by Will Ashworth | April 23, 2012 10:58 am
The highlight of last week’s business news — at least for me, anyway, was Google (NASDAQ:GOOG[1]) Chairman Eric Schmidt’s pay package[2]. Feeling sorry for Schmidt’s lack of pay in 2010 ($313,219), Google’s board gave the former CEO $101 million in options and share awards that vest over four years. The poor man will have to live on his 9.1 million shares and the $25 million or so that vests each year.
With money to spend, I thought Mr. Schmidt might like some ETF alternatives for stocks recommended by InvestorPlace contributors last week. He won’t get much richer than he already is, but his money should be a little safer.
On Monday, Richard Band of Profitable Investing was in a generous mood, providing readers with not one, but 10 stock picks[3]. Rather than pick a single company, I think it makes more sense to find an ETF that owns most or all of his stock picks. This won’t be easy, although Richard unknowingly made my task a little easier by choosing 10 stocks, as opposed to nine or 11. With three stocks each, financial and consumer goods represent 60% of the picks, followed by basic materials with two picks and one each for technology and utilities. The quickest solution is to buy the iShares NYSE Composite Fund (NYSE:NYC[4]), which holds all but T. Rowe Price (NASDAQ:TROW[5]), which trades on the Nasdaq. Given financials account for almost 22% of the NYC portfolio, there’s no need to own a second fund.
Susan Aluise made my life considerably easier Tuesday in her article abbout the rebound in offshore drilling[6]. She suggested my best bet is to go with the SPDR OIL & Gas Equipment & Services ETF (NYSE:XES[7]), which is an equal-weighted ETF investing in stocks like Diamond Offshore Drilling (NYSE:DO[8]). It’s tempting because I like Loews Corporation (NYSE:L[9]), Diamond’s majority owner. However, she also suggests National Oilwell Varco (NYSE:NOV[10]), and I like NOV even more. For that, I recommend Market Vectors Oil Services ETF (NYSE:OIH[11]), which has NOV at a 9.8% weighting compared to 2.52% for XES.
Midweek, Louis Navellier was talking up VF Corporation (NYSE:VFC[12]), a great apparel company[13] from North Carolina that bought New Hampshire-based Timberland, another great apparel company, for $2.3 billion in 2011. What stood out for me in Navellier’s article was the fact that while VF is the ninth-largest apparel company by market cap out of 119, it has the fourth-highest dividend yield at 1.9%. This tells me that although it is one of the best-run companies in the apparel industry, its growth still comes at a reasonable price. If you like the company, as I do, but can’t pull the trigger, perhaps a better alternative is to invest in the conveniently named RevenueShares Navellier Overall A-100 Fund (NYSE:RWV[14]), which seeks to replicate Navellier’s A-100 Index, substituting market cap weighting for revenue weighting. Under the RevenueShares method, VF is the sixth-largest holding at 3.44%. One thing to keep in mind — its expense ratio is a hefty 1% annually.
On Thursday, Jeff Reeves was offering up five stock recommendations trading at more than $100[15]. All five aren’t what you’d call “value” stocks, so your best bet is to find a growth-oriented ETF that owns some or all of them. Given they’re all large caps, the most obvious choice is Guggenheim’s S&P 500 Pure Growth ETF (NYSE:RPG[16]), which invests in the growth stocks that make up the S&P 500. Equally weighted to an extent, the biggest weighting of Jeff’s five picks is Apple (NASDAQ:AAPL[17]) at 1.76% while the lowest is W.W. Grainger (NYSE:GWW[18]) at 0.76%. By investing in this fund you’re getting all five picks — plus some additional diversification — for a reasonable 0.35% expense ratio. If you’re a value investor, it’s an inexpensive way to add some growth to your portfolio.
Closing out the week, Jonathan Berr suggests that while Target (NYSE:TGT[19]) has outperformed Wal-Mart (NYSE:WMT[20]) in 2012, there’s no reason why you shouldn’t own both[21]. He’s absolutely right. Target has big expansion plans in the grocery aisle and even bigger plans for Canada in 2013. Wal-Mart continues its global expansion and slowly is turning around its U.S. business. Jonathan believes that as the economy gets stronger, both will benefit, so why not hedge your bet by owning both? My sentiments exactly. Only, instead of buying their stocks, get yourself an ETF with both companies in the top 10 holdings. The best option to make that happen is the Market Vectors Retail ETF (NYSE:RTH[22]), with Wal-Mart weighted at 10.2% and Target at 4.97%. The fund seeks to replicate the performance of the Market Vectors U.S. Listed Retail 25 Index, which is the top 25 free-float market cap stocks in the retail sector. At 0.35%, I think it’s an excellent alternative.
As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.
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