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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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InvestorPlace contributor Jonathan Berr wrote Oct. 23 that both Apple and CBS (NYSE:CBS) face better prospects ahead, and although Apple’s more of a gamble, both have price-to-earnings ratios close to five-year lows. Finding an ETF to capture Apple in the top 10 holdings is almost as easy as finding a slot machine in Vegas; finding both in the top 10 is nonexistent.

Your best bet under the circumstances is the PowerShares Dynamic Large Cap Growth Portfolio (NYSE:PWB), which owns 50 large-cap stocks, including Apple at 3.02% and CBS at 1.29%. PWB has outperformed the S&P 500 by about 3 percentage points year-to-date.

Hotel Stocks

Hotels were on the mind of Lawrence Meyers on Oct. 24. Two things in particular: The first is that hotel demand in 2013 is expected to rise 2.9% versus a 1% increase in supply. This gives hotels pricing power, which improves occupancy rates and revenue per available room. Secondly, stealth inflation should enable it to continue raising prices for some time. The net result: steady, stable growth for the hotel industry.

Rather than pick one of the six hotel-related stocks Meyers provides, I suggest the PowerShares Dynamic Leisure Entertainment Portfolio (NYSE:PEJ), which owns Marriott International (NYSE:MAR), Starwood Hotels & Resorts (NYSE:HOT) and Marriott Vacations Worldwide (NYSE:VAC) in its top 10, with all three weightings above 3%. Investing in 30 of the top leisure and entertainment companies in the U.S., PEJ’s only negative is an annual expense ratio of 0.63%, which is high for a passive index fund — albeit one that takes into account several investment criteria.


Lastly, I’m going back to Lawrence Meyers and his Oct. 25 pick of Ingersoll-Rand (NYSE:IR), the quasi-conglomerate with familiar brands like American Standard, Schlage, Trane and Club Car. Meyers likes its free cash flow, which totaled $940 million in 2011. If you’re a Warren Buffett fan, you’re probably not interested in IR because Berkshire Hathaway (NYSE:BRK.B) unloaded the remainder of its position in the first quarter of 2012.

Those of you sitting on the fence are better off investing in the PowerShares Dynamic Building & Construction Portfolio (NYSE:PKB), which invests in 30 U.S. building and construction companies including Pool Corp. (NASDAQ:POOL) and Nacco Industries (NYSE:NC), two companies I’ve liked for several years.

Having gone to a third PowerShares fund that replicates an Intellidex index, I hope I haven’t gone to the well once too often.

As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.

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