Best-Performing ETFs Crush Stock Indexes

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. Ratings

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.

High-Flying ETFs
Fund (Ticker) Rating Tot'l Rtn 1 Mo Tot'l Rtn 2nd Qtr
Direxionshares Daily Emerging Markets Bull 3X Shares (EDC) U -9.35% 100.83%
Direxionshares Daily Developed Markets Bull 3X Shares (DZK) U -4.11% 79.42%
Rydex S&P Smallcap 600 Pure Value ETF (RZV) C 7.93% 73.50%
Market Vectors - Indonesia Index ETF (IDX) U 5.36% 70.82%
Market Vectors - Coal ETF (KOL) C+ -3.48% 69.57%
Direxion Daily Financial Bull 3X Shares (FAS) U -7.45% 68.26%
Direxion Daily Technology Bull 3X Shares (TYH) U 12.63% 67.08%
Rydex 2X S&P Select Sector Financial ETF (RFL) U -5.32% 62.06%
iPath MSCI India Index ETN (INP) B- -3.91% 61.37%
Direxion Daily Small Cap Bull 3X Shares (TNA) U 2.93% 60.08%
Source: Ratings & Bloomberg
Kevin Baker became the senior financial analyst for TSC Ratings upon the August 2006 acquisition of Weiss Ratings by, 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.