This is the first of a series of reports detailing the top performing equity exchange traded funds that are listed in Canada. The purpose is not to recommend ETFs but to use the investment vehicle as a tool to understand the inner workings of domestic and global markets - the sectors and investment strategies that might be emerging as performance leaders or falling back as laggards. The time frame is three months; leveraged ETFs will not be part of the analysis.
For the three months ended with last Thursday’s close, the five best and worst performers are listed in the accompanying table.
The tiny (in terms of assets) CI Global Climate Leaders ETF leads the pack with a 37.4 per cent three-month return. The fund’s mandate is long only, with a concentrated portfolio focused on decarbonization. Managed by Australia-based Munro Partners, the fund’s top holdings make the strong returns easy to comprehend. Largest holding Constellation Energy (a nuclear power provider) jumped 64.5 per cent for the period and second largest holding Nvidia was up 57.2 per cent.
Commodity price strength is definitely a theme. The Horizons Copper Producers Index ETF is the second best performer, climbing 29.3 per cent. The copper price was up 14.3 per cent over the past three months but moves in the ETF’s top holdings were much larger. Top holdings Lundin Mining and Capstone Copper were up 49.0 per cent and 42.0 per cent, respectively.
Another CI fund, the Global Alpha Innovation ETF, generated a 22.6 per cent three-month return by positioning perfectly for the investor rush into large-cap technology stocks benefitting from artificial intelligence (AI). The top two positions are Nvidia (up 57.2 per cent) and Amazon.com (18.8).
The BMO Equal Weight Global Gold Index ETF, up 22.5 per cent, finished in third spot after the bullion price added 17 per cent. Top holding Equinox Gold was up 24.3 per cent and second biggest, Chicago-based Coeur Mining, jumped 55.6 per cent.
The Fidelity Global Innovators ETF made the top five with a 22.3 per cent return. Like the CI Innovation ETF, the top holdings largely follow an All-AI-All-the-Time strategy with Nvidia, Microsoft, Amazon.com, Meta Platforms and Alphabet. Uranium miner Cameco is a non-tech exception among the top 10 and but it detracted from returns, falling by 2.8 per cent in the past three months.
The Tesla Yield Shares Purpose ETF uses borrowed funds and covered call writing to maximize upward moves in Tesla stock. Weakness in the underlying stock – it was down 26.2 per cent in the past three months – caused the ETF to drop 31.1 per cent.
The BMO ARK Genomic Revolution Fund ETF lost 17.0 per cent and is the second worst performing ETF in the past three months. Designed to track an underlying fund managed by U.S.-based ARK Investment Management LLC, it seeks to benefit from companies “incorporating technological and scientific developments and advancements in genomics into their business such as CRISPR, targeted therapeutics, bioinformatics, molecular diagnostics, stem cells and agricultural biology”. CRISPR Therapeutics, a gene-editing technology company, is the fund’s top position and it was down 8.6 per cent over the past three months.
The CIBC Clean Energy ETF dropped 13.0 per cent for the period. The fund attempts to replicate the returns on the CIBC Atlas Clean Energy Select Index, where the top positions are First Solar Inc., Darling Ingredients Inc., a company that recycles restaurant grease and animal tallow, and Brookfield Renewable Partners LP. First Solar was higher by 9.7 per cent in the past three months while the latter two were down 4.7 per cent and 18.6 per cent, respectively.
The Evolve Automobile Innovation Index ETF focuses on electric drivetrains, autonomous vehicles and vehicle connectivity. Remarkably, It was down 12.9 per cent in the past three months despite strong returns from tops holding Nvidia, Kyoto-based battery financer GS Yuasa (up 53.0 per cent) and Renault SA (up 44.6 per cent)
The First Trust Nasdaq Clean Edge Green Energy ETF was lower by 11.5 per cent. Top holdings are First Solar Inc., Enphase Energy and ON Semiconductor Corp.
The relative performance of the ETFs above underscore market trends that are already well-documented like the ongoing rally in large cap AI-related technology stocks and the recovery in oil, gold and copper prices. The strong return on nuclear power provider Constellation Energy is more interesting even if Cameco Corp. did not help fund returns.
The significant losses in Tesla could indicate a fragmentation of the Magnificent Seven group of companies that were previously driving U.S. markets.