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 best-performing exchange traded funds in the second quarter blew away major market averages. The Dow Jones Industrial Average rose 12%, the first quarterly increase since Sept. 28, 2007. It was also the biggest quarterly gain since Dec. 31, 2003. The broader S&P 500 Index followed suit, up 16%. The Nasdaq jumped 20%. The 10 best-performing ETFs each gained from 60% to 100% over the same three-month period ending June 30. Four accomplished that feat without the use of leverage. Doubling in value, the best-performing ETF was the Direxion Shares Daily Emerging Markets Bull 3X Shares ( EDC) on 300% leverage to the MSCI Emerging Markets Index. The fund is allocated 19% to Brazil, 13% to China, 13% to Taiwan, 11% to South Korea and 7.1% to India. Also targeting stocks of foreign shores, the Direxion Shares Daily Developed Markets Bull 3X Shares ( DZK) landed a 79% gain by betting 22% on Japan, 20% on the U.K., 9.1% on France, 8.5% on Germany and 7.5% on Switzerland. The fund has gained back most of its losses since its December inception. The best-performing, non-leveraged ETF, the Rydex S&P SmallCap 600 Pure Value ETF ( RZV) extended a rally to 74% in the second quarter. It jumped 52% in April. Sixteen holdings more than doubled in value, while seven tripled, one quadrupled and one gained six-fold. High-flying small-capitalization stocks held by the fund include Sonic Automotive ( SAH), up 535%; Lithia Motors ( LAD), up 311%; and Technitrol ( TNL), up 285%. Two of the other winning ETFs in the quarter are notable for their massive trading volumes. The Direxion Daily Financial Bull 3X Shares ( FAS), which gained 68%, averages a trading volume of more than 187 million shares as interest in JPMorgan ( JPM), Bank of America ( BAC) and Citigroup ( C) remain high.
The Direxion Daily Small Cap Bull 3X Shares ( TNA), at an average daily trading volume of 14 million shares, is the favored way to play small caps in comparison to the 60,000 share volume seen in the Rydex S&P SmallCap 600 Pure Value ETF.