Stocks, in general, were off to the races in February, although there was a fair amount of separation depending on where you were invested. The SPDR S&P 500 ETF (SPY), for example, was up a solid 3% on the month, but the iShares Russell 2000 ETF (IWM) gained more than 6%. Utilities, on the other hand, were down more than 6%.
The overall theme, as I saw it, was a rotation out of growth stocks and into cyclicals. All four of the traditionally cyclical sectors - energy, financials, materials and industrials - outperformed the broader market, while tech and consumer discretionary began lagging during the second half of the month.
Treasuries, however, were the biggest loser with the iShares 20+ Year Treasury Bond ETF (TLT) dropping nearly 6%. Higher interest rates and higher inflation risk have been driving the narrative and could continue to do so as we head into the spring months.
The biggest winners of February were heavily skewed towards towards two sectors - small-caps and energy. Investors were risk takers last month and they moved back into these two still undervalued sectors in a big way. Interestingly, several of last month's big winners - clean energy and video games - turned into February's worst performers. The energy sector, in particular, has turned into a complete reversal from last year. Traditional oil-focused ETFs have been the big outperformer, while clean energy and renewables ETFs have lagged badly.
I'll break down which subsectors were the biggest winners in February in just a moment, but first, here's the list of the ETF market's biggest gainers (side note: no, you won't find any ARK ETFs on this list).
25 Top Performing ETFs In February
Cannabis stocks were huge in January and continued their top flight performance in February. Two cannabis ETFs - the Amplify Seymour Cannabis ETF (CNBS) and the AdvisorShares Pure Cannabis ETF (YOLO) - managed to crack the top 20 again and the pair are up 85% and 55%, respectively, on the year so far. Other marijuana ETFs, including the ETFMG Alternative Harvest ETF (MJ) and the Cannabis ETF (THCX), are bubbling just below this list.
February overall belonged to risky asset classes.
Only one small-cap focused ETF - the Invesco S&P SmallCap Energy ETF (PSCE) - shows up on the top 25 list and that may be due more to its energy exposure than its small-cap exposure. In an interesting turn, it's value that significantly outperformed, thanks to that rally in cyclicals. The iShares Russell 2000 Value ETF (IWN) added nearly 10% for the month.
Not a lot of top performers among small-cap ETFs, but a lot of winners overall.
An incredible 14 of the top 25 performing ETFs in February have their primary focus on some segment of the energy sector. It's not often that you see the broadest sector funds appearing on a top performer list, but that's exactly what we have here with the presence of the Vanguard Energy ETF (VDE), the Fidelity MSCI Energy Index ETF (FENY) and the Energy Select Sector SPDR ETF (XLE).
As I mentioned earlier, oil-focused ETFs have done particularly well, especially the ones targeting producers and explorers. The iShares U.S. Oil & Gas Exploration & Production ETF (IEO) tops the list with its 26% gain, but the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), VanEck Vectors Oil Services ETF (OIH) and the iShares U.S. Oil Equipment & Services ETF (IEZ) also join the list as 20%+ gainers.
The Amplify Transformational Data Sharing ETF (BLOK) was February's top performer, gaining more than 31%. This can be considered an ancillary play on the popularity surge in bitcoin, dogecoin and other cryptocurrencies this year.
The fund's pure focus on blockchain turned out to be the differentiator. The Reality Shares Nasdaq NextGen Economy ETF (BLCN), BLOK's closest peer, was up "only" 13% on the month, but did nowhere near as well as the actively-managed BLOK did. The other two funds in the space - the Innovation Shares NextGen Protocol ETF (KOIN) and the First Trust Indxx Innovative Transaction & Process ETF (LEGR) - do a comparatively poor job of providing direct blockchain exposure and generated minimal returns.
Metals and miners rode the cyclical wave and performed well as the cyclical recovery narrative continued to play out. The Global X Copper Miners ETF (COPX), the NorthShore Global Uranium Mining ETF (URNM) and the Global X Uranium ETF (URA) all produced 20%+ gains.
The Breakwave Dry Bulk Shipping ETF (BDRY), which was down as much as 85% from its 2018 debut, was up 23% in February and is up more than 260% from its mid-May 2020 low.
The U.S. Global Jets ETF (JETS) continues its comeback after getting hammered during the initial COVID bear market. The travel & airline sector is still generating just a fraction of the revenue it did pre-pandemic, but investors are looking forward to the global recovery later this year.
The Pacer Lunt Large Cap Alternator ETF (ALTL) is perhaps the most unique name on this list. This fund uses a strategy that rotates between low volatility and high beta stocks within the S&P 500 based on a relative strength signal.