by Will Ashworth | October 22, 2012 11:50 am
The past week saw Google (NASDAQ:GOOG) deliver its earnings — which weren’t spectacular by any means — four hours earlier than expected due to human error. That caused trading in its stock to be halted for several hours during the day Thursday.
On Friday, several other companies including McDonald’s (NYSE:MCD) and Microsoft (NASDAQ:MSFT) also delivered less-than-stellar earnings and/or revenue numbers. By the close, the S&P 500 had lost 1.66% on the day, erasing most of the week’s gains.
Despite the negative tone of the week’s earnings reports, InvestorPlace contributors were busy recommending stocks to get you through the choppy waters leading up to the election. Here are my ETF alternatives to some of those picks.
Aaron Levitt started off last week talking about the use of natural gas as a transportation fuel. Levitt wonders why transportation companies aren’t taking advantage of the glut in natural gas by fueling their fleets with compressed or liquified natural gas. At the moment, it appears no one wants to take the first step.
Nonetheless, Levitt recommends several companies that should benefit from a move to natural gas. His favorite: Chesapeake Energy (NYSE:CHK), which has developed “CNG In A Box,” enabling service stations with a natural gas utility line to provide CNG refueling.
While I like the thought, Chesapeake is still a risky proposition given governance issues with CEO Aubrey McClendon. Instead, I’d look at the Market Vectors Unconventional Oil & Gas ETF (NYSEARCA:FRAK), which is a total of 44 energy stocks, including Chesapeake at 2.79% of the portfolio. It’s not cheap at 0.54%, but it simultaneously gives you diversification and exposure to Chesapeake.
Dividends — who doesn’t like receiving them? Dividend Growth Investor discussed the benefits of owning Automatic Data Processing (NYSE:ADP) on Oct. 16. ADP has increased its dividend for 37 consecutive years, making it part of the Dividend Aristocrat index, stocks that have increased their dividends for 25 straight years. More important, since 1986, ADP has doubled its dividend payment every five years, resulting in an annualized return of 12.5% over the 26-year period compared to 7.2% for the S&P 500.
Dividend Growth Investor recommends investors look at buying below $56. I don’t think you can go wrong with this steady payer. Nonetheless, for an ETF alternative, your best bet is to go with the Schwab U.S. Dividend Equity ETF (NYSE:SCHD), which is based on the Dow Jones U.S. Dividend 100 Index, and has an annual expense ratio of 0.07%. It’s a dirt cheap fund, and ADP represents 1.04% of the portfolio. SCHD has a 30-day SEC yield of 3.09% — music to the ears of any dividend investor.
Turning to technical analysis, InvestorPlace Chief Technical Analyst Sam Collins believes Ford (NYSE:F) has formed a bottom at $10.75 and is ready to break out. With an earnings per share projection of $1.47 in 2013, you’re talking about a forward P/E of 6.9. New vehicles like the Fusion and Escape should make next year be a good one for the Detroit automaker.
I don’t see a problem owning Ford at these prices, but those wanting to play it safe might consider the First Trust NASDAQ Global Auto Index Fund (NASDAQ:CARZ), which owns stock in 35 automobile manufacturers including Ford, the largest holding, at 8.35%. If you like Ford but aren’t so enamored by the auto industry as a whole, you’ll want something broader, like the Consumer Discretionary Select Sector SPDR Fund (NYSE:XLY), which is nice and cheap at 0.18%. And it has Ford as a top 10 holding at 2.75%.
Mobile has been in the news a lot these days, whether it be Facebook (NASDAQ:FB), Google (NASDAQ:GOOG) or eBay (NASDAQ:EBAY). What’s that last one? You read that right. Tom Taulli is very high on its mobile business generated through PayPal. According to Taulli, eBay’s mobile revenue in 2012 will hit $10 billion, or 71% of its overall business.
Considering mobile is where everything seems headed in e-commerce, the future looks bright for the once-left-for-dead auction site. Normally, fees are a big deal when I recommend any ETF. However, in this instance you’ll want to go with the best rather than the cheapest, and that’s the PowerShares NASDAQ Internet Portfolio (NASDAQ:PNQI), which owns 69 Internet-related stocks, including eBay, its No. 1 holding at 8.39%. Since its inception in June 2008, it’s achieved an annualized total return of 13.47%, significantly higher than the S&P 500. It’s worth every penny.
Lastly, James Brumley went low on Oct. 19, recommending five stocks under $5 that could make a run. Of the five, the one I particularly like is Fortress Investment Group (NYSE:FIG), the New York-based alternative asset manager that’s lost money for several consecutive years. Surprise, surprise, it’s actually made money in the first two quarters of 2012, and its business appears to have stabilized.
Not wanting to put all your eggs in one basket in this particular situation, your only ETF alternative is the PowerShares Global Listed Private Equity Portfolio (NYSE:PSP), which invests in 65 private equity, business development companies and master limited partnerships. The top holding: Canada’s Onex (PINK:ONEXF), which has a long and successful history in private equity.
As of this writing, Will Ashworth didn’t own any securities mentioned here.
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