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
stock market.
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
stock market 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 (
DTO), sank 54%. Five other energy funds made the list, including the
ProShares UltraShort DJ-UBS Crude Oil Fund (
SCO), down 41%; the
Direxion Daily Energy Bear 3X Shares ETF (
ERY), down 34%; and the
Rydex Inverse 2X S&P Select Sector Energy ETF (
REC), down 26%.
Seven other anti-commodity-based funds were caught betting against the trend including losses of 41% in the
ProShares UltraShort Silver Fund (
ZSL), 32% in the
PowerShares DB Commodity Double Short ETN (
DEE) and 20% in the
PowerShares DB Gold Double Short ETN (
DZZ).
The last fund on the list, the
iPath S&P VIX Short-Term Futures ETN (
VXX), fell 17% as fewer speculators bet against the
S&P 500 Index using put options.
| Worst-Performing Exchange Traded Funds in May
| | PowerShares DB Crude Oil Double Short ETN (DTO) U | Commodity | -44.60% | -53.49% | | Direxion Daily Financial Bear 3X Shares (FAZ) U | Sector Fund-Financial Service | -86.83% | -43.44% | | Direxionshares Emerging Markets Bear 3X Shares (EDZ) U | Sector Fund-Asset Allocation | -79.47% | -42.14% | | ProShares UltraShort Silver (ZSL) U | Commodity | -58.00% | -41.06% | | ProShares UltraShort DJ-AIG Crude Oil (SCO) U | Sector Fund-Undefined Equity | -40.08% | -40.88% | | Direxion Daily Developed Markets Bear 3X Shares (DPK) U | Sector Fund-Asset Allocation | -46.47% | -34.15% | | Direxion Daily Energy Bear 3X Shares (ERY) U | Sector Fund-Energy | -47.20% | -33.54% | | PowerShares DB Commodity Double Short ETN (DEE) U | Commodity | -21.87% | -32.20% | | ProShares UltraShort FTSE/Xinhua China 25 (FXP) E- | Country Fund-China | -61.39% | -31.61% | | Rydex Inverse 2X S&P Select Sector Financial ETF (RFN) U | Sector Fund-Undefined Equity | -69.37% | -30.35% | | ProShares UltraShort MSCI Emerging Markets (EEV) E- | Emerging Market-Equity | -60.39% | -29.07% | | ProShares UltraShort Financials (SKF) E- | Sector Fund-Financial Service | -59.68% | -27.15% | | PowerShares DB Crude Oil Short ETN (SZO) U | Commodity | -20.19% | -26.50% | | Rydex Inverse 2X S&P Select Sector Energy ETF (REC) U | Sector Fund-Energy | -36.09% | -25.58% | | ProShares UltraShort MSCI EAFE (EFU) C- | International Equity | -29.10% | -24.43% | | ProShares UltraShort DJ-AIG Commodity (CMD) U | Sector Fund-Undefined Equity | -24.73% | -23.93% | | PowerShares DB Agriculture Double Short ETN (AGA) C | Commodity | -19.11% | -23.68% | | ProShares UltraShort Oil & Gas (DUG) D- | Sector Fund-Energy | -31.31% | -22.77% | | ProShares UltraShort Basic Materials (SMN) D- | Sector Fund-Undefined Equity | -54.01% | -22.60% | | WisdomTree Dreyfus Emerging Currency Fund (CEW) U | Currency | -20.61% | -20.61% | | PowerShares DB Gold Double Short ETN (DZZ) E | Commodity | -22.40% | -19.85% | | Direxion Daily Large Cap Bear 3X Shares (BGZ) U | Growth-Large Cap | -38.22% | -19.10% | | ProShares UltraShort MSCI Japan (EWV) D+ | Country Fund-Japan | -12.15% | -19.04% | | ProShares UltraShort Gold (GLL) U | Commodity | -27.59% | -18.69% | | Direxion Daily Mid Cap Bear 3x Shares (MWN) U | Sector Fund-Undefined Equity | N.A. | -17.81% | | Source: Bloomberg & TheStreet.com Ratings
Data as of most recent month-end. | |