In this article, we discuss 5 worst performing industries in 2023. If you want to read our detailed discussion on the performance of the stock market in 2023, head over to 15 Worst Performing Industries In 2023.
5. Electric Vehicles
Industry ETF: Invesco Electric Vehicle Metals Commodity Strategy No K-1 ETF (NASDAQ:EVMT)
YTD Performance of Industry ETF as of October 31: -25.52%
According to J.P. Morgan, the cost of cars has been rising, much like other consumer products. When coupled with the surging gas prices and interest rates, this is increasing the burden of owning a car and slowing down car sales, making the vehicle industry one of the worst performing industries. In the third quarter of 2023, PwC reported that battery electric vehicle (BEV) sales increased by 26% across twenty analyzed markets compared to the same period last year. However, this growth would have been even more substantial if not for a slowdown in the Chinese BEV market, which heavily influences global BEV sales. In fact, Chinese BEV sales made up two-thirds of all BEV sales in the analyzed markets during this period. The decline in BEV sales in China is attributed to a weakening economic outlook, resulting in considerably lower growth compared to two years ago.
The Invesco Electric Vehicle Metals Commodity Strategy No K-1 ETF (NASDAQ:EVMT) is one of the electric vehicle ETFs in the red this year. It is an actively managed ETF with the goal of investing in futures and financial instruments linked to metals essential for manufacturing electric vehicles. It aims to achieve long-term capital growth by outperforming the S&P GSCI Electric Vehicle Metals Index. The ETF was launched on April 27, 2022, and, as of October 30, 2023, it has a total expense ratio of 0.73% and holds a portfolio of 13 stocks. The ETF’s performance was down by 25.52% year-to-date.
4. Agriculture
Industry ETF: Teucrium Wheat Fund (NYSE:WEAT)
YTD Performance of Industry ETF as of October 31: -28.12%
Ranked among the worst performing industries, the agriculture sector is facing challenges towards its growth. These include a trade war, increasingly extreme weather due to climate change, plummeting commodity prices as a result of globalization, heightened political division, and a shift in corporate farming towards technology and economies of scale rather than traditional structures like silos and red barns. This represents the most severe crisis the agriculture industry has experienced in decades.
An agriculture ETF that is in the red this year is Teucrium Wheat Fund (NYSE:WEAT), which offers investors a convenient way to participate in the wheat futures market through their brokerage accounts. The ETF was launched on September 19, 2011. As of October 31, 2023, the fund’s net assets amount to $200.5 million. It offers an expense ratio of 0.28%.
3. Biotechnology
Industry ETF: Global X Genomics And Biotechnology ETF (NASDAQ:GNOM)
YTD Performance of Industry ETF as of October 31: -29.20%
EY reported that in 2023, there will be five biologic products with substantial revenue, collectively valued in the billions, that will see their patents expire. Furthermore, by 2030, more than 20 products, accounting for nearly $200 billion in annual sales, are anticipated to have their patent protection expire. This makes the biotechnology sector one of the worst performing industries in 2023.
A biotechnology fund in the red this year is the Global X Genomics & Biotechnology ETF (NASDAQ:GNOM), which aims to track the performance of the Solactive Genomics Index. It invests in companies that could benefit from advancements in genomic science, including those involved in gene editing, genomic sequencing, genetic medicine/therapy, computational genomics, and biotechnology. The ETF launched on April 5, 2019. It features an expense ratio of 0.50%, with a portfolio of 41 stocks. The ETF experienced a drop of 29.20% in stock price year-to-date.
Sarepta Therapeutics, Inc. (NASDAQ:SRPT) is one of the biggest holdings of the Global X Genomics & Biotechnology ETF (NASDAQ:GNOM). Sarepta Therapeutics, Inc. (NASDAQ:SRPT) is a biopharmaceutical company that is actively engaged in discovering and developing treatments for rare diseases. They specialize in RNA-targeted therapeutics, gene therapies, and other genetic-based therapeutic approaches. According to Insider Monkey’s second quarter database, 53 hedge funds were bullish on Sarepta Therapeutics, Inc. (NASDAQ:SRPT), down from 57 funds in the prior quarter. Kurt Von Emster’s VenBio Select Advisor is the top shareholder of the company, with a position comprising 4.63 million shares worth approximately $530 million.
Here is what Artisan Mid Cap Fund has to say about Sarepta Therapeutics, Inc. in its Q1 2021 investor letter:
“We ended our campaign in Sarepta Therapeutics. Sarepta Therapeutics is a leader in Duchenne muscular dystrophy (DMD) drug development. Shares were pressured during the quarter amid a disappointing clinical trial outcome for its DMD gene therapy. We believe the odds of FDA approval for this therapy are lower and the timeline longer. Fortunately, we controlled for this risk by keeping this holding in the GardenSM. While Sarepta’s pipeline of gene therapies for neuromuscular disorders remains attractive, we exited our position given this setback. We believe CropSM holding Catalent is a better risk-adjusted way to participate in these opportunities. Catalent is a leader in gene therapy manufacturing and one of Sarepta’s key partners.”
