NEW YORK (ETF Expert) --There's a tendency in the financial media to wrap up calendar years with a focus on the "winners" and "losers." Inevitably, a large number of unsophisticated investors will allocate money to the so-called best performers, while avoiding any commitment to the underachievers.
Herein lies one of the biggest mistakes that ETF enthusiasts make. Specifically, they view success through a prism of calendar-year data, ignoring genuine momentum found in relative strength or price ratios or even May-over-May performance. In fact, a calendar-year obsession has enormous potential to mislead.
Keep in mind, it's not uncommon for worst performers in one year to reverse course entirely. In 2011, iShares MSCI Turkey
) lost a staggering -36.6%. In 2012? TUR was one of the best unleveraged ETF performers with an eye-popping 65.6% gain.
Recognizing that 2012 "losers" may reverse course in 2013, I identified three ETF spaces that may do just that. Each of the asset areas discussed below under-performed broader large-cap equity benchmarks (i.e., S&P 500
, MSCI All World) on a year-over-year basis. By the same token, each demonstrated greater relative strength than these benchmarks over the last five trading sessions.
1. Pipeline MLPs.
Whether aggregating individual companies via exchange-traded fund or exchange-traded note, pipeline master limited partnerships offer something that few investment types can: about a 5% or better yield with about a 5% average company growth rate.
Yet, 2012 was brutally unkind to the pipeline MLPs/energy sector due to falling demand, falling prices, regulatory fear/burden and fiscal cliff dividend tax uncertainty.
As recently as Dec. 30, JP Morgan Alerian MLP ETN
) was below a 200-day trendline. A few trading days later (Jan. 3), with the "cliff resolution" removing dividend tax uncertainty, things look very different.
This is not to suggest that everything is hunky-dory for the asset class. There is environmental resistance to allowing the Keystone Pipeline to be built. The White House has hinted at additional tax reform in the debt ceiling debate, which may reintroduce uncertainty to the asset class and its structure.