Just over three weeks into 2019, the stock market has seen impressive gains, making up for much of the ground it lost during 2018. In particular, some hard-hit areas have regained investor confidence, and their share prices are reflecting the increased optimism about their prospects for the coming year. Many investors like to track returns in specialized areas by choosing exchange-traded funds that concentrate on those parts of the market.
There's no shortage of high-performing ETFs in 2019. But some of the most impressive funds have already delivered what many would see as a solid year's worth of returns, and they could still have further to run. Below, we'll look at three of the top performers to see what their futures look like for the rest of 2019 and beyond.
The 3 top ETFs so far in 2019
|
ETF |
Assets Under Management |
YTD Return |
|---|---|---|
|
ETFMG Alternative Harvest (MJ 3.22%) |
$765 million |
24% |
|
VanEck Vectors Oil Services (OIH -0.06%) |
$1.16 billion |
23% |
|
SPDR S&P Oil & Gas Exploration & Production (XOP 0.10%) |
$2.27 billion |
19% |
Data source: ETFdb.com, fund companies. Includes ETFs with assets of $500 million or more but excludes leveraged or inverse ETFs.
Flying high with marijuana stocks
2018 was a landmark year for the cannabis industry, as the opening of the Canadian recreational marijuana market gave a huge opportunity to the many companies that positioned themselves to meet heavy consumer demand in the Great White North. Yet as so many other major news stories have unfolded in the past, hype that sent marijuana stocks soaring during the summer of 2018 gave way to a harsh reality check during the last part of the year. As a result, the Alternative Harvest ETF, which invests in dozens of promising companies tied to cannabis, finished the year with a 23% loss.
Image source: Getty Images.
But investors have turned over a new leaf on the marijuana industry in 2019. Global sales of cannabis are expected to grow at nearly a 40% pace this year, and investors are especially pleased at the passage of provisions within farm-related federal legislation that legalized hemp and hemp-based products in the U.S. market. Between that and the steady rise in legal availability of cannabis for medicinal and recreational purposes in a growing number of jurisdictions, Alternative Harvest is well positioned to keep benefiting from the rise in interest in marijuana stocks.
These 2 ETFs have gotten more energetic
Of even greater significance to the mainstream economy in 2018 was the plunge in energy prices. West Texas intermediate crude oil started the year above $60 per barrel but finished in the mid-$40s, and that resulted in heavy losses for many energy stocks throughout the year. Not only did exploration and production companies with direct exposure to crude prices falter, but the oil services companies that provide vital materials to drillers also suffered from the resulting declines in production.
However, investors see much better times ahead for the energy market in 2019, and they've already given stocks in the sector a big boost. West Texas Intermediate prices have pushed above the $50-per-barrel mark, and global prices have also seen solid gains. That's sent Schlumberger and Halliburton, two giants in the oilfield services industry, up roughly 20% on the year, and given that those two stocks make up more than a third of the VanEck oil services ETF's assets, investors in the fund have shared in the gains. On the exploration and production side, the equal-weight approach that the SPDR energy ETF takes has been particularly beneficial, as it's been the smallest E&P companies that have benefited most from the recovery in energy prices. Both ETFs stand to see further gains if oil can return to the levels it enjoyed during much of 2018.
Quick off the blocks in 2019
These ETFs have given investors a nice bonus to start out 2019, and even though a few weeks can't foretell whether a fund is likely to see sustained gains throughout the year, the gains that these ETFs have produced are a nice reversal from weakness last year. It's entirely possible that the same positive factors that have driven their outperformance so far this year will continue, and if that happens, then ETF shareholders could see even better returns ahead.
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