The bull market in U.S. stocks is marking its sixth birthday today, and a look back at what has worked best during this six-year run includes a roster of biotech, value stocks and consumer-focused ETFs.
Here we break down the top 10 best-performing ETFs from the March 2009 low to March 2015. Their individual performances can be seen in the table below, but the ETFs can be grouped into three broad segments:
- First Trust NYSE Arca Biotechnology ETF (FBT | B-38)
- PowerShares Dynamic Pharmaceuticals ETF (PJP | B-69)
- iShares Nasdaq Biotechnology ETF (IBB | A-30)
- SPDR S&P Pharmaceuticals (XPH | A-42)
FBT is the best-performing ETF in the past six years, delivering cumulative total returns of 618 percent. It tracks an equal-weighted index of U.S. biotechnology stocks.
In general, biotech and pharma names have done well thanks to drug innovations and Ebola-type scares in the past six years. FBT is particularly interesting because it often tops the segment in terms of performance thanks to its weighting scheme.
The fund regularly delivers alpha versus our market-cap-weighted segment benchmark because it's based on the equal-weighted NYSE Arca Biotech Index. That means it makes big bets on smaller companies.
Strategic Beta ETFs With Focus On Value:
- Guggenheim S&P 500 Pure Value ETF (RPV | A-58)
- Guggenheim S&P SmallCap 600 Pure Value ETF (RZV | B-43)
- Guggenheim S&P MidCap 400 Pure Value ETF (RFV | B-48)
Guggenheim ETFs dominated this segment. The issuer has, in fact, four of its strategic beta funds in the top 10 list, three of which serve up a focus on value stocks. Valuations in the U.S. stock market are high by most measures, which might help explain why focusing on value names has offered the most upside.
RPV was the second-best-performing ETF in the past six years, shelling out cumulative gains of 574 percent since the market bottomed in March 2009. The fund tracks an index of primarily large-cap, committee-selected U.S. stocks. The index covers about 33 percent of the S&P 500's market cap, using three factors to select value stocks.
The pure style approach paid off in not only the large-cap RPV, but also in the small- and midcap funds RZV and RFV.
- SPDR S&P Retail (XRT | A-46)
- Guggenheim S&P Equal Weight Consumer Discretionary ETF (RCD | A-80)
- First Trust Consumer Discretionary AlphaDex (FXD | A-71)
It might seem counterintuitive, but throughout the recovery from the worst economic downturn the U.S. has seen since the Great Depression, consumer discretionary stocks did quite well, delivering outsized gains in the past six years. Think things like retail, media, autos, etc.
Interestingly, none of the funds in this category adopts a plain-vanilla market-cap weighting. XRT is equal-weighted, and both RCD and FXD serve up alternatively weighted approaches to the segment as well.
Top Performers (%, Total Return)
|FBT||First Trust NYSE Arca Biotechnology||First Trust||1,835.08||3,014.64||618.29|
|RPV||Guggenheim S&P 500 Pure Value||Guggenheim||819.88||1,045.21||574.65|
|RZV||Guggenheim S&P SmallCap 600 Pure Value||Guggenheim||89.08||172.41||560.09|
|PJP||PowerShares Dynamic Pharmaceuticals||Invesco PowerShares||923.71||1,858.41||552.23|
|RCD||Guggenheim S&P Equal Weight Consumer Discretionary||Guggenheim||127.21||180.76||507.72|
|IBB||iShares Nasdaq Biotechnology||BlackRock||1,673.79||8,030.22||487.31|
|XPH||SPDR S&P Pharmaceuticals||SSgA||461.93||1,163.51||486.14|
|XRT||SPDR S&P Retail||SSgA||97.60||1,197.80||471.95|
|RFV||Guggenheim S&P MidCap 400 Pure Value||Guggenheim||69.89||118.23||462.79|
|FXD||First Trust Consumer Discretionary AlphaDEX||First Trust||1,856.80||2,303.24||438.56|