August has been a topsy-turvy month for traders, but it appears that the bulls are continuing to break through as major equity markets have approached (or surpassed) new ten month highs. This trend has translated into sizable gains for many index investors. Here are four ETFs that are on fire right now.
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Straight to the Bank
The big banks have been ringing the cash register over the past four weeks. The SPDR KBW Bank ETF (NYSE:KBE), which tracks the performance of the KBW Bank Index, has surged 25% during this timeframe. The banks which were a source of a great deal of volatility in 2008 have benefited from better-than-expected earnings and signs that the bottom may be in for the global recession.
Two interesting developments for investors in KBE are money manager interest and insider buying in some of these names. An SEC filing showed that the prominent mutual fund manager, Ken Heebner, had sizable positions in JPMorgan Chase & Co. (NYSE:JPM) and Bank of America (NYSE:BAC) as of June 30for his CGM Focus Fund (NYSE:CGMFX). Also, a couple of executives at Citigroup (NYSE:C) recently bought one million shares a piece of their company's own stock.
Not only have the big banks participated in this financial rally, but the regional banks have benefited as well. The iShares Dow Jones U.S. Regional Banks Fund (NYSE:IAT) has climbed over 16% over the past four weeks. Potential investors should remain somewhat cautious however. On Sunday, Rochadale Securities analyst Richard Bove said that an additional 150-200 banks could go under during the current banking crisis. (Read Analyzing a Bank's Financial Statements to learn more tools to enhance your financial analysis.)
Another ETF that was slammed particularly hard in 2008 was the Vanguard REIT Index ETF (NYSE:VNQ). The fund fell over 40% last year, but is now beginning to regain its footing. Over the course of the past four weeks, VNQ has gained about 20%. There is still some weakness in the commercial real estate market, and many companies in this space will soon be facing debt payments resetting at higher rates, but it appears that most of the damage has already been taken into account by the market.
The SPDR KBW Insurance ETF (NYSE:KIE) took a nosedive at the beginning of this year, as fears grew that many insurance companies were drowning in investment losses and lacked sufficient levels of liquidity. From January 1-March 9, this ETF slid 48.0%. Since then, KIE has surged 130% as some of these concerns have lessened. The fund is up 16% in just the past month.
The Bottom Line
The month of August was a particularly good month for equities - some sectors moreso than others. Industries tied to the financial sector were among the biggest winners, as disclosures revealed that money managers were heavily invested in financials. Looking ahead, investors should tread carefully in this space, as macroeconomic headwinds continue to swirl.
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