Top ETFs Of The 1st Quarter

| April 5, 2013 | 0 Comments

The start of the second quarter began this week.  So let’s take a look back at which ETFs were the best performers during the first quarter.

First though, it’s important to point out that the first quarter was a fantastic quarter for stocks.  The S&P 500 was up 10% and the Dow checked in with an even more impressive 11% gain.

Let’s take a closer look at three (non-leveraged) ETFs that led the markets higher in the first quarter.

JPMorgan Alerian MLP ETN (AMJ) +21%

AMJ’s 21% gain over the first three months of the year makes it the best performing non-leveraged ETF in the first quarter.

This ETN tracks the performance of the Alerian MLP Index.

The majority of MLPs operate in the energy infrastructure industry.  They own assets like pipelines that transport and storage tanks that store crude oil, natural gas, and other refined petroleum products.

AMJ’s expense ratio is 0.85%.  It’s a little bit higher than I’d like to see.  But the fact that it’s an ETN, not an ETF, and it tracks MLPs, not regular stocks, the higher expense ratio is justifiable.

The best thing about MLPs is they typically pay a large dividend.  And AMJ is no exception… the current dividend yield on AMJ is 4.5%.

Income investors have been flocking to MLPs to juice up the amount of money their investment accounts generate.  And with interest rates projected to remain near 0% for at least another year, AMJ and other MLP funds should continue to get plenty of attention.

First Trust NYSE Biotech Index (FBT) +19%

My favorite biotech ETF came in just behind AMJ with a 19% gain in the first quarter.  FBT’s performance was clearly a function of the index it tracks.

You see, FBT’s a little different from some of the more well known ETFs tracking biotech stocks.  It only has 20 or so stocks at any given time and it’s equally weighted across those 20 holdings.  In other words, each stock makes up about 5% of the holdings.

This unique focus and weighting allows individual stocks to have a bigger impact on the ETF’s performance.  This is a big contrast to other ETFs focused on the biotech industry that have 50 or even 100 or more stocks.  And they use a market cap weighting.

If you want a way to invest in the explosive upside of biotech stocks with the convenience of an ETF, then FBT is for you.

WisdomTree Japan Hedged Equity (DXJ) +18% 

Our last ETF is a clear indication that US stocks weren’t the only ones on the upswing in the first quarter.  DXJ’s 18% gain is impressive in its own right.

DXJ is a very interesting ETF.  It combines stock investing with currency hedge.  More specifically, it’s designed to track Japanese stocks and hedge out exposure to changes in the exchange rate between the US Dollar and the Japanese yen.

As you may have heard, the new Japanese Prime Minister is taking a very aggressive stance on the monetary policy.  And it has sparked some big moves in the Yen, as well as Japanese stocks.

If the Japanese continue down this path, DXJ should continue to rack up gains similar to the impressive performance they had in the first quarter.

As you can see, JPMorgan Alerian MLP ETN, First Trust NYSE Biotech Index Fund, and WisdomTree Japan Hedged Equity ETF all handily outperformed the S&P 500.

More importantly, they also outperformed other ETFs that track the same industry or country.  This is a perfect example of the importance of knowing what’s going on underneath the hood of the ETF, not just the title of the ETF.

Good Investing,

Corey Williams

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Category: ETFs

About the Author ()

Corey Williams is the editor of Sector ETF Trader, an investment advisory service focused on profiting from ETFs and the economic cycle. Under Corey’s leadership, the Sector ETF Trader has become one of the most popular and successful ETF advisories around. In addition to his groundbreaking service, Corey is the lead contributor to ETF Trading Research, where he shares his insights about ETFs and financial markets on a daily basis. He’s also a regular contributor to the Dynamic Wealth Report and the editor of one the hottest option trading services around – Elite Option Trader.

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