ETFs Bucking The Trend In April
Sweta Killa: Though the U.S. stock market kicked off second quarter with a record high, it lost steam in the past five trading days due to a broad sell-off in the high growth and high beta stocks. Investors are apprehensive of lofty valuations and warnings on Q2 earnings.
Global activity is picking up but the recovery is still subdued. This is primarily thanks to Chinese slowdown, geopolitical tensions in Ukraine, prospect of interest rate hike sooner than expected in the U.S., persistently low inflation in developed economies and higher borrowing cost in emerging markets.
The trend is likely to continue at least in the near term, suggesting an uncertain outlook on the stock markets. Meanwhile, commodities are also seeing bumpy trading this month due to higher volatility and global demand/supply dynamics.
Given this, while many ETFs have seen terrible trading so far in the month, some ETFs have managed to stay in the green in the current turbulence. Below, we have highlighted four ETFs that stood out in the early days of April and will likely to continue to do so as we move ahead in Q2.
First Trust ISE-Revere Natural Gas Index Fund (NYSEARCA:FCG)
This ETF offers exposure to the U.S. stocks that derive a substantial portion of their revenues from the exploration and production of natural gas. It follows ISE-REVERE Natural Gas Index and holds 30 stocks in its basket, which are well spread out across a single component (read: 3 Energy ETFs Marching Higher in the Past Week).
Stone Energy, Goodrich Petroleum and Penn Virginia occupy the top three positions in the portfolio with nearly 4% of total assets each. The fund has a blended style and is also diversified across various market cap levels with 45% in large caps, 37% in small caps and the rest in mid caps.
The fund has amassed $470.1 million in its asset base while sees solid volume of nearly 509,000 shares per day. Expense ratio came in at 60 bps. FCG has gained about 20% so far in Q2.
QuantShares U.S. Market Neutral Value Fund (NYSEARCA:CHEP)
This ETF uses a slightly active approach and offers investors spread return between high and low ranked stocks. This is easily done by tracking the Dow Jones U.S. Thematic Market Neutral Value Index, which takes long position in the undervalued stocks and short position in the overvalued stocks in equal weights and equal dollar amount within each sector.
This approach results in a value tilt for this product, and long and short positions in 400 stocks, divided equally. Due to this unique feature and active management, the fund charges higher annual fee of 1.49% from investors.
CHEP failed to attract investors as depicted by its AUM of just $1.4 million and average daily volume of 9,000 shares. However, it has added about 2.80% so far this month.