Are Comeback Kid ETFs Worth a Look?

I don’t know if you’re a football fan in general, or a New England Patriots fan in particular. But I’m both, and I have to tell you, that Super Bowl comeback was one for the ages! What an amazing game, an amazing performance, and a great way to close out this year’s NFL season.

Once the euphoria wore off, though, I started thinking about “Comeback Kids” in the markets. More specifically, I wondered if there were any ETFs that had a miserable 2016 … but that look primed for a resurgence this year?

So my team and I crunched the numbers on the almost 2,000 ETFs in our Weiss Ratings database. I searched for ETFs with negative returns in 2016, but the best returns so far this year. My screen eliminated leveraged and inverse ETFs, as well as volatility-based products like the iPath S&P 500 VIX Short-Term Futures (VXX, Rated “E+”). Here’s the list I ended up with:

You can see there’s a somewhat eclectic mix of ETFs trying to battle their way back. The Global X Uranium ETF (URA, Rated “D”) tops the list, with a year-to-date return of 29.3% after a 1.2% decline in 2016. Uranium prices have experienced a resurgence in the past several weeks thanks to production cutbacks from leading Canadian producer Cameco (CCJ, Rated “C-”) and Kazakhstan’s state-owned miner Kazatomprom.

A pair of ETFs focused on Indian stocks took the next two spots on the list. The Columbia India Small Cap ETF (SCIN, Rated “C-”) is up 15.8% after losing 9.4% last year, while the VanEck Vectors India Small-Cap Index ETF (SCIF, Rated “C”) is up 15.6% after dropping 4.5% last year.

They’re benefitting from Prime Minister Narendra Modi’s recently announced plans to cut taxes and boost stimulus spending, measures that should bolster economic growth. Diversified Chinese ETFs are also well-represented on the Comeback Kids list due to improving Chinese economic data.

Select Internet-and-technology-focused funds are faring better so far in 2017, too. The Emerging Markets Internet & Ecommerce ETF (EMQQ, Rated “C-”) and the ARK Innovation ETF (ARKK, Rated “D+”) are the #4 and #5 ETFs on my list. They hold stocks like NetEase (NTES, Rated “B+”), Baidu (BIDU, Rated “C”), Tesla (TSLA, Rated “D”), and Amazon.com (AMZN, Rated “C”).

A pair of biotechnology ETFs round out the top ten. In fact, the BioShares Biotechnology Clinical Trials Fund (BBC, Rated “D”) was the biggest Cinderella story of all. It’s up by more than 11.1% so far this year after a dismal 36.6% drop in 2016. As the name suggests, this $19.8 million ETF focuses on newer, smaller biotech companies trying to produce breakout drugs.

So should you look to purchase any of these funds? Well, there isn’t a single one that officially merits a BUY rating. But if Donald Trump wins his war on the U.S. dollar, materials prices rebound further, and/or China and India continue to stimulate their economies, the 2017 turnaround could continue.

Another way to profit might be to use the Ratings website to search through the top holdings of these ETFs, and consider purchasing a couple of the BUY-rated stocks they hold. NetEase is one such stock, and it’s up more than 18% so far this year. Facebook (FB, Rated “B”) and Nvidia (NVDA, Rated “A-”) are two more. They’re showing gains of 12.8% and 16.8%, respectively.

Happy hunting!

Mike Larson