Category: INO.com Contributors

Worst Performing ETFs in 2022

Posted on by Matt Thalman

Like the best-performing Exchange Traded Funds of 2022, the worst-performing ETFs of the year were all leveraged.

It is no surprise that leveraged ETFs would be the best and worst-performing ETFs each year. But, interestingly, three of the top first worst performing ETFs were leveraged funds that are bullish big technology stocks, and the other two were ETFs that are short oil & gas companies.

2022 was a year we saw many divergences occur compared to the past almost ten years.

The technology-heavy index, the NASDAQ, was the worst-performing major index, while the slow and sleepy Dow Jones Industrial Average, while still down, was the best performer. The Dow Jones Industrial Average fell 8.8% as the S&P 500 dropped 19.4%, and the NASDAQ sank 33.1%.

Let's look at which ETFs finished in the top five worst performers of 2022.

The worst performing Exchange Traded Fund of 2022 was the ProShares UltraShort Bloomberg Natural Gas ETF (KOLD) which ended the year down 88.62%. KOLD provides two times short exposure to an index that tracks natural gas by holding second-month futures contracts.

In 2022 the price of natural gas went through the roof as Russia invaded Ukraine. That invasion led to almost all of Europe imposing a ban on Russian oil and gas, which led to price increases for any other country that also banned the importation of Russian oil and gas.

While KOLD was the worst-performing ETF, the ProShares UltraShort Oil & Gas ETF (DUG) was the fourth worst ETF of 2022 after dropping 72.99%. DUG offers investors two times short exposure to a market-cap-weighted index of large US oil and gas companies.

Since Russia is one of the largest oil and gas producers in the world, the bans on buying their products sent the price of both oil and gas higher in 2022. Thus oil and gas companies based in the United States benefited, and DUG rose substantially.

But, most experts claim the Russian-Ukranie conflict was not the only reason we saw oil and gas prices climb. Some of the increase was likely due to increased demand as most of the world came out of Covid-19 restrictions, and more people felt comfortable traveling. Continue reading "Worst Performing ETFs in 2022" →

2 Retail Names With Higher Prices Ahead

Posted on by Taylor Dart

We’ve seen a better start to the year for the major market averages, with the S&P 500 (SPY) up over 3% year-to-date and the Nasdaq Composite enjoying an even more impressive 4.5% return.

While some of these gains could be whittled away if we see a disappointing CPI report with higher-than-expected inflation, this is certainly a welcome departure from last year’s mess, with both indexes down over 20% for the first time since 2008.

Unfortunately, not all stocks have participated, and one sector that continues to remain in the doghouse from a sentiment standpoint is the Retail Sector.

Within the sector, the restaurant group has outperformed on hopes of peak inflation and improving demand (lower gas prices), but other retail brands like Chico’s FAS (CHS), with the stock being one of the worst performers year-to-date.

While this is partially attributed to the company’s softer holiday sales numbers, the sell-off is starting to look overdone, and a lot looks priced in here, with the stock trading at a mid-single-digit PE ratio.

Meanwhile, within the restaurant space, Wingstop (WING) may be an outperformer but it is positioned to continue its outperformance with aggressive unit growth and deflation in its core commodity (bone-in chicken wings).

This allowed it to price less aggressively than peers and capture market share despite a challenging backdrop where traffic growth has been elusive, especially while gas prices are hovering above $4.00/gallon.

Let’s take a closer look at both names below:

Wingstop (WING)

Wingstop (WING) began as a small buffalo-style chicken wing restaurant in Texas and has since grown to 1,800+ restaurants, with more than 95% of its system being franchised.

Since going public, the company has outperformed nearly all other restaurant stocks with a 640% return in just seven years. Continue reading "2 Retail Names With Higher Prices Ahead" →

Is Dollar's Dominance Over?

Posted on by Aibek Burabayev

Last September, the Congressional Research Service published an "In Focus" report. They had already attempted to address speculation about the dollar's dominance in the face of global economic and geopolitical changes at the time.

Three major threats were addressed in that document.

China and its currency have risen to sixth place, accounting for 1.66% of global payments.

The next source of concern was US financial sanctions, as the share of Russian exports to Brazil, China, India, and South Africa in US dollars fell from 85% in Q2 2018 to 36% in Q4 2021.

Digital currencies, which include cryptocurrencies and digital currencies issued by central banks, have completed the list.

“Some policymakers have expressed concerns about an international race to create a digital currency with widespread adoption, arguing that the United States should create a U.S. digital currency to maintain the dollar’s prominence in international payments.”

