TSC Ratings provides exclusive stock, ETF and mutual fund ratings and commentary based on award-winning, proprietary tools. Its "safety first" approach to investing aims to reduce risk while seeking solid outperformance on a total return basis.
The worst-performing exchange traded funds in May, which largely bet against commodities, might be good investments for short sellers who are bullish on the
Of the 25 biggest losers, the first 24 use inverse strategies that cause them to gain value as their underlying index falls. The remaining fund tracks an index that measures bearishness. If the
rebounds significantly, a short position in these funds could generate big gains.
Half of these ETF laggards track commodities inversely, specifically metals and energy. The weakening dollar lit a fire under crude prices in May, causing them to soar 30% to $66.31 a barrel. The falling dollar also boosted demand for gold and silver, whose prices rose 10% and 27%, respectively.
The worst-performing ETF, the
PowerShares DB Crude Oil Double Short ETN
, sank 54%. Five other energy funds made the list, including the
ProShares UltraShort DJ-UBS Crude Oil Fund
, down 41%; the
Direxion Daily Energy Bear 3X Shares ETF
, down 34%; and the
Rydex Inverse 2X S&P Select Sector Energy ETF
, down 26%.
Seven other anti-commodity-based funds were caught betting against the trend including losses of 41% in the
ProShares UltraShort Silver Fund
, 32% in the
PowerShares DB Commodity Double Short ETN
and 20% in the
PowerShares DB Gold Double Short ETN
The last fund on the list, the
iPath S&P VIX Short-Term Futures ETN
, fell 17% as fewer speculators bet against the
S&P 500 Index
using put options.
Kevin Baker became the senior financial analyst for TSC Ratings upon the August 2006 acquisition of Weiss Ratings by TheStreet.com, covering mutual funds. He joined the Weiss Group in 1997 as a banking and brokerage analyst. In 1999, he created the Weiss Group's first ratings to gauge the level of risk in U.S. equities. Baker received a B.S. degree in management from Rensselaer Polytechnic Institute and an M.B.A. with a finance specialization from Nova Southeastern University.