S&P Still Likes Pharma, Staples, Utilities ETFs

Following a dour 2011 for many sector ETFs, last year's winners (pharmaceuticals, staples and utilities ETFs) could still be worth a look and in a recent research note, S&P Capital IQ reiterates Overweight ratings on four ETFs tracking those sectors. The firm notes that in 2011, there were just 162 ETFs and ETNs with positive total returns out of universe of about 1,400 funds and just 31 of those funds posted gains of 10% or more. Among 2011's10 top-performing ETFs, eight of them were classified by S&P Capital IQ as being sector ETFs, based on assets they held. This included three Utilities sector ETFs, two Health Care, and one apiece from Financials, Consumer Discretionary and Consumer Staples, S&P said in the note. S&P said the largest of the 10 best performers in 2011 was the Utilities Select Sector SPDR XLU. That ETF is up almost 17% in the past year and has over $7.5 billion in assets under management. S&P rates the Utilities Select Sector SPDR Overweight. The Consumer Staples Select Sector SPDR XLP, iShares Dow Jones US Pharmaceuticals ETF IHE and the PowerShares Dynamic Pharmaceuticals Portfolio PJP were the other sector funds rated as Overweight by S&P that also generated positive returns last year. The firm also has an Overweight rating on the WisdomTree Equity Income ETF DHS. The WisdomTree Equity Income ETF has an almost $368 million in AUM and devotes about 45% of its weight to health care, staples and utilities names. DHS is up almost 14% in the past year and overall, the fund offers exposure to 10 sectors. S&P found six ETFs with a 2011 total return performance of worse than negative 50%. This included Market Vectors Solar Energy ETF KWT, Guggenheim Solar ETF (TAN Global X Uranium ETF URA), and Market Vectors India Small-Cap Index ETF SCIF. Each of these ETFs had a negative total return of between -56% and -64%, S&P noted. The firm has Underweight ratings on the two solar funds and an Overweight rating on SCIF. It does not rate the Global X Uranium ETF.