ETF Leaders and Laggards

Exchange-traded funds sprinted out of the gate in 2007 in what looked like a market that would produce a repeat of last year's winners and losers.

But in late February, turmoil in the foreign markets, particularly in Asia, flattened the market's early gains and triggered some high-RPM sector rotation.

At the end of February, the big winners were funds that invested in metals and materials; eight of the top 10 ETF equity and commodity fund performers were in that category. Conversely, many of last year's star performers collapsed to the bottom rungs of the year-to-date performance ladder.

With the exception of the (EWM)MSCI Malaysia Fund, (EWM) the (SLV)Silver Trust and the (ICF)Cohen & Steers Realty Major Fund -- all from the iShares group -- metals and materials funds dominated the top-10 ETF performance list.

Two of the top three are from what was once considered the most cyclical of "smokestack" industries: steel. Five of the remaining ETF winners had the word "materials" in their fund names, four with the qualifier of "basic."

The market in early 2007 has underscored the potential frustrations of momentum investing. With the exception of a software fund and two funds that focus on the troubled homebuilding sector, the weaker side of the year-to-date performance spectrum is dominated by ETFs that shined for a long time prior to the late-February downdraft.

For example, funds invested in the "BRIC" territories -- Brazil, Russia, India and China -- populate three of the bottom four spots on the roster of laggards.

Considering that the epicenter of the market's February earthquake was Shanghi, it's appropriate that the year's bottom performer to date, and the only ETF with a double-digit loss so far for the year, was the (FXI)iShares FTSE/Xinhua China 2 fund. That ETF tumbled 11.08% in the year's first two months. The letdown came after a sizzling total return of 82.98% during 2006.

Next to last in the year-to-date performance derby was the (TBH)HOLDRs TeleBras fund, whose share value fell 9.28% in the year's first two months. The fund in the group with holdings in all four BRIC markets, the (EEB)Claymore/BNY BRIC ETF, was down 5.59% at the end of February. Other favorites of recent years to appear on the laggards list include two emerging markets funds -- (EEM)iShares MSCI Emerging Markets and (EWT)iShares MSCI Taiwan Fund -- and two energy ETFs.

The first horse out of the starting gate does not always win the race. But considering the reversals thus far from the patterns of the last few years, it looks to be another interesting year for ETFs. Below is a list of the leaders and laggards among ETFs as rated by TheStreet.com Ratings.

ETF Leaders & Laggards
Name	Ticker	Objective	Year-to-Date Return (%) *	TheStreet .com Ratings Grade **
LEADERS
Market Vectors Steel Index ETF	SLX	Equity Income	11.60	U
iShares MSCI Malaysia	EWM	Non-US Equity	10.66	B+
SPDR S&P Metals & Mining ETF	XME	Equity Income	10.02	U
iShares Silver Trust	SLV	Sector - Precious Metals	9.80	U
Vanguard Materials ETF	VAW	Equity Income	8.18	A
PowerShares FTSE RAFI Basic Mat	PRFM	Equity Income	7.91	U
SPDR Materials	XLB	Growth - Domestic	7.58	C+
PowerShares Dynamic Basic Materials	PYZ	Equity Income	7.37	U
iShares Dow Jones US Basic Material	IYM	Equity Income	7.02	C+
iShares Cohen & Steers Realty Major	ICF	Growth & Income	6.93	C
LAGGARDS
iShares MSCI Emerging Markets	EEM	Emerging Market Equity	-3.87	C+
iShares MSCI Taiwan	EWT	Non-US Equity	-4.00	D
WisdomTree International Energy	DKA	Sector - Energy/Natural Res	-4.03	U
HOLDRS Software	SWH	Growth - Domestic	-4.50	D+
SPDR S&P Homebuilders ETF	XHB	Equity Income	-4.60	U
iShares S&P Global Energy	IXC	Sector - Energy/Natural Res	-5.53	A-
Claymore/BNY BRIC ETF	EEB	Global Equity	-5.59	U
iShares DJ US Home Cons Idx	ITB	Equity Income	-8.31	U
HOLDRS TeleBras	TBH	Non-US Equity	-9.28	E-
iShares FTSE/Xinhua China 25	FXI	Non-US Equity	-11.08	A+
COMPARATIVE INDICES
MSCI EAFE Index (International Stocks)			1.51
S&P 500 Composite Total Return			-0.47
S&P 400 Midcap Total Return			4.39
Russell 2000 Index (Small Cap Stocks)			0.87
* Total 2007 return through 2/28/2007. ** "U" is unrated. Note: Leveraged and "inverse" ETFs not included. Source: TheStreet.com Ratings

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