ETF's Top and Bottom Performers

The TSX index was up some 3.3 % in December recovering from the onset of the Omicron virus due to strength in the Financials, Materials and Real Estate Sectors. Strong employment numbers and high commodity prices contributed to this result. Below we discuss the top and bottom-performing ETFs in Canada for the month of December. The table of the top and bottom three performing ETFs can be seen below:

The top performer for the month was Hamilton Enhanced Canadian Bank ETF (HCAL) which was up 18.26% on the month and 64.95% for the year. Canadian banks have been good investments. This ETF invests entirely in the Hamilton Canadian Bank Mean Reversion ETF (HCAL), levered by cash borrowing of 25%. HCAL invests in the big 6 Canadian banks using a mean reversion strategy such that it rebalances each quarter to put 80 % in the three recent underperformers and 20% into the recent three top performers. At December 31, 2021 the underperformers were BNS, TD, RY at about 27% each and the remaining three outperformers, BMO, CIBC and NA, were at about 6.5% each. The return from the HCAL investment is enhanced by 25% leverage providing a current yield of 5.34%. The outlook remains favourable.

The second top performer of the month was Dynamic Active Global Financial Services ETF (DXF) which was up 16.37% and 40.11% on the year. The objective of this ETF is to actively manage a portfolio of global financial services and financial technology beyond Canada’s borders. At November 30, 2021, 69.2% was invested in financial sector and 30.8% in technology sector. 74.2% was invested in the USA; 9.1% in the UK; 5.0% in the Netherlands and 4.1% in Canada. The top holding was Petershill Partners PLC at 5% followed by KKR&Co Inc at 4.8%.

In third place was NBI Canadian Family Business ETF (NFAM) which returned 16.02% on the month and 48.40% for the year 2021. This ETF attempts to match the return of an index of Canadian-owned family companies that are publicly listed. At November 30, 2021, 21.85% of the portfolio was invested in the Consumer Services sector; 14.29% in the Financial Services sector and 14.06% in the Consumer Goods sector. The top three holdings were Paramount Resources Ltd at 3.34%; Aritzia Inc at 2.84% and Galaxy Digital Holdings Ltd at 2.79%. The outlook remains favourable for Canadian companies.

The third worst performing ETF was Black Diamond Global Equity ETF (BDEQ) at  –16.83% on the month. This is a new fund (March 25,2021) which aims to generate long-term capital growth and current income. At November 30, 2021 the NAV was $13.60 and return since inception was 1.61%. The best month result was +3.85 % and the worst was -4.19%

 The second worst-performing ETF was CIBC Clean Energy Index ETF (CCLN) which was - 17.27% on the month. This too is a brand-new ETF (November 16, 2021) which aims to track the CIBC Atlas Clean Energy Select Index. It is billed as an energy transformation opportunity.

The worst performer was Horizons Psychedelic Stock ETF (PSYK) which was –20.07% on the month.  This is a new ETF (January 26, 2021) which aims to replicate the performance of a basket of North American publicly listed life sciences companies having significant exposure to the psychedelics industry. It aims to capitalize on the growing interest in psychedelics for the treatment of mental health issues. Its performance since inception has been poor: starting with a NAV at more than $10 to less than $5 at year-end. Its current top three investments include: Cybin Inc at 9.64%; GH Research PLC at 9.48% and Compass Pathways PLC ADR at 7.9%.

Ron Riley

Disclosure: Analysts of 5i Research and authors responsible for this report have do not have a financial or other interest in any of the securities mentioned.