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Why KOLD Is Poised to Underperform

By Brian D. Pacampara, CFA - Apr 11, 2013 at 9:21PM

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Market-lagging returns could be written in this 1-Star.

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 (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.

Want to see how well (or not so well) the stocks in this series are performing? Follow the TrackPoisedTo CAPS account.

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Stocks Mentioned

ProShares UltraShort DJ-UBS Natural Gas Stock Quote
ProShares UltraShort DJ-UBS Natural Gas
KOLD

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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