On that note, let’s look at some ETFs that look set to reverse recent trends and either over or underperform the market going forward. Unlike most ETF ratings that are based on past performance, our predictive ratings are based on our fundamental analysis of the holdings.
One underperforming ETF that we like going forward is the State Street SPDR Insurance ETF (NYSEARCA:KIE). KIE is down ~1%, this year, but it has an extremely strong portfolio. Over 50% of its holdings earn our Attractive or Very Attractive rating, led by its top holding, Aspen Insurance (AHL), one of our Most Attractive stocks.
On the other side of the coin, the iShares Dow Jones US Oil & Gas Exploration ETF (NYSEARCA:IEO) is up 11% in 2014 but earns our Very Dangerous rating. 88% of its holdings earn our Dangerous or Very Dangerous rating. On average its holdings have a price to economic book value ratio (PEBV) of 4.7, nearly double that of the S&P 500 at 2.5.
Oil and gas stocks may be hot right now, but following the crowd into this sector looks like a good way to lose money. No one is hyping up the insurance sector at the moment, but for long-run returns it looks like a good place to be.
Sam McBride contributed to this report.
Disclosure: David Trainer and Sam McBride receive no compensation to write about any specific stock, sector, or theme.
This article is brought to you courtesy of David Trainer from New Constructs.