2. Banking
Industry ETF: SPDR S&P Regional Banking ETF (NYSE:KRE)
YTD Performance of Industry ETF as of October 31: -32.09%
The banking industry has taken a significant hit in 2023, especially after three primary US banks collapsed. The Silicon Valley Bank crisis has been compared to the Washington Mutual in 2008, classifying it as the largest banking collapse since then. SPDR S&P Regional Banking ETF (NYSE:KRE), which represents the broader banking sector in the United States, was down nearly 32% year-to-date as of October 31, making it one of the worst performing industries this year.
SPDR S&P Regional Banking ETF (NYSE:KRE)’s top holding is Zions Bancorporation, National Association (NASDAQ:ZION). The bank provides corporate banking services, commercial banking, commercial real estate banking services, municipal and public finance services, retail banking, wealth management and private client banking services, and capital markets products and services. According to Insider Monkey’s second quarter database, 21 hedge funds were bullish on Zions Bancorporation, National Association (NASDAQ:ZION), down from 33 funds in the prior quarter. John Overdeck and David Siegel’s Two Sigma Advisors is the leading position holder in the company.
FMI made the following comment about Zions Bancorporation, National Association (NASDAQ:ZION) in its Q1 2023 investor letter:
“Our two most impacted holdings during this recent crisis were Zions Bancorporation, National Association (NASDAQ:ZION) and discount broker Charles Schwab. We believe both have sticky deposit bases, best-in-class management teams, conservative balance sheets, and attractive valuations. In both cases, outside of absolute contagion/panic resulting in a run on their deposits (a very low probability tail risk), we view the impact on the businesses as more of an “earnings” event, not a “balance sheet” event. Zions and Schwab got caught up in the contagious fear around SVB’s collapse due to some optical similarities between their balance sheets (namely bonds carried at mark-to-market losses), and Zions being a West Coast regional bank. We believe the similarities largely end there. Zions has a much more diverse deposit base than SVB. We estimate that half of Zions’ deposit base are small and medium-sized business operating deposits, which have historically been quite stable and a competitive advantage. Nearly half of Zions’ deposits are FDIC-insured, and the bank has ample liquidity to meet outflows without selling its securities portfolio. Similarly, Schwab’s retail deposit base is very sticky. Over 80% of their customers’ cash is FDIC-insured, and the cash is spread across approximately 34 million brokerage accounts (average ~$10,000 in bank cash per account). Schwab has more balance sheet liquidity than deposits. In both cases, there appears to be a low risk of correlation among their respective client bases. Although there will likely be some profit headwinds that stem from this crisis, we viewed the large declines in these shares as overly punitive, and thus believe the risk/reward for each is increasingly attractive. We have added to both positions.”
1. Solar
Industry ETF: Global X Solar ETF (NASDAQ:RAYS)
YTD Performance of Industry ETF as of October 31: -44.40%
The solar industry is currently experiencing a significant downturn. Persistent inflation and increasing interest rates have resulted in declining demand for solar power systems. Consequently, installation companies are forced to negotiate lower prices for components, resulting in reduced profit margins for companies in the solar sector. Enphase Energy, Inc. (NASDAQ:ENPH), a market leader in the solar space, presented a negative outlook for the remainder of the year. Badrinarayanan Kothandaraman, the CEO of Enphase, said during the latest earnings call on October 27:
“We have seen a substantial demand reduction in Europe. We have also seen the U.S. market continue to fall, driven by California.”
One of the solar ETFs significantly down in 2023 is Global X Solar ETF (NASDAQ:RAYS), making it one of the worst performing industries this year. Global X Solar ETF (NASDAQ:RAYS) was established on September 8, 2021. The Global X Solar ETF (NASDAQ:RAYS) aims to track the Solactive Solar Index’s performance. It invests in companies connected to the solar technology industry, including those in solar power production, energy system integration, and the development of solar-related technologies. As of October 30, 2023, the ETF’s net assets amount to $5.88 million and it features an expense ratio of 0.51%.
First Solar, Inc. (NASDAQ:FSLR) is one of the largest holdings of Global X Solar ETF (NASDAQ:RAYS). First Solar, Inc. (NASDAQ:FSLR) offers PV solar energy solutions worldwide, designing and selling cadmium telluride solar modules that convert sunlight into electricity. According to Insider Monkey’s second quarter database, 51 hedge funds were long First Solar, Inc. (NASDAQ:FSLR), up from 39 funds in the last quarter.
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