Every exchange-traded fund has its bad month, in some cases its bad years. But a few ETFs with perfectly reasonable strategies have done so badly for so long they seem cursed. The charts on these investments show one step forward, two steps back.
Is there any value left in these left-for-dead funds?
It depends. Solar ETFs, for example, were longtime horrible performers. Once a big supply glut finally worked itself off, they raced up the charts. The Guggenheim Solar ETF became the top-performing ETF in 2013, rising 130%.
As a streak like that suggests, long-shot ETFs can pay off — but they're risky tactical investments meant for a tiny part of a portfolio.
Global X Uranium ETF (URA)
URA, which tracks small-cap uranium miners mostly in Canada and Australia, has plunged 81% since its 2010 inception.
It was down 24% for the year at the beginning of November. But it may be coming back, as it has narrowed its year-to-date loss to 8%.
This ETF has been haunted by Japan's March 2011 Fukushima nuclear disaster. Despite good news for uranium miners — such as more than 100 planned reactors in China, India and Russia — URA has floundered. The current drop in oil prices isn't helping, but the ETF also struggled when oil prices were high.
(More: Unprecedented demand for ETF tracking Chinese stocks)
A much-needed psychological boost (not to mention a future source of demand) came when Japan recently voted to start re-opening its nuclear reactors for the first time since the disaster. Some of those reactors could be up and running by next year. That led to URA's 20% surge in November.
China's plan to quadruple its nuclear capacity by 2020 also may give URA a lift. The ETF has $253 million in assets and charges 0.69% of your total investment in annual fees.
Market Vectors Russia ETF (RSX)
RSX is down 28% this year, making it the second-worst-performing country fund, after the Global X FTSE Greece 20 ETF (GREK). RSX has consistently lagged its emerging-markets peers over the past five years. During that stretch, the iShares Emerging Markets ETF (EEM) is up 15%, while RSX is down 22%.
RSX is down 43% since its launch in September 2007. Judged by their price-to-earnings ratios, the stocks in RSX on average cost less than half as much as stocks in Japan, Europe, the U.S. and many emerging markets. RSX's P/E is 8.
The dark cloud hovering over RSX is the unpredictability of Russian President Vladimir Putin. Putin's invasion of Ukraine has spurred sanctions that are crippling the Russian economy.
Russia also relies heavily on energy exports. Considering the country's five-year history of hurting value investors, a mild economic growth outlook and its recently cut debt rating, it's hard to say that all the uncertainty is already priced into Russian stocks.
Still, investors such as hedge funds are going bottom fishing in the country. RSX, which charges 0.62% in annual fees, has taken in $1.2 billion this year, bringing its total assets to $2 billion. ETF assets rarely rise while prices fall. It happened in 2013 in the Market Vectors Gold Miners ETF (GDX).
In the first 10 weeks of the year, GDX finally woke up and surged 30%. Since then, it has given all those gains back.
Market Vectors Rare Earth/ Strategic Metals ETF (REMX)
REMX tracks companies that produce, refine and recycle rare metals such as cerium, titanium, manganese and neodymium.
Such rare-earth, or “strategic,” metals have more specialized uses than base metals (such as lead, nickel and zinc) and are harder to extract. Many of them are used in products such as jet engines, hybrid cars and smartphones.
REMX is down 24% this year, making it one of 2014's worst performers. It has done nothing but go down, losing 63% since its launch in 2007.
The force weighing on its fortunes is the Chinese government. China, which produces 90% of the world's rare-earth metals, has distorted the market for many years with export quotas and taxes. This has led to smuggling and has forced buyers to stockpile the metals, seek alternatives and get better at recycling. That, as well as a weak global economy, has hurt demand.
The bright side is that China's stranglehold has sparked new competition. Some $12 billion of rare-earth mining projects have popped up in other countries. And China plans to crack down on illegal mining. The prospect of a more rationally functioning market for rare metals is one reason behind calls for a rebound in REMX.
REMX is about twice as volatile as the S&P 500 index. That's because of its 64% weighting in micro- and small-cap stocks and 36% weighting in midcaps. It has $62 million in assets and charges 0.57% in annual fees.
