Market Overview

Lazarus ETFs: 2011's ETF Laggards Become 2012 Studs


Not looking to offend anyone's religion or views on the matter (all are welcome in this space), we'll briefly recall the biblical story of Lazarus, who was raised from the dead. The parable is essentially a lesson in persevering through hard times and in that vein, it's relevant to the financial markets. Particularly at the sector level and when looking for new leadership opportunities.

Indeed, some of 2011's worst ETF offenders have risen from the dead to be stalwart performers in the early stages of 2012. This quintet might hold more opportunities for investors through the rest of 2012.

Global X Auto ETF (NYSE: VROM) In the essence of full disclosure, we're based in Michigan so it warms hearts when automakers are performing well and that they are. In July 2011, VROM was trading over $16. By October, it was flirting with $10. In other words, you wanted no part of this ETF last year.

Rising from the ashes, VROM is now pushing $14 and has outperformed the rival First Trust NASDAQ Global Auto Index Fund (NYSE: CARZ), Ford (NYSE: F) and the SPDR S&P 500 (NYSE: SPY) year-to-date. Make your bets on a rebounding U.S. economy with the super-cyclical VROM.

Market Vectors Steel ETF (NYSE: SLX) Already noting that steel stocks have been outperformers this year we reiterate the position that the Market Vectors Steel ETF is one of 2012's more compelling rebound candidates among sector ETFs. SLX was bludgeoned in 2011 and that was no surprise given the cyclical nature of this ETF.

Well, the sleeping giant that is SLX has risen from its slumber and could deliver another 20%-25% in upside this year on top of the 19% the ETF is already up year-to-date. SLX has handily outperformed big-name steel stocks like Arcelor Mittal (NYSE: MT) and U.S. Steel (NYSE: X) in 2012.

iShares MSCI Peru All Capped Index Fund (NYSE: EPU) We own up to it when we're wrong, so we'll admit we've had our doubts about investing in Peru in the past. The iShares MSCI All Peru Capped Index Fund faced political headwinds last year and was damaged by a move away from the materials trade.

Now, investors seem to be believing the new political regime in Peru isn't going to nationalize everything in sight and EPU is getting help from multiple places. Rising gold, silver and copper prices will help and if nothing else, the longer the iShares MSCI Brazil Index Fund (NYSE: EWZ) rises, the longer that ETF drags EPU along for the ride.

EPU has one of the best-looking charts of any LatAm ETF and while it might be prudent to wait for a pullback to support at $42, the path of least resistance here is clearly higher, so waiting for $42 might mean waiting a while.

Market Vectors Vietnam ETF (NYSE: VNM) The Market Vectors Vietnam ETF that has been of those ETFs you want to like, but often times can't pull the trigger on. Rampant inflation that would have made Brazil or India blush and a central bank with tendency to devalue a currency will do that. And when an ETF allocates almost 43% of its weight to financials, inflation and currency issues become a big deal.

The flip side is any news of easing inflation in Vietnam is a boon for VNM. How bad was 2011 for this ETF? One day it was trading near $29.50. By the end of the year, support at $15 had given out. From there, VNM has moved up in a straight line and has been one of the best emerging markets ETFs in 2012. Remember this: The "V" stands for Vietnam, but with this ETF, it might as well stand for "volatility."


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