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TheStreet Open House

Two 'Green' ETFs Clean Up

The health/biotechnology sector dominated half the top 10 list of the most recently improved exchange-traded funds, as measured by improvements in their grades computed by TheStreet.com Ratings.

A pair of "green" ETFs also adorn the most-improved section of the accompanying table of major grade changes. The Market Vectors Environmental Industry ETF (EVX) recently improved from a mark of C-minus from TheStreet.com Ratings' objective grading system to an A, elevating it from a "hold" to a "buy" recommendation.

Perhaps it's a sign of the times that an environmental fund and an alternative energy ETF appear in the "most improved" section while two more energy funds that focus on the more traditional petroleum side of the energy industry populate the "most deteriorated" section of the table.

The Market Vectors Global Alternative Energy ETF (GEX) climbed from an E grade, which equates to a "sell" recommendation, to a mark of C-minus.

Closely related to the environmental funds are two that invest in the business of supply water. The PowerShares Water Resources ETF (PHO) moved from a D to a B-minus grade, while the First Trust ISE Water Index Fund (FIW) climbed from an E-plus to a mark of C.

Of all the upgrades, the First Trust Amex Biotechnology ETF (FBT) stood out performancewise. Its double-digit gains of 15.57% and 13.45% for the most recent three months and 12 months, respectively, pulled its grade from a C-minus to an A.

FBT's major portfolio holdings include Vertex Pharmaceuticals (VRTX), Amgen (AMGN), Genentech (DNA) and Gilead Sciences (GILD).

The perils of leverage are graphically demonstrated in the six ETFs on the list that suffered major deteriorations in grades. Five of them include "ultra" in their respective names, indicating gearing that hurts on the downside just as much as it supplies additional pleasure when prices are rising.

The only nonleveraged fund on the bottom section of the table is the Wisdom Tree International Energy ETF (DKA), whose grade tumbled from an A to a C-plus. That reduced its recommendation from TheStreet.com Ratings from a "buy" to a "hold".

Another energy ETF, the leveraged ProShares Ultra Oil & Gas (DIG), is also found on the lower list.

DKA's major holdings include Total (TOT), Cnooc (CEO), BP (BP) and Royal Dutch Shell (RDS.A).

LARGEST RECENT EXCHANGE TRADED FUND RATINGS GRADE CHANGES
NAME, TICKER TheStreet.com RATINGS CURRENT GRADE PREV. RATINGS GRADE NEW STATUS PREV. STATUS 3-MO. TOTAL TER'N (%) 12-MO. TOTAL TER'N (%)
MOST IMPROVED
Market Vectors Environment Ind ETF (EVX) A C- Buy Hold 4.98 8.20
First Trust AMEX Biotechnology (FBT) A C- Buy Hold 15.57 13.45
ProShares Ultra Short Utilities (SDP) B- D- Buy Sell 9.49 -5.45
HealthShares Infectious Dis (HHG) C+ E+ Hold Sell 8.67 -3.26
HealthShares Cardio Devices (HHE) A- C Buy Hold 6.52 5.96
PowerShares Water Resources (PHO) B- D Buy Sell 4.28 6.70
iShares DJ US Medical Devices Idx (IHI) B+ C- Buy Hold 5.13 5.06
First Trust ISE Water Index Fund (FIW) C E+ Hold Sell 2.20 7.90
HealthShares Autoimmune-Inflammatio (HHA) C- E Hold Sell 6.87 2.69
Market Vectors Global Alt Energy (GEX) C- E Hold Sell -4.75 12.53
MOST DETERIORATED
ProShares Ultra Sht Rus 2000 Growth (SKK) D+ A Sell Buy -5.42 -2.36
ProShares Ultra Short Russell 2000 (TWM) C- A+ Hold Buy -3.78 1.20
ProShares Ult Sht Russell 2000 Val (SJH) C+ A+ Hold Buy 0.27 8.01
ProShares Ultra Short Real Estate (SRS) E- C- Sell Hold 7.76 -14.54
ProShares Ultra Oil & Gas (DIG) C A- Hold Buy -19.68 1.07
WisdomTree International Energy (DKA) C+ A Hold Buy -8.91 3.00
Source: TheStreet.com Ratings - Data as of 7/31/2008.
For an explanation of our ratings, click here.

Richard Widows is a senior financial analyst for TheStreet.com Ratings. Prior to joining TheStreet.com, 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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