ETF Alternatives for Last Week’s Hot Stocks

Basketball, banks, digital media and coffee are among this week's ETF options

   

Last week was noteworthy because it included a leap day — something that happens only once every four years. In addition, we said goodbye to February and hello to March. With the markets continuing to show promise, our crack team of writers made arguments for and against some of the most popular stocks in America. As part of my weekly Monday roundup, I’ll provide readers with some ETF alternatives to those stocks.

Kyle Woodley and the rest of the InvestorPlace staff were in a basketball frame of mind Feb. 27, talking up a version of New York Knick Jeremy Lin’s Zoom Hyperfuse Low shoes made by Nike (NYSE:NKE). Another company apparently benefiting from Lin’s rise is his employer, Madison Square Garden (NASDAQ:MSG).

Since Lin’s sudden fame, MSG has been testing all-time highs on the expectation of higher revenues from a possible post-season playoff berth. Since sports fans are very fickle, this bubble could burst at any moment. Therefore, in order to protect yourself from the inevitable, it might make more sense to pick up the iShares Morningstar Small Growth Index Fund (NYSE:JKK), which replicates the Morningstar Small Growth Index and has 242 holdings, including MSG at 0.65%. With a 0.30% expense ratio, JKK is a reasonably inexpensive way to own some of America’s best small companies, with Madison Square Garden chief among them.

On Feb. 28, InvestorPlace Chief Technical Analyst Sam Collins had six buy recommendations for the month of March, including JPMorgan Chase & Co. (NYSE:JPM), considered the safest bet among the major banks. On a technical basis, Collins sees JPM heading higher.

Unfortunately for investors, CEO Jamie Dimon is an egomaniacal jerk who will eventually get his comeuppance. Sandy Weill did the right thing in forcing him out of Citigroup back in 1999.

Anyway, if you must own this bank stock, a good alternative would be to buy the Financial Select Sector SPDR Fund (NYSE:XLF), which has a low 0.18% expense ratio. JPMorgan is the second-largest holding, at 8.58%, with only Wells Fargo (NYSE:WFC) having a bigger weighting.

Among the fund’s top 10 holdings are two very interesting companies: Berkshire Hathaway (NYSE:BRK.B) and Simon Property Group (NYSE:SPG). Both are big bets on the future of America. I especially like the stability and diversification that Berkshire Hathaway brings to the mix.

Contrarian investors who believe print media businesses like Gannett (NYSE:GCI) and  New York Times Co. (NYSE:NYT) are going to come roaring back thanks to digital revenues might want to read the Jonathan Berr article that closed out February. Business is still pretty bleak at the large print-dominated media, and no type of paywall is going to change that.

A high-risk option would be to short the PowerShares Dynamic Media Portfolio (NYSE:PBS), which has 30 stocks, including Gannett at 2.61%. I say high risk because Walt Disney (NYSE:DIS), Viacom (NYYSE:VIAB) and Google (NASDAQ:GOOG) are its three largest holdings. A safer bet in this instance would be to short Gannett’s stock exclusively. The payoff would be bigger, and it’s more to the point.

Opening the month of March, James Brumley was optimistic about large caps operating in Europe. At the top of his list is Starbucks (NASDAQ:SBUX), one of my favorites as well. Starbucks is looking to add 700 to 1,000 stores in Europe over the next five years.

Once Howard Schultz stepped back into the CEO spot in January 2008, it was almost preordained that Seattle’s own would regain its rightful place in the coffee world. For those of you that aren’t so sure and want to hedge your bet, consider the PowerShares Dynamic Leisure and Entertainment Portfolio (NYSE:PEJ). In existence since June 2005,  its annualized total return for the past five years through March 2 is 4.3% — 240 basis points higher than the S&P 500. While its expense ratio is high at 0.63% annually, you get Starbucks at 5.04% of the portfolio, plus many other great brands. While consumer discretionary funds can experience extreme volatility, long term they’ll normally outdo the index.

Closing out the week on March 2,  Jim Woods discussed 14 companies announcing dividend increases. The combination of Sempra Energy‘s (NYSE:SRE) 25% quarterly increase, to $0.60 a share, and a current yield of 4.1% makes the Southern California gas utility easily the most attractive dividend play in my opinion.

There are two ways to play this from an ETF perspective. You can buy the Utilities Select Sector SPDR ETF (NYSE:XLU), which has a yield of 3.91%, not too far from Sempra’s, or you can buy the iShares Dow Jones Select Dividend Index Fund (NYSE:DVY), which pays a lower dividend, at 3.44%, but is far more diversified. If it were up to me, I’d go with the dividend fund.

As of this writing, Will Ashworth did not own a position in any of the stocks named here.


Article printed from InvestorPlace Media, http://investorplace.com/2012/03/etf-alternatives-for-last-weeks-hot-stocks-3/.

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