Best ETF’s for 2010…how to choose? (Part 2)

By: ispeculatornew
Date posted: 12.23.2009 (5:00 am) | Write a Comment  (4 Comments)

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On Monday, we took a look at the ten ETF’s that had the best returns so far in 2009 and what could be drawn from such results. It is probably as important to look at those who did poorly and in this column, we take a look at the 10 ETF’s that have the worst returns so far this year. You would certainly expect to have a few leveraged ETF’s in here. It’s no secret that owning a 2 or 3 times bear ETF on something that keeps going up will turn into a disaster.

Worst ETF’s so far in 2009 as per their return

TickerNamePriceDividend YieldPayout RatioDvd Ex-Date
WINWindstream Holdings Inc8.0712.39356.1512/27/2013
FTRFrontier Communications Corp4.688.55298.6412/5/2013
CTLCenturyLink Inc30.77.03231.483/6/2014
FEFirstEnergy Corp32.636.74119.432/5/2014
DODiamond Offshore Drilling Inc60.055.8367.542/13/2014
HCPHCP Inc36.775.71110.322/6/2014
POMPepco Holdings Inc19.085.6687.0212/6/2013
HCNHealth Care REIT Inc55.995.46607.362/6/2014
ETREntergy Corp61.895.3769.572/7/2014
MOAltria Group Inc36.985.1982.7212/23/2013
TETECO Energy Inc17.045.1677.42/14/2014
TAT&T Inc35.215.11141.351/8/2014
ESVEnsco PLC59.085.0828.6112/5/2013
TEGIntegrys Energy Group Inc53.745.0672.792/26/2014
SOSouthern Co/The40.635722/6/2014
RAIReynolds American Inc50.454.99103.612/12/2013
PPLPPL Corp30.714.7954.5412/6/2013
VTRVentas Inc56.834.72238.4212/17/2013
KMIKinder Morgan Inc/DE35.544.61116.281/29/2014
EXCExelon Corp26.914.61147.722/12/2014
PCGPG&E Corp40.374.5195.7112/30/2013
EDConsolidated Edison Inc55.214.4662.32/10/2014
DUKDuke Energy Corp69.964.46100.422/19/2014
AEEAmeren Corp35.854.46#VALUE!12/9/2013
RIGTransocean Ltd50.384.4534.812/19/2014
PEGPublic Service Enterprise Group Inc32.694.4156.3112/4/2013
PMPhilip Morris International Inc85.544.462.6412/24/2013
MACMacerich Co/The56.944.36111.532/18/2014
KIMKimco Realty Corp20.624.36356.1812/30/2013
WMBWilliams Cos Inc/The35.224.32102.5312/11/2013
SCGSCANA Corp47.174.361.812/6/2013
PBCTPeople's United Financial Inc15.144.2988.831/30/2014
LOLorillard Inc51.334.2973.632/26/2014
VZVerizon Communications Inc49.624.27657.011/8/2014
PNWPinnacle West Capital Corp53.364.2575.481/30/2014
AEPAmerican Electric Power Co Inc47.064.2572.762/10/2014
DRIDarden Restaurants Inc53.334.1364.091/8/2014
GASAGL Resources Inc46.544.0474.912/19/2014
PCLPlum Creek Timber Co Inc43.744.02133.992/19/2014
XELXcel Energy Inc28.02457.6712/24/2013
LEGLeggett & Platt Inc30.213.9765.312/11/2013
KRFTKraft Foods Group Inc53.123.9518.0512/23/2013
DTEDTE Energy Co66.743.9362.0112/19/2013
LLYEli Lilly & Co50.223.953.482/12/2014
IRMIron Mountain Inc28.123.84196.4512/23/2013
CMSCMS Energy Corp26.543.8466.742/12/2014
AIVApartment Investment & Management Co25.113.82#VALUE!2/19/2014
COPConocoPhillips72.83.7944.312/13/2014
INTCIntel Corp23.843.7839.532/5/2014
LMTLockheed Martin Corp141.673.7649.652/27/2014
GRMNGarmin Ltd48.563.7164.7812/12/2013
PSAPublic Storage152.73.67114.7812/11/2013
WECWisconsin Energy Corp41.773.6650.582/12/2014
SESpectra Energy Corp33.553.6480.172/5/2014
AVBAvalonBay Communities Inc118.563.61147.8512/27/2013
FCXFreeport-McMoRan Copper & Gold Inc34.693.639.011/13/2014
NUNortheast Utilities41.083.5871.412/16/2013
CVCCablevision Systems Corp16.773.58483.893/12/2014
CNPCenterPoint Energy Inc23.433.5482.972/14/2014
MRKMerck & Co Inc49.833.5383.8712/12/2013
STXSeagate Technology PLC49.043.5128.182/10/2014
DDominion Resources Inc/VA64.913.47373.0912/4/2013
SYYSysco Corp33.633.4565.9912/31/2013
MCDMcDonald's Corp97.373.3353.072/26/2014
VNOVornado Realty Trust87.933.32265.312/5/2014
ABBVAbbVie Inc48.453.301/13/2014
DOWDow Chemical Co/The39.063.28170.7312/24/2013
MCHPMicrochip Technology Inc43.293.28214.952/18/2014
CVXChevron Corp122.443.2726.142/19/2014
PBIPitney Bowes Inc23.173.2468.952/12/2014
NEMNewmont Mining Corp24.833.2236.8712/3/2013
CPBCampbell Soup Co38.733.2252.871/3/2014
CINFCincinnati Financial Corp52.413.2162.4712/16/2013
CSCOCisco Systems Inc21.253.233.161/2/2014
PAYXPaychex Inc43.733.283.781/31/2014
SPGSimon Property Group Inc149.853.286.842/10/2014
WMWaste Management Inc45.683.280.5812/2/2013
NINiSource Inc31.623.1666.612/5/2014
DPSDr Pepper Snapple Group Inc48.263.1545.5412/12/2013
NEENextEra Energy Inc84.593.1252.332/26/2014
LYBLyondellBasell Industries NV77.183.1184.093/6/2014
MATMattel Inc46.273.1155.082/18/2014
EQREquity Residential51.543.1210.0112/19/2013
SPLSStaples Inc15.533.09#VALUE!12/26/2013
CLXClorox Co/The93.173.0560.061/27/2014
CAGConAgra Foods Inc32.993.0352.551/29/2014
PFEPfizer Inc31.733.0368.92/12/2014
CACA Inc333.0348.483/3/2014
KKellogg Co60.643.0364.722/27/2014
GISGeneral Mills Inc50.433.0146.791/10/2014
WUWestern Union Co/The16.67324.7812/19/2013
IPInternational Paper Co46.65365.022/14/2014
RSGRepublic Services Inc34.912.9858.3912/30/2013
HASHasbro Inc53.822.9755.621/29/2014
KMBKimberly-Clark Corp109.162.9766.4612/4/2013
GCIGannett Co Inc27.062.9643.7512/4/2013
PLDPrologis Inc37.932.95#VALUE!12/19/2013
MSFTMicrosoft Corp38.132.9435.192/18/2014
DDEI du Pont de Nemours & Co61.382.9367.292/12/2014
EIXEdison International46.212.9228.4812/31/2013

