Four Momentum ETFs to Start the Week

Each week, I like to publish the past week's hottest ETFs to share some new trends and niche ETFs out there and give investors some new ideas. For this week, real estate and the reign of the months-long Short Treasury play reversed for big gains in leveraged long Treasury Bond ETFs. China and sugar (there's an ETN for that) performed well also. Here are 4 top performing ETFs from last week:

PSR - Up 11% Powershares Active US Real Estate - This is an "actively managed ETF" which may sound like a bit of a misnomer. The fund will invest at least 80% of assets in securities of companies that are principally engaged in the U.S. real estate industry and included within the FTSE NAREIT Equity REITs Index. It is free to utilize the balance of the assets for additional exposure to other real estate or alter the weighting of its holdings. With a higher expense ratio of .8% than its passively managed brother VNQ at .1%, it will be interesting to see if the ability to add some actively managed positions to the ETF outweigh the .7% difference in expense ratios.

What is somewhat deceiving as well though, is that the instrument doesn't seem to have much trading volume at all and last week may have actually been an anomaly, since it didn't track VNQ closely at all. I'd watch PSR with suspicion near term if you see it showing up on ETF hot lists and perhaps think about VNQ if you're itching to get into real estate until there's more volume and the spreads are smaller.

TMF - Up 11% -Direxion 3X Long 30 year Treasury - A few months back, shorting Treasuries seemed like surefire way to capture the optimal risk-adjusted return - since Treasuries really couldn't run much higher with yields approaching zero - and some short dated maturities actually fetching negative yields. Well, that strategy has sputtered out and is reversing near term. From here, it's like volatility both ways and the easy money appears to have been made. Recall that leveraged ETFs pose risks that aren't immediately intuitive due to daily rebalancing - see this article on Leveraged ETF Risks to understand why these are only suitable for a near term trade (sometimes) and never suitable for a long term hold.

TAO - Up 9% - Claymore/AlphaShares China Real Estate - Virtually anything China has been hot during the recovery and for the prior week, this niche China Real Estate ETF has turned in stellar performance, with a 3 month return of 60% vs. 10% for the S&P500. While many US Real Estate ETFs and Real Estate Investment Trusts offer higher yields, TAO comes in with a once per year dividend, averaging around 2% based on December's payment, so don't plan on buying this one for income.

SGG - Up 9% - Barclays iPath Sugar ETN - Trading in a sugar ETN (exchange traded note which has some different properties than ETFs that you'd want to research further) is probably best suited to those with industry knowledge, but there is such a niche ETN available to retail investors nonetheless. Sugar moves at the whims of India's production output, the indirect relationship with Brazil's sugarcane and weather all over the globe. Year to date, SGG has returned 30% vs. a roughly flat S&P500. For broader commodity representation, consider the the Greenhaven Continuous Commodity index ETF GCC, which holds sugar along with several other commodities. Note however, that SGG has routinely outperformed in recent history.

Miss the Boat on Corporate Bonds and Bond ETF?

Investors may well want to keep an eye on high yield corporate bonds as well, since returns are trending virtually in lock-step with equities, yet the yields on the bonds are often significantly higher than the dividend payouts (which are cut well ahead of a bankruptcy declaration that would chop the bond return by more than 75%). For simplicity, a lower barrier to entry and diversification of risk, this High Yield Bond ETF HYG is still sporting a double digit yield - just note that there will likely be some defaults in the underlying holdings as the economy stagnates in the next year or so, which may adversely impact share price and yield.

Disclosure - The only active position at this time is HYG. The author closed a 2X Short Treasuries position last week.