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ETF Alternatives for Last Week’s Hot Stocks

Roll toy companies, hotels and more into funds instead

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Last week was another bad one for the S&P 500, which fell 1.5% between Oct. 22 and Oct. 26. The cause? Corporate results are severely disappointing investors so far in the Q3 reporting season.

Slightly less than 40% of S&P 500 companies reporting so far have exceeded expectations, compared to a historical average around 60%. Even Amazon (NASDAQ:AMZN) delivered weaker-than-expected earnings, prompting many to speculate that the bull run is over.

Regardless, a few bulls still are out and about. InvestorPlace contributors were hard at work providing readers with some plausible stock ideas. Here are a few ETF alternatives to those stocks that can offer a little protection via diversification:

Housing Stocks

My first alternative comes from James Brumley’s Oct. 22 article highlighting stocks within the equipment rental, home fixtures and mortgage lending industries. Rather than purchasing an overbought homebuilder, Brumley suggested some stocks within all three industries that investors can use to play the housing rebound.

Whenever I recommend an ETF alternative, I like to suggest something where the stock in question is a top 10 holding. Out of the 10 stocks mentioned in the article, Fortune Brands Home & Security (NYSE:FBHS) provides the most appealing ETF alternative in the Guggenheim Spin-Off ETF (NYSE:CSD), a fund that seeks to replicate the performance and holdings of the Beacon Spin-Off Index — a group of up to 40 stocks that have been spun off from their parent no earlier than six months prior to reconstitution (semi-annually) and no later than 30 months prior.

Potential stocks are ranked using a 100% quantitative rules-based methodology, then given a modified market cap weighting with a maximum 5%, though the weight occasionally can drift higher until the next reconstitution. FBHS currently is the sixth-largest holding of 25 stocks at 5.14%. For those fixated on price, its annual expense ratio is high at 0.6%.

Toy Stocks

Next up is InvestorPlace Editorial Assistant Alyssa Oursler, who discussed the pros and cons of owning Mattel (NASDAQ:MAT) and Hasbro (NASDAQ:HAS). While Oursler slightly favors Hasbro because of its greater commitment to technology, I believe Mattel makes more sense given its stronger third-quarter earnings. Further, its diversification beyond Barbie will keep it growing at a faster rate than its smaller rival.

The ETF best suited as an alternative to Mattel is the iShares Morningstar Mid Core Index Fund (NYSE:JKG), which (as the name suggests) invests in mid-cap stocks intended for the core of your portfolio. With a total of 183 holdings — including Mattel in the No. 1 spot, with a weighting of 1.38% — it’s a good way to add some performance to an otherwise conservative portfolio. At 0.25%, its annual expense ratio is easy on the pocketbook.


My brother recently asked me whether he should sell Apple (NASDAQ:AAPL), which seems to be in free fall. I told him I thought Apple had lots of good stuff in development or just being introduced into the market, so it should be fine. The real test for CEO Tim Cook will be a couple of years from now, when all the influence of Steve Jobs will have disappeared from Cupertino. Then it will be solely on him.

Article printed from InvestorPlace Media,

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