Real Estate ETF Falls 82% in Three Months

With pessimistic predictions of a longer-than-forecast global recession, the World Bank spooked the stock market into testing the recent rally.

Eight of the 10 exchange traded funds with the worst grades from TheSteet.com Ratings rise at twice the pace of their underlying indexes' declines. Even this week's dip in stocks hasn't come close to bringing the funds into the black. But they could jump back quickly if equities extend their declines.

The ratings are based on month-end data. All of these ETFs earned the lowest possible grade of E-minus by combining high volatility risk and poor reward performance.

The worst-rated, UltraShort Real Estate ProShares ( SRS), obliterated shareholder value, declining 82% in three months and 78% over the past year. Betting against the stocks in the FTSE/Xinhua China 25 Index has proved to be just as lethal, with the UltraShort FTSE/Xinhua China 25 ProShares ( FXP) down 70% in three months and 84% in 12 months.

The other two ETFs listed play the long side of natural gas prices. At $4 per million British thermal units, the price of natural gas is just off the 8 ½-year low of $3.15 set April 28. The current slump is being blamed on weak global demand on lower industrial consumption, high stockpiles and mild weather in the U.S. in May and June, resulting in less need for gas-generated electricity for air conditioning.

Over the span of a year, the iPath Dow Jones-UBS Natural Gas Total Return Sub-Index ETN ( GAZ) and the United States Natural Gas Fund ( UNG) lost 77% and 76%, respectively.

TheStreet.com Ratings grades can be interpreted as follows: A is "excellent" or "buy." B is "good" or "buy." C is "fair" or "hold." D is "weak" or "sell." And E is "very weak" or "sell." A plus or minus sign designates that a fund is in the top or bottom third of funds with the same letter grade.

Worst-Rated Exchange Traded Funds
Fund (Ticker) Rating
Total Return 1 Year
Total Return 3 Months
ProShares Ultra Short Real Estate (SRS) E-
-78.2%
-82.1%
ProShares UltSht FTSE/Xinhua Ch 25 (FXP) E-
-83.8%
-70.1%
iPath DJ UBS Ntrl Gas Tl Rtr Sub In (GAZ) E-
-77.3%
-11.4%
ProShares UltSht MSCI Emg Mkts (EEV) E-
-69.3%
-67.4%
ProShares Ultra Short Financials (SKF) E-
-67.1%
-84.0%
ProShares Ultra Sht Basic Materials (SMN) E-
-0.1%
-68.4%
ProShares Ult Sht Telecommunication (TLL) E-
-4.1%
-49.6%
ProShares Ultra Short Semiconductor (SSG) E-
0.2%
-54.5%
United States Natural Gas Fund (UNG) E-
-75.7%
-8.7%
ProShares Ultra Sht Rus 2000 Growth (SKK) E-
-11.9%
-62.3%
Source: TheStreet.com Ratings

TheStreet.com Ratings' Jake Lynch will be on Stockpickr Answers on Wednesday, June 24, to respond to investing and trading questions posed by members of the Stockpickr community. Not a member? Join the Stockpickr community today -- for free.

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.

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