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Top ETFs Heavy on Metal

Editor's note: As a special feature for April, is offering a series reviewing the first-quarter performance of mutual funds and ETFs. This is the fifth installment.

Seven of the top 10 exchange-traded fund performers for the first quarter of 2007 focus their holdings on metals, materials or petroleum industries. Until the day when ETFs are created that invest in cardboard box producers, it would be difficult to imagine a more unglamorous group.

But as our list of ETF leaders in the accompanying table clearly demonstrates, solid returns -- not glamour -- is what makes an investment attractive.

Also among our list of top ETFs are those investing overseas -- four of the top 10 ETFs focus their portfolios abroad. Three of these ETFs are located in the Asia-Pacific region. Those three each carry a grade in the "A" range, which equates to "buy" recommendations. In fact, two have the highest possible marks of A-plus.

The iShares MSCI Malaysia Fund (EWM) has rewarded its investors with a total return just shy of 50% over the past 12 months. This just beat out the ETF that invests in Malaysia's neighbor, the iShares Singapore Fund (EWS), which increased 44.78% in the past year.

However, the presence of the iShares MSCI Taiwan Fund (EWT) and the iShares FTSE/Xinjua China 25 (FXI) on the roster of 10 ETF laggards shows that Asia is not necessarily a slam dunk. Throwing darts at a map of Asia will no longer guarantee a winning game.

Also on the laggards list are some tech-related ETFs. HOLDRs Software (SWH - Get Report) and iShares Internet Infrastructure (IIH) were among our worst performers for the quarter.

The only ETFs to suffer double-digit percentage setbacks in the first quarter invested in the depressed housing industry. The iShares Dow Jones U.S. Home Construction Index Fund (ITB) demolished investor hopes by plunging 19.24% during the quarter.

First-Quarter ETF Leaders
ETF Ticker Objective 3-Month Total Return (%) 12-Month Total Return (%) Ratings Grade*
Market Vectors Steel Index SLX Equity Income 20.80 N/A U
iShares MSCI Malaysia EWM Non-U.S. Equity 19.01 48.09 A
SPDR S&P Metals & Mining XME Equity Income 16.81 N/A U
WisdomTree Intl Basic Materials DBN Non-U.S. Equity 13.57 N/A U
PowerShares Dynamic Basic Materials PYZ Equity Income 11.30 N/A U
iShares S&P Global Materials Index MXI Global Equity 10.50 N/A U
iShares MSCI Singapore EWS Non-U.S. Equity 10.45 44.78 A+
iShares MSCI Australia EWA Non-U.S. Equity 10.43 35.69 A+
Claymore MACROshares Oil Up UCR Energy/Natural Resources 10.40 N/A U
Vanguard Materials VAW Equity Income 10.28 19.95 B+
S&P 500 Total Return 0.64 11.83
* U is Unrated.
Data as of 3/31/2007.
Source: Ratings

First Quarter ETF Laggards
ETF Ticker Objective 3-Month Total Return (%) 12-Month Total Return (%) Ratings Grade*
iShares Dow Jones U.S. Financial Serv IYG Financial Services -3.81 9.48 C-
ProShares Short Midcap 400 MYY Growth - Domestic -3.89 N/A U
iShares MSCI Taiwan EWT Non-U.S. Equity -3.93 11.78 D-
HOLDRS Software SWH Growth - Domestic -4.11 3.66 E+
HOLDRS Internet Infrastructure IIH Growth - Domestic -5.91 4.85 E-
iShares FTSE/Xinhua China 25 FXI Non-U.S. Equity -8.09 39.51 A+
ProShares Ultra Short MidCap 400 MZZ Growth - Domestic -8.84 N/A U
Claymore MACROshares Oil Down DCR Energy/Natural Res -9.17 N/A U
SPDR S&P Homebuilders ETF XHB Equity Income -12.70 -26.70 E-
iShares DJ U.S. Home Cons Idx ITB Equity Income -19.24 N/A U
S&P 500 Total Return 0.64 11.83
* U is Unrated.
Data as of 3/31/2007.
Source: Ratings

Note: The author holds a long-term investment position in the iShares MSCI Taiwan Fund.
Richard Widows is a financial analyst for Ratings. Prior to joining, Widows was senior product manager for quantitative analytics at Thomson Financial. After receiving an M.B.A. from Santa Clara University in California, his career included development of investment information systems at data firms, including the Lipper division of Reuters. His international experience includes assignments in the U.K. and East Asia.

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ITB $27.85 -0.11%
FXI $38.66 -0.46%
EWT $14.17 0.64%
EWS $11.18 2.10%
EWM $11.19 0.81%


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DOW 17,084.49 +33.74 0.20%
S&P 500 2,013.43 +15.91 0.80%
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