Are stocks getting too prosperous? Infinity stimulus sent the markets through the roof last week, with the S&P 500 jumping almost 2% to finish at 1,465.77 — 6.4% below its all-time high reached on Oct. 9, 2007.
With the markets up about 20% year-to-date, it seems almost everything InvestorPlace contributors recommend turns to gold these days. But for those wanting to hedge some of those picks in something a little more diversified, here are five interesting ETF alternatives from the week of Sept. 10-14:
Starting out last week, Tom Taulli analyzed the pros and cons of owning Under Armour (NYSE:UA). Taulli believes the athletic apparel and footwear company is an American success story whose brand power is second only to Nike (NYSE:NKE) in the sporting goods realm. However, despite all the good things to say about Under Armour, Taulli feels its P/E is a just too pricey and investors should wait till it cools down.
You can do that … or you can buy the Guggenheim S&P MidCap 400 Pure Growth ETF (NYSE:RFG), which holds 100 mid-cap growth stocks, including Under Armour at 2.01%. In addition to Under Armour in its top 10, it has positions in Carter’s (NYSE:CRI) and NewMarket Corp. (NYSE:NEU), two companies I follow very closely.
With $540.6 million in net assets, RFG is reasonably liquid, and its 0.35% expense ratio is attractive. Most importantly, mid caps tend to outperform small caps and large caps over the long haul.
On Wednesday, Aaron Levitt made a cogent argument why Transocean’s (NYSE:RIG) focus on deepwater drilling will pay big dividends for the company soon enough. Transocean’s stock is down 50% since the Deepwater Rig explosion in 2010 as ongoing litigation and liability concerns keeps its stock on a short leash.
I too believe Transocean’s stock is a good buy at current prices. Once the litigation is settled and the shackles come off, its stock will naturally rise. However, ultra-deepwater drilling is not without risk. Oil services companies like Transocean do fantastic when exploration and production companies are drilling new wells. However, they do miserably when E&P companies aren’t. It’s as cyclical as they come.
The ETF alternative I’d recommend is the Market Vectors Oil Services ETF (NYSE:OIH), which exposes you to some of the industry’s biggest and best companies. Transocean is a top-10 holding at 4.55% of the 25-stock portfolio. At 0.35%, its expense ratio is reasonable. The only caveat: OIH should be considered a small specialty holding and not a core part of your portfolio.
Pier 1 Imports
On Thursday, InvestorPlace Editorial Assistant Alyssa Oursler was praising the turnaround of home-furnishings retailer Pier 1 Imports (NYSE:PIR), suggesting that its comeback is still under way. Pier 1’s stock is up 72% in the past year, but Oursler feels it has a lot more gas in the tank. PIR’s second-quarter net income jumped 36% on strong sales, yet its stock barely budged.
A company by the name of Greek Investments has been accumulating Pier 1’s stock since 2009, and it currently is PIR’s largest investor, owning 11.26%. If you buy the stock, you’d do well to keep an eye on Greek Investments’ ownership position.