Under The Radar ETFs

The stock market may be down, but it’s not out. After declining precipitously in the fourth quarter, the S&P 500 roared back in the past two weeks, raising hopes that the decade-long bull market still has legs.

Even after the rally, stocks are still down on a year-over-year basis, with trade, growth and interest rate concerns weighing heavily on the asset class. Even bonds, as measured by the iShares Core U.S. Aggregate Bond ETF (AGG), are lower from where they were a year ago, underscoring just how difficult the investing landscape has been in the past 12 months.

Still, not everything is struggling. There are some ETFs that have quietly thrived during the past year, rising as others have fallen. What’s more, these aren’t well-known funds that everyone is buying—they’ve made their moves under the radar.

Here are five of them:

ProShares Long Online/Short Stores ETF (CLIX)

The ProShares Long Online/Short Stores ETF (CLIX) is a relatively young fund, only about 14 months old. But in that period, the ETF has done well, capitalizing on what many believe is an inexorable trend: the demise of brick-and-mortar retailers and the ascendance of e-commerce.

CLIX bets on that trend aggressively by combining a 100% long position in shares of online retailers with a 50% short position in shares of brick-and-mortar retailers.

The resulting portfolio has long positions in the likes of Amazon, Alibaba and eBay; and short positions in Best Buy, Costco and Office Depot.

CLIX has a 0.65% expense ratio and $44 million in assets.

CLIX Returns Since Inception

Aberdeen Standard Physical Palladium Shars ETF (PALL)

All that glitters is certainly not gold. The yellow metal was eclipsed by the lesser-known palladium early this year as the most valuable of the big-four precious metals.

The per-ounce price of palladium exceeded that of gold by as much as $43, the first time that’s happened in nearly two decades.

The $207 million Aberdeen Standard Physical Palladium Shares ETF (PALL) has been red hot, gaining 20% year-over-year thanks to record-high palladium prices.

Weak prices for platinum—which is often mined together with palladium—have discouraged producers in South Africa and Russia from increasing their metals output, even as palladium prices have soared.

That’s kept the palladium market consistently tight, especially as demand from automakers using the metal in gasoline catalytic converters has leapt.

Analysts say palladium has to rise high enough to offset the lowly prices of platinum before supply finally catches up with demand. That could mean more gains are in store for PALL this year.

Palladium Price

iShares MSCI Saudi Arabia ETF (KSA)

Saudi Arabia was prominent in the news last year, but not for the best reasons. The brutal murder of a journalist in Saudi Arabia’s consulate in Turkey ignited a firestorm of condemnation around the world, prompting businesses, investors and politicians to dramatically reassess their outlooks for the country and its economy.

A sharp plunge in the price of oil, from as high as $75 to less than $45, didn’t help matters. The forecast for Saudi Arabia was dire—or so you would think.

In reality, the iShares MSCI Saudi Arabia ETF (KSA) turned out to be one of the best-performing single-country ETFs of the past year. The fund sits close to its all-time highs, an incredible feat considering the challenges Saudi Arabia faced in 2018.

An important upgrade to Saudi Arabia’s investment status by index provider MSCI last year provided ballast for the country’s stocks in the face of geopolitical head winds. Starting this year, Saudi Arabian stocks will be a part of the MSCI Emerging Markets Index, a privilege granted thanks to what MSCI says are key regulatory and operations enhancements that opened the Saudi market to international and institutional investors.

If investors continue looking past the swirl of controversies surrounding the Kingdom and its foreign policies, perhaps KSA can continue rallying on the business-friendly reforms happening in Saudi Arabia.

KSA Returns Since Inception

AGFiQ U.S. Market Neutral Anti-Beta Fund (BTAL)

Even though it’s an equity ETF, the AGFiQ U.S. Market Neutral Anti-Beta Fund (BTAL) is not your typical buy-and-hold investment. The ETF goes long low-beta stocks and shorts high-beta stock, resulting in a market-neutral position.

When relatively safe, low-volatility stocks are outperforming their riskier, high-volatility counterparts, BTAL should trend up. That’s what happened in 2018, when BTAL trounced the market with a 15.1% gain.

Of course, when the opposite happens and investors bid up high-flying momentum stocks, BTAL tends to underperform the market significantly.

BTAL’s market-neutral positioning and its steep 1.06% expense ratio mean the fund isn’t suitable as a buy-it-and-forget-it long-term investment, but it’s an interesting tactical tool for making bets on beta.

BTAL 5-Year Returns

VelocityShares Daily 4x Long USD vs AUD ETN (DAUD)

Unlike other asset classes, currency ETFs  haven’t taken off with ETF investors. In aggregate, there’s a modest $1.7 billion of assets under management in all currency ETFs—nothing compared to the amount of money in stock, bond and even commodity ETFs.

Foreign exchange traders, who together trade trillions of dollars of currencies daily, haven’t gravitated toward ETFs like traders and investors of other asset classes.

Most of them still prefer to trade on the vast over-the-counter currency market, which is typically cheaper and offers more leverage.

That said, a batch of new currency products—some of which are delivering stellar returns—may pique the interest of some traders who may find the ease of trading currencies in a traditional equity brokerage account attractive.

A little over a year ago, VelocityShares launched a suite of 10 quadruple-leveraged currency ETNs, targeting the U.S. dollar against the euro, pound, yen, Australian dollar and Swiss franc. The 4x-leverage, while nothing new or big in the currency world, is a first for U.S.-listed ETPs.

The hefty leverage has resulted in some notable gains (and losses) for the young currency ETNs. After the U.S. dollar rallied against the Australian dollar last year, the VelocityShares Daily 4x Long USD vs AUD ETN (DAUD) surged 55%; and even with the recent pullback, the exchange-traded note is up 42% since inception.

Thanks to the 4x-leverage, it didn’t take that large of a move in the underlying currency pair to spur that huge gain. Going forward, these currency products are likely to make regular appearances on the lists of best- and worst-performing ETPs, raising their profile.

DAUD Returns Since Inception

Email Sumit Roy at [email protected] or follow him on Twitter sumitroy2