by Will Ashworth | September 24, 2012 1:06 pm
For a week where the markets were so lethargic, with the S&P 500 losing 0.38% for the week of Sept. 17-21, I’ve had a tough time narrowing my ETF alternatives to just five articles. That’s because InvestorPlace contributors were on fire last week, fully recovered from the summer slowdown.
Up first is Ivan Martchev‘s assessment of the retail industry. Relatively bi-polar in nature, high-end retailers are doing well at the same time discount stores are also thriving. It’s all very difficult to make heads or tails of.
Nonetheless, since Martchev has recommended Ralph Lauren (NYSE:RL), Coach (NYSE:COH) and Tiffany (NYSE:TIF), it’s clear we need to find you a good retail ETF. Not so fast. The largest retail ETF by assets is the SPDR S&P Retail ETF (NYSE:XRT). Unfortunately, it holds only Tiffany (1.05% weighting) and not the other two.
No, the best retail fund to own is the Guggenheim S&P 500 Equal Weight Consumer Discretionary ETF (NYSE:RCD), which owns all three at weightings of more than 1% and with a reasonable 0.60% expense ratio. You would think three heavyweights like these ones would find better representation, but no such luck.
Next on the docket is Louis Navellier‘s trifecta of stocks related to the NFL, the strongest professional sports league in the world (Premier League supporters probably disagree). Any company affiliated with the NFL has to be of excellent pedigree.
Navellier is big on Anheuser-Busch InBev (NYSE:BUD) and Papa John’s (NASDAQ:PZZA), while extremely cautious about PepsiCo (NYSE:PEP). I couldn’t agree more. Indra Nooyi’s tenure as CEO has been an abject failure. Nonetheless, it’s still a blue-chip company in the NFL’s eyes.
To capture all three stocks in one ETF is an impossible task given Anheuser-Busch InBev is no longer a U.S. equity. However, in the spirit in which Navellier’s article was written, I’d have a look at the FlexShares Morningstar U.S. Market Factor Tilt Index Fund (NYSE:TILT), which enhances one’s exposure to the broader market by tilting the holdings toward smaller cap and value stocks. It holds both PepsiCo and Papa John’s, although both are at weightings of less than 1%.
InvestorPlace Editor Jeff Reeves was feeling generous Sept. 19, providing readers with nine reasons to invest in emerging markets. Though emerging markets are out of favor now, Reeves feels it’s the perfect time to take some profits off the table in the U.S. and put them to work in places like Russia, China and Latin America.
Many of the BRIC stocks are priced to move at this point, and the smart money is going to pounce.
Since other emerging markets are doing well, it makes sense to consider an ETF that’s broader than just the BRIC countries. In addition to the four BRICs, the Vanguard MSCI Emerging Markets ETF (NYSE:VWO) has top 10 holdings in South Korea, Taiwan, South Africa, Mexico, Malaysia and Indonesia. At 0.20% expense fee, the price is right — and you’re getting excellent exposure to emerging markets.
It’s funny that Dan Burrows was discussing the pros and cons of owning General Mills (NYSE:GIS) on the very same day I was picking up Yop at the grocery store, the drinkable yogurt brand from Yoplait. My wife suffers from low iron, so she uses it as a chaser for the awful tasting herb-like drink she takes daily as an iron supplement. Without Yop she’d be a goner.
Anyway, Burrows reasons that General Mills’ dividend yield at 3.4%. combined with a small amount of capital appreciation, delivers a workmanlike total return in most years, making it an excellent defensive position. To replicate this steady performance, you’re better to go with the iShares Dow Jones Select Dividend Index Fund (NYSE:DVY), which has a 30-day SEC yield of 3.62% and holds General Mills in its portfolio of 101 stocks. Its expense ratio is 0.40%.
The alternative is the PowerShares Dynamic Food & Beverage Portfolio (NYSE:PBJ), which has General Mills as its third-largest holding. Unfortunately, the dividend yield is much lower at 1.20% and the expense ratio much higher at 0.63%.
Jeff Reeves ended the week talking about health care. Given the aging population, it’s a great industry to be invested in long-term, and its risk-to-reward profile is better than any other. Many health care players are hitting 52-week highs, making it difficult to know which will keep up the momentum and which will fall back down to earth.
To avoid being on the wrong side of a bad call or two, you might want to buy the Health Care Select Sector SPDR (NYSE:XLV), which owns four of the stocks Reeves mentioned in its top 10 holdings. Keep in mind that in recent years it’s performed very much like the SPDR S&P 500 (NYSE:SPY). So, if you wanted to kill two birds with one stone and save a little on the fees, the SPY makes an excellent proxy.
As of this writing, Will Ashworth did not own a position in any of the stocks named here.
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