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
. The fund returned 51% as four of its holdings more than doubled in value, including 236% from
CBL & Associates
, 180% from
, 118% from
Pennsylvania Real Estate Investment Trust
and 106% in
Cedar Shopping Centers
Another big winner in April, the
PowerShares FTSE RAFI Basic Materials Sector Portfolio
jumped nearly 38%, the top performer of the six commodity funds making the list. Holdings contributing to the ascent include a 113% jump from
, 92% from
and 90% from
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.
The best-performing, non-leveraged ETF in April was one of four value-stock funds, the
Rydex S&P Smallcap 600 Pure Value ETF
, up almost 52%. Sixteen holdings more than doubled in value, with
, up 223%;
, up 163%; and
, up 132%, as investors snapped up good companies previously mauled by the bear market for stocks.
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.