ETF Alternatives for the Week of April 2-6

by Will Ashworth | April 9, 2012 10:29 am

The S&P 500 and the Dow Jones Industrial Average fell 0.74% and 1.2% respectively for the week of April 2-6, shortened a day due to Good Friday. While the markets took a holiday, did not. I’ll look at some of our contributors’ stock picks from last week, providing readers with ETF alternatives.

On Monday, Ivan Martchev was in a financial frame of mind. But his thoughts weren’t of banks or even the Financial Select Sector SPDR (NYSE:XLF[1]). Instead, Martchev believes safer bets exist[2] in Visa (NYSE:V[3]) and MasterCard (NYSE:MA[4]), two businesses with good margins, no debt and zero exposure to credit risk.

Since those picks were made to avoid banks and other financial institutions, for an ETF you’ll want to go with PowerShares Dynamic Market Portfolio (NYSE:PWC[5]), which has both Visa and MasterCard as top 10 holdings, yet limits its financial-services exposure to 13% of the fund. It does have an expense ratio of 0.59%, so those concerned with fees might also consider Vanguard Information Technology ETF (NYSE:VGT[6]), which charges 0.19% annually. But neither Visa nor MasterCard is in its top 10 holdings — both have weightings of less than 2%.

Sam Collins went north of the border Tuesday for one of his five stock picks for the month of April[7], recommending TransCanada Corporation (NYSE:TRP[8]), the folks behind the Keystone Pipeline. Being Canadian, I always notice when someone’s recommending a homegrown business.

I, too, was in a Canadian frame of mind this past week, recommending three companies[9] operating in my own backyard. But I digress. TransCanada is an infrastructure play, and as such I’d suggest you go with the iShares S&P Global Infrastructure Index Fund (NYSE:IGF[10]), which has 76 holdings, including TransCanada at 4.08%.

Midweek, James Brumley had a hankering for silver, suggesting that its industrial applications make demand for it far more consistent than demand for gold. Deutsche Bank believes silver will outperform gold in 2012[11].

The obvious choice here is the iShares Silver Trust (NYSE:SLV[12]), which Brumley mentions. With almost $10 billion in assets, the fund dwarfs any other silver-related ETF.

A less obvious idea would be to buy a fund that combines silver and gold, thereby hedging your bet. ETFS Physical Precious Metals Basket Shares (NYSE:GLTR[13]) gives you a 50.4% interest in gold bullion, a 38.9% interest in silver bullion, with the remaining 10.7% invested in platinum and palladium bullion. At 0.60%, its annual expense ratio seems reasonable.

Lawrence Meyers spent Thursday discussing the relationship between Liberty Media (NASDAQ:LMCA[14]) and Sirius XM (NASDAQ:SIRI[15]). Three years ago, Liberty lent the satellite radio network $500 million[16] so it could continue operating. In exchange, Liberty acquired 40% of the company and is  now seeking control.

Sirius XM CEO Mel Karmazin is intent on blocking any takeover move without some sort of premium paid by Liberty for this control. Meyers suggests you buy both stocks. I would be interested only in Liberty, but for those who agree with Meyers, your best bet is to buy PowerShares DWA Technical Leaders Portfolio (NYSE:PDP[17]), which invests in 100 U.S.-listed companies that demonstrate powerful relative strength characteristics. With a net expense ratio of 0.70%, you get Liberty Media at a weighting of 2.57% and Sirius XM at 0.58%. Not surprisingly, the fund’s top holding is Apple (NASDAQ:AAPL[18]).

Ending the week on Good Friday, Jim Woods discussed a total of eight companies increasing their dividends[19]. The healthiest hike came from teen retailer Hot Topic (NASDAQ:HOTT[20]), which upped its quarterly dividend by 14.3%, to $0.08 a share, providing investors with a yield of 3.18% as of April 5.

Hot Topic is expected to turn a profit in fiscal 2013 of $0.36 a share, providing further upside to its 54% gain year-to-date as of April 5.

A safer bet would be WisdomTree SmallCap Dividend Fund (NYSE:DES[21]), which isn’t weighted by market cap but instead by the dollar amount of dividends paid annually. Under these guidelines, Hot Topic represents just 0.13% of the portfolio. Most important, the fund’s distribution yield is 3.4%, with an annual expense ratio of 0.38%.

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

  1. XLF:
  2. Martchev believes safer bets exist:
  3. V:
  4. MA:
  5. PWC:
  6. VGT:
  7. five stock picks for the month of April:
  8. TRP:
  9. recommending three companies:
  10. IGF:
  11. silver will outperform gold in 2012:
  12. SLV:
  13. GLTR:
  14. LMCA:
  15. SIRI:
  16. Liberty lent the satellite radio network $500 million:
  17. PDP:
  18. AAPL:
  19. eight companies increasing their dividends:
  20. HOTT:
  21. DES:

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