Gary Gordon, author of the ETF Expert blog, highlights an eclectic mix of exchange-traded funds that have posted gains so far this year despite the down market:
1. iShares Biotechnology Fund (symbol IBB). With resurging market interest in biotechnology firms including Amgen, Teva Pharmaceutical Industries, and Gilead Sciences, Gordon says, this ETF is up 8 percent so far in 2008.
2. Merrill Lynch Broadband HOLDRs (BDH). This ETF is up 1 percent so far this year, thanks in part to its top holding Qualcomm, which recently hit a 52-week high.
3. iShares Dow Jones Transportation Fund (IYT). Railroad companies like Burlington Northern Santa Fe and American Railcar Industries are profiting from U.S. infrastructure needs, Gordon says, because they deliver coal, metals, and agricultural products. Although United Parcel Service and FedEx may be hurt by high oil prices, they're also expanding abroad, he says. The fund is up 9 percent so far this year.
4. Market Vectors Environmental Services (EVX). This ETF, which tracks about two dozen companies that manage, remove, and store consumer waste or industrial byproducts, is up 1 percent so far in 2008. Gordon points out that the fund charges a lofty 1.4 percent. In this niche, an ETF he likes even more is PowerShares Cleantech (PZD).
5. HealthShares Cardio Devices (HHE). "Indeed, it seems the more narrow the focus, the more chance for victory in the bear," says Gordon. This fund, which holds 22 medical equipment companies, is up 6 percent so far this year.
Healthcare seems to be getting a lot of attention these days from both professional and average-Joe investors. Investors recently surveyed by TradeKing named healthcare/biotech as one of the sectors holding the most potential for the third quarter.
As for the mix of ETFs posting gains this year, Gordon says: "Biotech, broadband, transports, cardio devices, and environmental services? None of these areas are traditional recession-free zones, let alone inflation fighters. And yet, each has produced 2008 gains in a year when most economic sectors...as well as the broader market...have returned a deplorable—[negative] 15 percent!" (Update: As of yesterday's market close, the S&P 500 was down 14 percent year-to-date.)