"To date, there is no evidence of a shift away from the US dollar as the dominant reserve currency," the study concluded.

Back in October, I shared my most recent update for the dollar index, as it hit the first target with a fresh outlook.

At the time, I proposed two paths for the dollar: a continuation to the next target of $121 on an aggressively hawkish Fed, or a consolidation before resuming to the upside. The majority of readers supported both paths, with the consolidation option coming out on top.

The question of the dollar's dominance is resurfacing these days, as its value has plummeted dramatically. It is too early to tell whether this is a consolidation or a global reversal.

One thing is certain: the path of unending growth has been abandoned.

In my charts, I see a clash of perspectives. The technical chart is about to give a strong bearish signal. The chart comparing fundamental factors, on the other hand, supports the king currency's continued strength.

Let me show you each of them one by one, beginning with the emerging bearish alert. Continue reading "Is Dollar's Dominance Over?" →

Best Performing ETFs in 2022

Posted on by Matt Thalman

2022 was a very tough year for investors, both big and small. All three of the major indexes ended the year down substantially. The Dow Jones Industrial Average fell the least, just 8.8%. The S&P 500 dropped 19.4%, while the technology-heavy NASDAQ sank 33.1%.

2022 was the first year in four that the major industries ended the year lower. Inflation and aggressive interest rate hikes by the Federal Reserve to combat persistent inflation weighed on the market as a whole but had a more damaging effect on technology stocks.

Out of the top-performing Exchange Traded Funds in 2022, two of the top five were ETFs that are short technology stocks, while two others were short Treasury Bonds.

It's not very often that the best performing Exchange Traded Funds are ones that had bet against an asset class or specific industries, but that was the type of year we had in 2022.

Let's look at the top five performing ETFs of the year and see what they had in common and if there is anything we can learn that will make us better investors in 2023 and beyond.

As mentioned, two of the top five best-performing ETFs were short, US Treasury bonds.

The best-performing ETF of 2022 was ProShares UltraPro Short 20+ Year Treasury (TTT) which rose 150.17%.

The third best-performing ETF was the ProShares UltraShort 20+ Year Treasury ETF (TBT), which increased by 93.29%.

Both funds were "short" or betting that they would decline in value, Treasury bonds that have 20 or more years until maturity.

The TTT was leveraged three times short Treasury bills. That means if a Treasury bill fell $1 and the TTT triple short leveraged fund had bet against it, TTT would be up $3. So for every $1 move lower Treasury bonds went, TTT was moving $3 higher.

The TBT fund was also short-leveraged, but it was only short two times. So if it were short a bond that fell $1, it would go higher by $2, not $3 like TTT. This also means that TBT carried lower risk than TTT, and still performed well in 2022. Continue reading "Best Performing ETFs in 2022" →

Gold Miners Index Starting The Year Strong

Posted on by Taylor Dart

2022 was a year to forget for most sectors and certainly the major market averages, with the S&P 500 (SPY) declining 19% for the year and the Nasdaq Composite suffering an even more disappointing 33% loss.

While most investors certainly didn’t have the Gold Miners Index (GDX) in their cards to be an outperformer in 2022 after it found itself down 30% for the year in October with one quarter to go, the sector managed to recover and has started off the new year strong as well.

The strength in GDX can be attributed to the rally in gold prices ($1,650/oz → $1,850/oz) but also sentiment being the worst in years as of Q3, with many names trading at their cheapest valuations since 2015.

This gave the sector the fuel to significantly outperform gold if we saw any positive change in sentiment, and this is exactly what we’ve seen with the gold price back above key support at $1,800/oz.

While this rebound in the GDX is certainly positive from a momentum standpoint, it has made things a little more difficult from a stock-picking standpoint.

This is because many miners have already made 40-50% moves off their lows, and it can be dangerous to chase the lower-quality miners or sector laggards with them hovering well above key support levels.

In this update, we’ll look at two of the better buy-the-dip candidates sector-wide and highlight why these two names have the potential to outperform in 2023, making them attractive names to keep near the top of one’s watchlist if we see further weakness.

I-80 Gold (IAUX)

I-80 Gold (IAUX) is a $730MM company in the gold sector with multiple projects in the state of Nevada, including its Ruby Hill, Granite Creek, and McCoy-Cove projects. The company also has a processing facility with over $1.0BB in sunk costs in northern Nevada.

The company plans to employ a Hub & Spoke model and feed material from its three mines to its central “hub” or processing facility at Lone Tree. Continue reading "Gold Miners Index Starting The Year Strong" →