by Will Ashworth | April 2, 2012 2:28 pm
It’s that time of the week again where I take off my stock-picking hat and replace it with my ETF chapeau.
Helping with this task, as always, are my colleagues at InvestorPlace.com. Taking five articles published from March 26-30, I provide readers with ETF alternatives to the stocks mentioned in those articles.
Starting out the week, Nancy Zambell had two small-cap stock picks for readers: Spectrum Pharmaceuticals (NASDAQ:SPPI) and FSI International (NASDAQ:FSII).
The simplest thing to do here would be to buy a small-cap ETF. But which one? A quick screen shows as many as 107 to choose from. Narrowing the focus to the U.S. only, that number is reduced to 58. There’s one fund that holds both stocks and that’s the Russell Microcap Index Fund (NYSE:IWC); unfortunately, with 1,374 holdings, you’re only getting a tiny sliver of each.
A better solution would be to buy the Russell 2000 High Momentum ETF (NYSE:SHMO), which has Spectrum Pharmaceuticals as a top 10 holding at 1.13% of the portfolio. Best of all, its net expense ratio is about half that of the iShares fund.
On Tuesday, March 27, we headed to South America, where Aaron Levitt was talking up Apache‘s (NYSE:APA) participation in the Argentinian natural gas boom in the Neuquén Basin. It’s now the fifth-largest gas producer in Argentina.
The straight way to play this is to invest in the iShares Dow Jones US OIl & Gas Exploration & Production Index Fund (NYSE:IEO). Apache is the third-largest holding at 8.26%, giving you good participation in its Argentinian successes.
A second option would be to buy the iShares NYSE Composite Index Fund (NYSE:NYC), which owns both Apache and YPF (NYSE:YPF), Argentina’s largest oil-and-gas company. You don’t get the same focus on energy, but you do get a much more diversified investment.
Midweek, InvestorPlace writers were thinking about TV, specifically Apple‘s (NASDAQ:AAPL) rumored HDTV. Foxconn (PINK:FXCNY), the company that manufactures both the iPad and iPhone, is investing $1.6 billion in both Sharp (PINK:SHCAY) and Sony (NYSE:SNE) in an effort to solidify its supply chain of LCD panels.
There are many ways to play this from an ETF perspective, but since Apple’s been covered ad nauseam, I’ll focus on Foxconn instead.
The first choice is to invest in the Global X NASDAQ China Technology ETF (NASDAQ:QQQC), where Foxconn represents 4.02% of the portfolio. A broader option, albeit with a smaller weighting of 3.21%, is to buy the iShares S&P Asia 50 Index Fund (NYSE:AIA). Rather than owning Foxconn directly, it owns shares in Foxconn’s parent company, Hon Hai Precision Industry. In my opinion, the second option is the better play.
On Thursday, just two days away from the Final Four weekend, March Madness was the topic of the day for Jim Woods. Specifically, Jim was interested in who was benefiting from this annual rite of passage.
His Fab Five were CBS (NYSE:CBS), Coca-Cola (NYSE:KO), Nike (NYSE:NKE), Foot Locker (NYSE:FL) and Dick’s Sporting Goods (NYSE:DKS). Finding an ETF holding all five of these stocks is impossible unless you choose the iShares NYSE Composite Index Fund mentioned above. Still, the five companies we’re looking for combined represent just 1.36% of the fund’s holdings. Why someone doesn’t create a global sports index is beyond me.
Jeff Reeves finished the week talking about seven Dow Jones stocks paying measly dividends. That list included Bank of America (NYSE:BAC), Alcoa (NYSE:AA) and American Express (NYSE:AXP).
As far as I know, there isn’t a fund that shorts dividend stocks, so I suppose one could do that with a dividend ETF. However, you’d have to cover the distributions paid out while borrowing the shares. More importantly, what would you accomplish?
I think the smart thing here is to avoid some of these companies by investing in the Guggenheim S&P Global Dividend Opportunities Index ETF (NYSE:LVL), which has a 12-month yield of 5.08%. You get good global dividend exposure with U.S. companies still representing the largest geographic weighting, at 25.2%.
As of this writing, Will Ashworth did not own a position in any of the stocks named here.
Source URL: http://investorplace.com/2012/04/etf-alternatives-for-last-weeks-hot-stocks-6/
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