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Each week, I like to publish the past week's hottest ETFs to share some new trends and niche ETFs (and ETNs) out there (check out this ETF Ticker List full of ~800 - every exchange traded fund I could find) and give investors some new investing/diversification ideas. Last week, it was short emerging markets and natural gas taking the lion's share of gains. I made sure to include both conventional and leveraged ETFs in this week's hot list:

Hot List Leveraged ETFs

LHB - Latin America Bear 3X - Up 13% - With the Latin American ETF so heavily vested in hard commodities and the weak dollar trend reversing so rapidly, it wasn't a good week for hard asset-related regions to say the least.

DRN - Direxion Daily Real Estate 3x - Up 5% - This 3X Return Real Estate Fund was up 5% last week, in a roughly flat week for US equities at large. DRN has been very strong since launch, up 120% since mid-July, but note that ETFs are often launched when the underlying sector is hot. Imagine how this one would have performed in 2008.

Hot List - Sector ETFs (no leverage)

UNG - US Natural Gas Fund - Up 11% - Aside from the fact that it was a cold week and the news was saturated with a large winter storm in the Northeast, there was a weekly drop in the inventory report which helped boost shares of this Natural Gas ETF. Note that this is a reversal from a long downward trend, whereby UNG is down over 50% YTD.

SGG - iPath DJ AIG Sugar TR Sub-Idx ETN - Up 8% - 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 81% vs. a 25% gain for the 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.

MES - Market Vectors Gulf States ETF - Up 8% - The gulf states fared well with an up week for oil (USO up 3.3% on the week). MES has suffered considerably recently given the economic malaise in Dubai which has implications for the entire region. While the ETF had kept up with US equities for most of the year, shares have declined considerably in the month, down 8% vs. a marginal gain of 1% on the S&P500.

MES Top 10 Holdings are:

Agility
Commercial Bank of Kuwait SAK
DP World Ltd
Emaar Properties PJSC
Kuwait Finance House KSC
Mobile Telecommunications Company KSC
National Bank of Abu Dhabi
National Bank of Kuwait
Natl Inds Grp Hldg
Qatar National Bank SAQ

So, What's Working?

While leveraged ETFs appear to work if you cherry-pick the right timeframe, they're not a "prudent" investment, but rather, a trade due to the loss of value over time from daily rebalancing. Of late, there are a few ETFs that are routinely exceeding returns of the S&P500 as outlined in this Niche ETF article outlining 5 such investments, as well as this Spinoff ETF that has completely trounced the indices.

Disclosure: No positions in any ETFs covered.

Source: Top Five ETFs from Last Week - LHB, DRN, UNG, SGG, MES