The best-performing exchange-traded funds signal a bottoming in two key areas of the U.S. economy: real estate and commodities. The ETFs also point to a bottom-fishing expedition in value stocks.
After excluding the 20 ETFs that use leverage, 10 of the 25 best-performing funds in April invest in real estate.
Pending sales of existing U.S. homes rose in April for the second month in a row, showing buyers are locking in prices that are cheaper than at any time in a generation. Add to that a gain in construction spending bolstered by commercial and government stimulus projects, and the foundation is laid for an upturn.
Of the real estate funds, none performed better than the iShares FTSE NAREIT Retail Capped Index Fund (RTL). The fund returned 51% as four of its holdings more than doubled in value, including 236% from CBL & Associates (CBL), 180% from Macerich (MAC), 118% from Pennsylvania Real Estate Investment Trust (PEI) and 106% in Cedar Shopping Centers (CDR).Another big winner in April, the PowerShares FTSE RAFI Basic Materials Sector Portfolio (PRFM) jumped nearly 38%, the top performer of the six commodity funds making the list. Holdings contributing to the ascent include a 113% jump from Ashland (ASH), 92% from Domtar (UFS) and 90% from Dow Chemical (DOW). The other five commodity funds making the list focus on coal, timber and steel. All are positioned to be early beneficiaries of a renewal in demand during an economic recovery. Commodity funds experienced a freefall, collapsing as much as 62%, since my September article on Five Commodity ETFs to Avoid. After bouncing along the bottom for a few months, commodity funds present an attractive bet on an economic recovery and offer an inflation hedge.
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