Silver and Energy the New ETF Stars

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"While often overlooked, shares of midsize companies were big winners, and the trend is likely to continue."

There's no question what's driving the stellar run-ups of the best ETFs: silver and energy.

A vast majority of the top-performing exchange traded funds in the first quarter, 15 of the top 20, are all linked to silver, oil, gas or alternative energy such as solar. Such a concentration of winners is even more noteworthy as it came despite the best first quarter for the broad Standard & Poor's 500 since 1998.

"The first quarter was very lopsided with sector leadership," says Oliver Pursche, portfolio manager of the GMG Defensive Beta fund.

Dramatic global events, including the conflict in the Middle East with NATO airstrikes against Libya and the environmental and natural disasters in Japan, put silver and energy back on top of many investors' lists, he says. "Two events in March were where much of the rally came from," Pursche says. Investors' appetite got an added kicker from expectations of stronger global demand for commodities as well as the fear of higher inflation.

Midcaps Were Standouts.

While often overlooked, shares of midsize companies were big winners. The ProShares UltraPro MidCap 400 ETF, which moves triple the daily moves of the S&P Midcap 400, rose 27.9%. Many midsize companies, such as Salesforce.com, Netflix and Chipotle, may have pricey stocks but their businesses are in excellent positions and have rapid growth prospects, Dailey says.

Given the amount of stimulus governments have poured into their economies, the trend for precious metals and commodities could continue, says Robert Cohen of the Dynamic Gold and Precious Metals fund. But he's not quite as confident the big run in silver ETFs can last because the price of silver is pulling further ahead of gold than it historically can support.

Silver ETFs are being pushed up by "insane retail investors," Cohen says. "There's an extra bit of mania on silver."

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