Red Hot ETFs

By Billy Fisher | October 09, 2009 AAA

The month of September brought about an interesting shift among the top performing ETFs, as investors began to prepare for the Q3 earnings season. BRIC-focused ETFs regained some of their previous luster and solar energy continued to shine. That being said, here are four ETFs that are on fire right now.

IN PICTURES: 10 Tips For Choosing An Online Broker

High-Powered Returns
Natural gas has made quite the reversal in recent weeks after following a path that seemed to have no bottom in site for the better part of 2009. The United States Natural Gas Fund (NYSE:UNG), which seeks to track the performance of the price of natural gas, has surged 20.5% over the past four weeks. This fund had been under a great deal of stress in recent months due to a supply surplus that has not been experienced in years.

Will this ascent continue for UNG? There is some positive news that this ETF may still have room to run in the near-term. One forecast has called for the northeast to have its coldest winter in a decade. The mere possibility of a scenario in which the demand for heating fuel could see a strong spike has already generated a great deal of additional speculation in the space. Absent any other improvements in fundamentals, it is doubtful that cold weather alone will make this rally sustainable in the long run.

Another ETF that has climbed on the strength of rising commodity prices has been the iShares MSCI Brazil Index Fund (NYSE:EWZ). EWZ has risen 17.5% over the course of the last four weeks. The prospects of infrastructure plays in Brazil benefiting from Rio de Janeiro being awarded the 2016 Olympics has also provided an added boost to this ETF. The country plans to spend approximately $11 billion on improving its infrastructure prior to the games.

Warming Up to Solar Power
The Market Vectors Russia ETF (NYSE:RSX) has realized a trend similar to that of EWZ. RSX is two-thirds invested in energy and natural resources. The fund has rallied 17.2% over the past four weeks, and is also one of the best performing ETFs year-to-date. The resolution of a dispute by Vimpel Communications (NYSE:VIP) with the Nordic phone company, Telenor, helped RSX rally 2.5% this past Monday.

Clean energy stocks have been gaining momentum this year as Congress has introduced legislation to cut down on greenhouse-gas emissions. In recent weeks, Democratic senators have offered up a plan that would reduce emissions by 20% through 2020. The Claymore/MAC Global Solar Energy Fund (NYSE: TAN) which is up 12.3% during the last four weeks would be one of several beneficiaries should such legislation ultimately be enacted.

TAN's top holding, First Solar (Nasdaq: FSLR) recently received some good news when it was announced that the company will eventually replace Wyeth (NYSE: WYE) as a component of the S&P 500. Shares of First Solar are up 8.5% so far this year.

The Bottom Line
These four ETFs have been fairly volatile over the course of the past year, but now have appeared to hit their stride. The release of quarterly earnings in the weeks ahead will be a major factor in determining the direction of some of these ETFs as 2009 begins to wind down. A month from now, we could be looking at a markedly different composition of ETFs that have moved to the front of the pack. (For more, check out our Investopedia Special Feature: Exchange Traded Funds.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

comments powered by Disqus
Related Analysis
  1. India Remains An Emerging Market Bright Spot
    Stock Analysis

    India Remains An Emerging Market Bright Spot

  2. Alt-Energy Up on Emerging Markets - Industry Outlook
    Stock Analysis

    Alt-Energy Up on Emerging Markets - Industry Outlook

  3. Still More Gains Ahead For Semiconductor Makers
    Stock Analysis

    Still More Gains Ahead For Semiconductor Makers

  4. There's 10 Years Of Data Behind My Favorite Seasonal Trade

    There's 10 Years Of Data Behind My Favorite Seasonal Trade

  5. Winter is Coming -- Here's My Favorite Seasonal Trade

    Winter is Coming -- Here's My Favorite Seasonal Trade

Trading Center