-UBS Sugar Subindex Total Return Index, which provides the returns that are in an investment in the futures contracts on the commodity of sugar. The note has garnered nearly $53 million in assets and trades in a daily volume of 48,000 shares. It charges 75 bps in fees and has a Zacks ETF Rank #3 (Hold) with a High risk outlook (see all Agricultural ETFs here).
iPath Bloomberg Tin SubTR ETN (JJT - Free Report) – Up 11.87%
Tin was one exception among the commodities experiencing a bullish trend in prices amid fears of supply shortage. Solder used in electronics accounts for about half of the global demand for tin. In the past one month, tin prices rose 5.8%.
Indonesia, the world’s largest tin exporter, imposed restrictions on tin exports in order to curb illegal mining. The country has mandated that all tins going out of the country must come from government-certified mines. Further, tin output from Myanmar, the new entrant in the tin market, has been declining due to falling ore grades.
These took the ETN to new heights. JJT tracks the Dow Jones-UBS Tin Subindex Total Return index, consisting of one futures contract on tin. However, the note has not yet received enough attention gathering only $2 million in assets and trading in a paltry volume of roughly 300 shares per day. It charges 75 bps in fees and has a Zacks ETF Rank #4 (Sell) with a High risk outlook (see all Industrial Metals ETFs here).
ETFS Physical Palladium (PALL - Free Report) – Up 8.51%
Palladium is another metal that is witnessing rising prices. It is actually a surprise gainer from the Volkswagen scandal, which has turned consumers away from diesel-engine vehicles toward gasoline-engine vehicles, where the precious metal is used in catalytic converters. Palladium prices rose 14.8% last month. As a result, this ETF was a top performing candidate in the month (read: Surprise Loser and Gainer from VW Scandal: Metal ETFs).
The ETF tracks the spot price of palladium bullion and amassed roughly $223 million in assets. This fund charges 60 bps in fees and trades in an average volume of 34,000 shares. It has a Zacks ETF Rank #3 with a High risk outlook.
AccuShares Spot CBOE VIX Up Shares – Down 58.85%
The presence of this volatility ETF among the worst performers is surprising when this asset class have been investors’ darling during the third quarter as they tend to outperform when markets are falling or fear levels over the future are high.
VXUP offer direct “spot” exposure to the CBOE Volatility Index or ‘VIX’, also known as fear gauge and the best representative of volatility in the stock market. It is constructed using the implied volatilities of a wide range of S&P 500 index options. VIX was indeed down 13.8% in the last month, pointing to investors’ belief that market may not reach its bottom in the near term.
This few-months old fund has market capitalization of $1.1 million and trades in an average volume of a meager 5,000 shares. It charges 95 bps in fees (read: Volatility ETF Guide: VXX vs. VXUP).
Barclays Return on Disability ETN (RODI - Free Report) – Down 36.45%
RODI is a thinly traded ETN, which exchanges only 50 shares in hand per day. Thinly traded assets are considered very risky due to its illiquidity and are not a proper choice of investors at turbulent times.
This note seeks to track the performance of the Return on Disability US Large Cap ETN Total Return USD Index which zeroes in on companies that have very favorable policies towards the disabled, both as customers and workers. It charges 45 bps in fees and has a market capitalization of $26.8 million.
InfraCap MLP ETF (AMZA - Free Report) – Down 22.06%
Units of energy-based master limited partnerships or MLPs are trading in the south due to the continued slide in crude oil price. AMZA seeks total return through investments in equity securities of publicly-traded MLPs and limited liability companies taxed as partnerships.
AMZA is highly exposed to MLPs engaged in the midstream oil and gas sector, which has been experiencing huge sell-off. This made the ETF one of the worst performing candidates in September. The fund has garnered only $16 million in assets and trades in an average volume of 22,000 shares. It charges a hefty 270 bps in fees (see all MLP ETFs here).
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