ETF Alternatives for Last Week’s Hot Stocks

by Will Ashworth | April 16, 2012 10:00 am

ETF Alternatives for Last Week’s Hot Stocks

We finished the week of April 9-13 on a downer, with the S&P losing 1.25% Friday[1]. In the past two weeks, the index has lost 2.7%, its biggest two-week drop in 2012 — even though 75% of the companies that have so far reported earnings have beaten expectations. Although it was another tough week, InvestorPlace contributors were able to find some interesting stocks to buy. As always, I’ll provide you with ETF alternatives for those stocks.

Nancy Zambell[2] got last week rolling with a couple of picks[3]: a micro-cap and a mid-cap. I’m going with Leggett & Platt (NYSE:LEG[4]), best known for its residential furnishings, which represent slightly less than half its 2011 revenue of $3.9 billion. The standout is its Specialized Products segment, which saw revenues and EBIT earnings increase by 17% year-over-year. Although the division represents less than 18% of revenues, it delivered 32% of Leggett & Platt’s EBIT profit in 2011. With car sales continuing to improve, look for this division to lead the way.

ETF Alternative: SPDR S&P Dividend ETF (NYSE:SDY[5])

Three reasons I like this ETF:

1) Leggett & Platt is a top-five holding at 2.83%.

2) It seeks to match the returns of the S&P High Yield Dividend Aristocrats Index, which has done nicely in the long term.

3) 43% of its portfolio is invested in small- and mid-cap stocks.

After last week’s win by Bubba Watson at the Masters, Traders Reserve[6] was in the mood Tuesday for a little golf talk. Providing readers with four golf-related options[7], the easy choice is to go with Nike (NYSE:NKE[8]), whose most important athlete endorser — Tiger Woods — failed miserably at Augusta, finishing tied for 40th. Nike, on the other hand, continues to dominate the world of athletic apparel and footwear, increasing third-quarter revenue by 15% to $5.8 billion, and earnings per share by 7% to $1.21. Look for it to continue its impressive growth in emerging markets.

ETF Alternative: PowerShares Dynamic Large Cap Growth Portfolio (NYSE:PWB[9])

Three reasons I like this ETF:

1) Nike’s a top-10 holding at 3.24%.

2) Consumer discretionary stocks represent the biggest piece of the portfolio at 35.5%.

3) Apple (NASDAQ:AAPL[10]) is the biggest of its 50 holdings at 3.78%.

By the middle of the week, Charles Sizemore[11] was already thinking about the weekend and quaffing a few Shiner Bocks, Texas’ finest. Separating growth companies like Boston Beer (NYSE:SAM[12]) from the more stable, consistent returns of the mass producers like Anheuser-Busch InBev (NYSE:BUD[13]) and Molson Coors (NYSE:TAP[14]), Sizemore provides readers with a handful of opportunities[15]. Last November, I explained to InvestorPlace readers why Boston Beer is a much better stock to own[16] than Molson Coors. Up only a couple of dollars since then, it’s still the better buy.

ETF Alternative: PowerShares S&P SmallCap Consumer Staples Portfolio (NASDAQ:PSCC[17])

Three reasons I like this ETF:

1) Boston Beer’s the ninth-largest holding at 4.24%.

2) All 23 of its holdings are consumer staples’ stocks, providing investors with a good defensive position.

3) Its annual expense ratio of 0.29% is reasonably cheap.

Two days after Alcoa (NYSE:AA[18]) announced its first-quarter earnings, Jeff Reeves[19] was trumpeting the five reasons the maker of aluminum foil was a top stock to buy[20]. At the top of Jeff’s list is improved earnings and a stock that’s exceptionally cheap. I happen to like all five of his arguments, and the fact he bought the shares in mid-December is evidence of his conviction in the future direction of its stock.

ETF Alternative: Global X Aluminum ETF (NYSE:ALUM[21])

Three reasons I like this ETF:

1) Global X provides some really esoteric and interesting ETFs, including this one, which I believe will do well as aluminum prices rebound from their lows.

2) Alcoa represents almost 10% of the 22-stock portfolio.

3) It’s global in nature, providing excellent geographic diversification to counter the lack of sector breadth.

Finishing off the week, Susan Aluise[22] was marveling at the long and storied career of Paul Otellini, Intel‘s (NASDAQ:INTC[23]) current CEO. Like anyone who stays with an organization for 38 years, there’s going to be a lot of ups and downs along the way. Otellini’s history is no different. Citing four reasons Intel will continue to deliver better results than its peers, Aluise finished by suggesting Intel’s stock is a bargain[24].

ETF Alternative: Vanguard Mega Cap 300 Value ETF (NYSE:MGV[25])

Three reasons I like this ETF:

1) Its annual expense ratio is dirt cheap at 0.12%.

2) It invests in 155 of the biggest stocks by market cap in the U.S.

3) Investors get a value orientation rather than growth.

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

Endnotes:
  1. S&P losing 1.25% Friday: http://investorplace.com/2012/04/ending-with-a-thud-friday-ip-market-recap/
  2. Nancy Zambell: http://investorplace.com/author/nancy-zambell/
  3. couple of picks: http://investorplace.com/2012/04/my-2-favorite-stocks-for-this-week-3/
  4. LEG: http://studio-5.financialcontent.com/investplace/quote?Symbol=LEG
  5. SDY: http://studio-5.financialcontent.com/investplace/quote?Symbol=SDY
  6. Traders Reserve: http://tradersreserve.com/
  7. four golf-related options: http://investorplace.com/2012/04/tee-up-your-portfolio-with-these-fore-golf-stocks-ely-nke-dks-ibm/
  8. NKE: http://studio-5.financialcontent.com/investplace/quote?Symbol=NKE
  9. PWB: http://studio-5.financialcontent.com/investplace/quote?Symbol=PWB
  10. AAPL: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAPL
  11. Charles Sizemore: http://investorplace.com/author/charles-sizemore/
  12. SAM: http://studio-5.financialcontent.com/investplace/quote?Symbol=SAM
  13. BUD: http://studio-5.financialcontent.com/investplace/quote?Symbol=BUD
  14. TAP: http://studio-5.financialcontent.com/investplace/quote?Symbol=TAP
  15. handful of opportunities: http://investorplace.com/2012/04/beer-stocks-should-you-slum-it/
  16. Boston Beer is a much better stock to own: http://investorplace.com/2011/11/molson-coors-tap-sam-adams-stocks-to-sell/
  17. PSCC: http://studio-5.financialcontent.com/investplace/quote?Symbol=PSCC
  18. AA: http://studio-5.financialcontent.com/investplace/quote?Symbol=AA
  19. Jeff Reeves: http://investorplace.com/author/jeff-reeves/
  20. top stock to buy: http://investorplace.com/2012/04/5-reasons-alcoa-is-a-top-stock-to-buy/
  21. ALUM: http://studio-5.financialcontent.com/investplace/quote?Symbol=ALUM
  22. Susan Aluise: http://investorplace.com/author/susan-j-aluise/
  23. INTC: http://studio-5.financialcontent.com/investplace/quote?Symbol=INTC
  24. Intel’s stock is a bargain: http://investorplace.com/2012/04/otellinis-4-smart-moves-for-intel/
  25. MGV: http://studio-5.financialcontent.com/investplace/quote?Symbol=MGV

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