And yes, as expected, leveraged ETF’s are a big part of these worst performers. Poor Direxion has the 3 top ETF’s in this category but you would probably expect that when you offer ETF’s with 3X the exposure.  What I am surprised about is that for the best performers, a few picks were not leveraged ETF’s but all 10 ETF’s listed here are leveraged. Lessons? Again, I would argue that unless you are truly going for a homerun, I would not use a leveraged ETF for long term investing (the key here being the point that I consider 1 year to be long term).

Here is the chart for the past few months for FAZ:

Of course, with the complete collapse that financials suffered in 2008, it was doubtful that being short financials would be the trade of the year wasn’t it? I would say that generally, picking the same trade that was a winner in the past year will rarely be the result. So do not expect me to pick GLD, BIDU, EBAY or USO for my picks next week.

The other non surprising result is that leveraged ETF’s that were emerging market bears did not do well. An economic recovery is obviously very good news for emerging markets as they have a strong beta (they usually go up and down more than the developed markets).

Seeing these results also helps me confirm that I will not be picking any 3x leveraged ETF’s. I am not 100% decided on 2x ETF’s but I would say that I will probably stay far from those as well.

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4 Comments

  1. Comment by Frank — December 23, 2009 @ 8:20 am

    I agree IS. I think that 3 times leveraged ETFs are hard to trade: you need to be 3 times faster than the market (Prices change so dramatically!) I would also be “triple” careful trading on margin with these kinds of product. They are three times more dangerous than the underlying indexes. No buy-and-hold strategy, that’s for sure.

  2. Comment by Stuart — December 23, 2009 @ 6:08 pm

    I agree. Leveraged ETFS are for homeruns only. You should only own these for a short time frame like day-trading. I attempted this in the summer when the volatility dried up thought and lost my shirt.

    You could always short the 3X Bear and 3X Bull at the same time to take advantage of the rebalancing and interest costs.

  3. Comment by Lewis — January 20, 2010 @ 2:08 pm

    I’m really interested with time decay on leveraged etfs. what are your thoughts about it?

  4. Comment by IS — January 25, 2010 @ 7:48 pm

    @Lewis – Actually, time decay is how these ETF’s are made. Later this year, there will be ETF’s launched that are leveraged on the montly return instead of the daily returns. But there are good and bad things about it. I’d say the most important is to be aware of how the product works and yes, how the time decay impacts the returns.

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