Why KOLD Is Poised to Underperform

Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool's free investing community, the ProShares UltraShort DJ-UBS Natural Gas (NYSEMKT: KOLD  ) has received the dreaded one-star ranking.

With that in mind, let's take a closer look at KOLD, and see what CAPS investors are saying about the ETF right now.

KOLD facts

   

Inception

October 2011

Total Net Assets

$32.1 million

Investment Approach

Seeks to replicate the inverse of the performance of the Dow Jones-UBS Natural Gas Subindex for a single day. The index reflects the performance of a rolling position in natural gas futures contracts traded on the NYMEX without regard to income earned on cash positions.

Expense Ratio

1.1%

3-Month / Year-to-Date / 1-Year Returns

(38.1%) / (32.2%) / (67.6%)

Alternatives

United States Short Oil 

PowerShares DB Commodity Short ETN 

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 92% of the 75 members who have rated KOLD believe the ETF will underperform the S&P 500 going forward.

Just yesterday, one of those Fools, All-Star TerryHogan, succinctly summed up the KOLD bear case for our community:

Definitely not a NatGas bull with all the shale capacity in North America coming online, and the liquefied from Australia hitting the world market over the next few years. Having said that, it can't go that much lower, because producers just won't supply it in volume. So even if the price of NatGas just goes sideways, this leveraged ETF will underperform in the long run.

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Read/Post Comments (1) | Recommend This Article (1)

Comments from our Foolish Readers

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  • Report this Comment On April 12, 2013, at 11:17 AM, jim1199 wrote:

    All-star not withstanding, we should all be aware of the hazards of driving by looking in the rear view mirrow. The fool's all-star assumes that producers are price setters not price takers. I think the jury is still out. My undesratnding is that once a well is tapped that it can't be turned off. Producers can manipulate supplies by adding or subtracting storage. We had the coldest winter in 30 years and the supplies are only down a fraction of the five year average. Natural gas got pummeled in 2012 and this years supply/storage looks a lot like 2011's. I think natural gas is in a deflationary spiral because of over supply and stressed infrastructure. Who's going to pay for the needed infrastructure? usually the producers, so who's going to finance it with prices at this level?The recent bull run in NG prices might be a classic head fake in an overall bear market.

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