3 Overlooked ETFs for Buying a Dip

A bad start for an ETF doesn’t always mean a bad year.

In fact, contrarian investors can often find their best investments in early-year laggards. Amid the remarkable diversity of products and market segments, they may pinpoint products that will rebound later on, because their sectors or wider market conditions affecting them could improve.

Below you’ll find three ETFs in, respectively technology, China and energy, that have ranked among the worst performers in still young 2024 but might be worth considering. They have slumped for different reasons, but their sufferings will not necessarily continue throughout the year. 

Etf.com’s tools allow investors to track end-of-day performance, while other platforms enable intraday monitoring.

Buy the Dip Candidates 

Consider the Amplify Lithium & Battery Technology ETF (BATT) a sort of how-to-build-an-electric-vehicle ETF. It invests in a global mix of companies involved in lithium, cobalt, nickel and other components of EV technology. One notable feature here is a 7% cap on any stock position at the time of rebalancing. It has two stocks that currently exceed a 7% weighting, implying that those have appreciated since being set at or below 7% the last time BATT rebalanced. 

BATT is off 13% year to date through Wednesday, and 28% the past 12 months, largely because of its global nature, as only 22% of the ETF is in U.S. companies. But with assets of only $115 million and in its sixth year, BATT has room to grow in price and AUM, if this sector starts to accelerate.

The iShares Trust-China Large-Cap ETF (FXI) has been a disaster for several years. It is off 11% this year, nearly 30% the past 12 months, and has dropped an annualized 10% the past five years, despite representing the most prominent China-based stocks that trade on the Hong Kong stock exchange.

But China’s fading economy and a crashing property market have swept up many of China’s largest, best-known brands, including the hard-hit financials and tech sectors, which make up more than 50% of FXI.

PBW’s Energyless Performance 

Invesco WilderHill Clean Energy ETF (PBW) was one of the early entrants in the clean energy space, debuting in 2005. But like a horse that starts fast but then tires before the finish line, PBW has fallen behind its competition in the race for assets. It stands around $485 million and continues to represent an equal-weight basket of companies in wind, solar, and companies that are relevant to the energy conservation space, but not as directly as pure play stocks.

This part of the stock market has been anything but “clean” recently, as PBW’s 20% year-to-date loss attests. It has lost 45% in the past 12 months, which effectively wiped out gains from the four prior years. Its five-year annualized return is now only 2%.

Attention ETF Shoppers 

These three ETFs remind investors and financial advisors of a few realities of modern markets and can be useful for scanning the performance of hundreds of market sub-segments. One reality is that stocks can decline more and for longer than we ever think is realistic. And current valuation may not prompt price responses. For instance, PBW’s portfolio sells at 1.3x trailing sales, and earnings are expected to grow 30%. Yet it is among the worst performers to start 2024. 

Conditions change quickly, making the hunt for opportunity more efficient for investment advisors and investors.