Bitcoin has risen from the crypt - from the December 31 close of $3.96 to the April 12 close of $6.49. That’s very impressive, except for the fact that there is some troublesome arithmetic at play here. When an asset starts from a small base, as is the case with Bitcoin, a 65% gain is only useful to those who had impeccable timing. For everyone else, 65% is essentially chump change.
The other 4 names on the winners list were bona fide recoveries from their poor showing in 2018. A quick scan of the table below supports this.
Not to pick on Bitcoin… well o.k. I am picking on Bitcoin a little… the chart below shows just how far it has fallen since December 2017. The 65% gain year-to-date is great, but it doesn’t do much for those who were buyers on the spike up and the trip back down.
A quick scan of the table below from Morningstar further illustrates how volatile this asset is. The only people who have made money are the very recent buyers and those who got in 3 years ago and either bailed out during the spike or rode the thing all the way back down. These folks still managed to make a profit of 118% over the full 3-year period. Timing is everything, especially with Bitcoin.
ARK Genomic Revolution Multi-Sector ETF (NYSEARCA:ARKG)
Compared to Bitcoin, this winner looks downright tame, although it’s far from tame on an absolute basis. In 2018, this ETF beat the market by not losing as much. In 2019, it’s up 41%, earning it the #2 spot on the winners list.
I won’t go through all 10 ETFs on these lists because you can do that yourself with a few clicks. I’m only going to highlight 2 of the winners and 2 of the losers.
What happened to coffee this year? Did people stop drinking it? Was there not enough rain for the crops? Or are the folks who run this ETF just bad at their jobs? I don’t know the answer, but it’s an interesting development.
This chart of the iPath Bloomberg Coffee ETN (JJOFF) is among the ugliest I’ve seen, except for Bitcoin of course. I’m no expert, but I’m pretty sure that the price and volume of coffee sales have not declined by 31% last year and another 12% this year. This leads me to speculate that the problem is with the way this ETF is structured and operated. I could be wrong, and I welcome any arguments for a different cause.
The last chart in this series is the Columbia India Consumer ETF (NYSEARCA:INCO)
I don’t know much about the Indian economy, so I can’t offer any insights into the causes of this poor year-to-date performance. It could just be a matter of mean reversion from last year’s valuations. Or it could be something more structural. I encourage comments from anyone who has knowledge on this subject.
Experienced investors will know how to use the information presented here. For those who are newer to the game, here is how I go about it.
I tend to favor value over growth, and mean reversion over momentum. I guess you could say I’m a contrarian investor in that way. What I do is look for the winners who could be vulnerable to a correction based on overvaluation. I do the same with the losers, looking for ETFs that have been unfairly punished by investors who may have overreacted.
There are other ways to use these lists, but I’ve given you a starting point for further research if you’re so inclined.
Check out my Factor-Based trading strategy in the SA MarketPlace.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.