ETF Alternatives for Last Week’s Hot Stocks

by Will Ashworth | June 11, 2012 1:40 pm

Just as 2012 was turning into a bloodbath on Wall Street, the indexes bounced back with the best week of the year.

The S&P 500 Index and Dow Jones Industrial Average were up 3.7% and 3.6%, respectively, during the week of June 4-8. The renewed enthusiasm for equities had InvestorPlace contributors bursting with stock recommendations. Here are my ETF alternatives for some of those picks:

On Monday, editor Jeff Reeves highlighted five dividend stocks[1] that were up 20% year-to-date. Of his five picks, I particularly like two of them — Whirlpool Corporation (NYSE:WHR[2]) and Copa Holdings (NYSE:CPA[3]).

Whirlpool is an iconic brand whose stock has been volatile in recent years. However, with a 3.4% dividend yield and a stock that has traded below $30 just twice in the past 22 years, its downside is manageable. Copa is a Panamanian-based airline that serves the Latin America market. With some of the best margins in the business, it has an excellent future.

Both are attractive long-term holds providing reasonable income. Your best bet for Whirlpool is the Guggenheim S&P 500 Pure Value ETF (NYSE:RPV[4]), where Whirlpool is the third-largest holding at a 2.28% weighting. The Guggenheim fund’s dividend yield is less than half of Whirlpool’s, but it gives you a broad array of value stocks at the same time.

To own Copa, you’d go with the Guggenheim Airline ETF (NYSE:FAA[5]), which, as its name suggests, invests in airlines from around the world. A total of 26 airlines are held in the fund, with Copa at 1.4%.

On Tuesday, Dan Burrows was discussing the pros and cons[6] of owning Dollar General (NYSE:DG[7]), the highly successful discount retailer. Dan believes Dollar General is cheaper now than it was three months ago. To act on this recommendation while hedging your bets, I’d go with the First Trust US IPO Index Fund (NYSE:FPX[8]). Dollar General’s a top 10 holding at 3.29%, and the fund has a very good performance record since its inception in April 2006.

By the way, the fund’s most recent addition to its top 10 is Phillips 66 (NYSE:PSX[9]), which I recently recommended[10] over the stock of its parent. I’ve never been a big fan of IPOs, but for some reason this fund works.

Midweek, Marc Bastow, with assistance from editors Jeff Reeves and Kyle Woodley, put together a five-stock, $10,000 portfolio[11]. The stock in this bunch that stands out for me is Corning (NYSE:GLW[12]), whose solid balance sheet protects on the downside.

Killing two birds with one stone, I’d buy the First Trust Technology AlphaDEX Fund (NYSE:FXL[13]), which uses both growth and value factors to compile its list of holdings. Corning is a top 10 holding, at 2.11%. In addition to Corning, the technology fund’s 89-stock portfolio includes Cisco (NASDAQ:CSCO[14]), one of the other four picks by Bastow, Reeves and Woodley.

On Thursday, the InvestorPlace team disagreed about Starbucks (NASDAQ:SBUX[15]). While Louis Navellier heaped praise on the coffee giant[16] for its innovation and expansion into different markets, Jeff Reeves argued that Starbucks is losing focus[17] and predicted that its stock is destined to take a hit as a result.

Just a day earlier, I’d taken Navellier’s side, suggesting that Starbucks’ latest move — acquiring San Francisco’s La Boulange bakery for $100 million — was a brilliant move[18] that will strengthen its customer experience by providing better food. Nothing the company has done in the past two years strikes me as a sign that it’s losing focus. On the contrary, to my mind, Starbucks has shown a clear understanding of its business and its weaknesses.

I think you’re buying growth at a reasonable price here. However, if you’re not sure who’s right, buy the Focus Morningstar Consumer Cyclical ETF (NYSE:FCL[19]), which has Starbucks as a top 10 holding at 2.65%, costs only 0.19% to own and gives you a lot of great names in addition to Starbucks.

Ending the week, James Brumley discussed the value available in solar stocks[20]. He sees solar as a far better buy at this point than social media, both of which are trading at new lows. Carting out no less than four possible picks, including First Solar (NASDAQ:FSLR[21]), this is exactly the situation where ETFs make sense: If you agree with the hypothesis that solar stocks in general are insanely cheap right now, buying either the Guggenheim Solar ETF (NYSE:TAN[22]) or the Market Vectors Solar Energy ETF (NYSE:KWT[23]) provides you with the best possible proxy for solar power at a cost of just 0.65%.

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

Endnotes:
  1. five dividend stocks: http://investorplace.com/2012/06/5-dividend-stocks-up-20-in-2012/
  2. WHR: http://studio-5.financialcontent.com/investplace/quote?Symbol=WHR
  3. CPA: http://studio-5.financialcontent.com/investplace/quote?Symbol=CPA
  4. RPV: http://studio-5.financialcontent.com/investplace/quote?Symbol=RPV
  5. FAA: http://studio-5.financialcontent.com/investplace/quote?Symbol=FAA
  6. pros and cons: http://investorplace.com/2012/06/should-i-buy-dollar-general-3-pros-3-cons/
  7. DG: http://studio-5.financialcontent.com/investplace/quote?Symbol=DG
  8. FPX: http://studio-5.financialcontent.com/investplace/quote?Symbol=FPX
  9. PSX: http://studio-5.financialcontent.com/investplace/quote?Symbol=PSX
  10. I recently recommended: http://investorplace.com/2012/06/conoco-or-phillips-66-only-one-is-a-buy/
  11. five-stock, $10,000 portfolio: http://investorplace.com/2012/06/5-stocks-for-a-100-share-portfolio-aapl-goog-amzn-pcln-amzn-aa/
  12. GLW: http://studio-5.financialcontent.com/investplace/quote?Symbol=GLW
  13. FXL: http://studio-5.financialcontent.com/investplace/quote?Symbol=FXL
  14. CSCO: http://studio-5.financialcontent.com/investplace/quote?Symbol=CSCO
  15. SBUX: http://studio-5.financialcontent.com/investplace/quote?Symbol=SBUX
  16. heaped praise on the coffee giant: http://investorplace.com/2012/06/starbucks-is-one-new-buy-for-june-sbux/
  17. Starbucks is losing focus: http://investorplace.com/2012/06/starbucks-serving-a-venti-cup-of-desperation/
  18. a brilliant move: http://investorplace.com/2012/06/starbucks-bakes-a-brilliant-move/
  19. FCL: http://studio-5.financialcontent.com/investplace/quote?Symbol=FCL
  20. value available in solar stocks: http://investorplace.com/2012/06/a-better-bargain-bet-than-social-networking-solar-stocks-to-buy/
  21. FSLR: http://studio-5.financialcontent.com/investplace/quote?Symbol=FSLR
  22. TAN: http://studio-5.financialcontent.com/investplace/quote?Symbol=TAN
  23. KWT: http://studio-5.financialcontent.com/investplace/quote?Symbol=KWT

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