by Will Ashworth | October 9, 2012 9:45 am
Last week was memorable for both stocks and the country. The S&P 500 gained 1.41%, Mitt Romney took the first debate on Wednesday evening and then Jack Welch rained on that parade with an accusation of a jobs report conspiracy so bizarre General Electric (NYSE:GE) shareholders were thanking their lucky stars he’s no longer CEO.
With third-quarter earnings reports kicking off this week, InvestorPlace contributors were busy providing stock recommendations to ride for the year’s final quarter. Here are my ETF alternatives for those picks.
Contributor Aaron Levitt provided readers with five natural gas picks on Oct. 3 that will benefit from rising prices, a prediction from billionaire oilman T. Boone Pickens. Three of them — EnCana (NYSE:ECA), Quicksilver Resources (NYSE:KWK) and Chesapeake Energy (NYSE:CHK) — are stocks. The two other picks — United States Natural Gas Fund (NYSE:UNG) and First Trust ISE Revere Natural Gas Index Fund (NYSE:FCG) — are ETFs.
So, Levitt has done most of my work in this instance by recommending a good ETF alternative in the First Trust fund, which owns all three of the stocks mentioned earlier. A broader alternative is to purchase the Guggenheim S&P 500 Equal Weight Energy ETF (NYSE:RYE), which owns Chesapeake Energy along with 42 other energy-related stocks, and is 10 basis points cheaper than the First Trust fund.
Leading up to the Nov. 6 election, Hilary Kramer expects the markets to pull back as much as 5% to 8% in the next month and then finish strong once the presidency has been decided. Two stocks Kramer believes will do well are CableVision Systems (NYSE:CVC) and True Religion Apparel (NASDAQ:TRLG).
CableVision has a strong cable franchise in the New York City area and would make a nice acquisition for a larger operator. True Religion’s dividend yield of 3.8% makes it attractive for investors interested in growth plus income.
No ETF gives you decent exposure to both stocks, so I’d recommend the PowerShares Fundamental Pure Mid Core Portfolio (NYSE:PXMC) for CableVision Systems and the Guggenheim S&P SmallCap 600 Pure Growth ETF (NYSE:RZG) for True Religion. Both have reasonable expense ratios with diversified portfolios.
Option traders John Jagerson and Wade Hansen, editors of the SlingShot Trader, are big on farm equipment manufacturer Deere (NYSE:DE), suggesting that the low-volume rally over the past few months hasn’t been kind to Deere and other cyclical companies.
However, the authors point out that the U.S. Department of Agriculture says 2012 has been the most profitable year on record for farmers, which should lead to new equipment purchases. Jagerson and Hansen believe DE could flirt with $100 in the next year. I also like Deere and most other agriculture-related stocks.
To take advantage of the good prospects in agriculture, your best bet is the MSCI Global Agriculture Producers Fund (NYSE:VEGI), a fund that’s less than a year old and has 139 holdings, including Deere at 7.88%. Kubota (NYSE:KUB) is the second equipment manufacturer in the top 10, which represent 60.4% of the overall holdings. At an expense ratio of 0.39%, VEGI is a reasonably priced, diversified bet on Deere and agriculture.
If you’re looking for a micro-cap stock to invest in, InvestorPlace IPO Playbook editor Tom Taulli believes Vringo (NYSE:VRNG) is worth a look. The mobile-phone software developer’s stock is up 359% as of Oct. 5, thanks in large part to a federal district judge allowing its patent battle with Google (NASDAQ:GOOG) and others to go to court on Oct. 16. A favorable result in this trial would be a game changer for the company, which is why Taulli sees it as a good risk-to-reward bet for more speculative investors.
Those less speculative could purchase the iShares Russell Microcap Index Fund (NYSE:IWC), which has 1,343 holdings including Vringo at 0.03%. With a median market cap of $164 million, no stock has a weighting greater than 0.33%. At 0.69%, its expense ratio isn’t cheap. However, it’s the price you have to pay to invest in some of America’s smallest public companies.
The final recommendation from last week comes from Jon Markman, editor of Trader’s Advantage, who believes F5 Networks (NASDAQ:FFIV) will benefit from the insatiable demand for online content from services like Netflix (NASDAQ:NFLX) and Hulu. F5′s products allow Netflix to push out its content quickly and efficiently. Forty-four of the Fortune 50 use its products.
A good ETF alternative is the iShares S&P North American Technology-Multimedia Networking Index Fund (NYSE:IGN), a 31-stock portfolio seeking to replicate the performance of the S&P North American Technology-Multimedia Networking Index. F5 Networks is the No. 1 holding at 9.01%. The only downside — Research In Motion (NASDAQ:RIMM) is a top 10 holding.
As of this writing, Will Ashworth did not own a position in any of the stocks named here.
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