by Will Ashworth | April 1, 2013 11:54 am
The first quarter of 2013 is in the books, and it was a stellar one indeed. Despite muted economic conditions, the S&P 500 finished out March up 10% year-to-date, gaining 0.8% in the holiday-shortened week of March 25-29, and reached a new all-time high.
With very few attractive alternatives to equities, InvestorPlace contributors continue to find plenty of stocks to recommend to readers. Here are my ETF alternatives to those picks:
Charles Sizemore points out in his March 27 article that Daimler (PINK:DDAIF) is having a tough year on the markets, in large part due to its European location. However, while its stock is down 1% year-to-date through the end of March, its sales are booming, especially in emerging markets like China. Daimler delivered record sales in 2012, and it’s very possible it will do it again in 2013. Down 11% in the past 52 weeks, Sizemore believes the maker of Mercedes-Benz cars and trucks is priced to move. I would tend to agree.
The ETF alternative is the First Trust NASDAQ Global Auto Index (NASDAQ:CARZ), which is a group of 35 auto manufacturers including Daimler, the fifth-largest holding at a weighting of 7.41%. While CARZ doesn’t have a lot of assets ($12.2 million) and volume (1,920 average daily volume), it’s not on the ETF Deathwatch, which means your investment shouldn’t be liquidated anytime soon. So, if you feel — as Sizemore does — that Daimler is ready to pop and you like the idea of investing in an industry that’s getting stronger every day, CARZ is the ETF for you.
Exploration and production companies are going deeper into the ocean in search of oil these days, providing equipment makers with unprecedented opportunities. Aaron Levitt believes energy producers will continue to spend large on subsea and deepwater equipment because it can mean the difference between making or losing money on a project. Although Aaron provides readers with two pure-play equipment makers, I’m going to instead suggest focusing on General Electric (NYSE:GE), which has quickly become a player in the subsea space.
There’s many ways to play the conglomerate. I’m going to go with the cheapest alternative, the Vanguard Industrials ETF (NYSE:VIS), which has an annual expense ratio of just 0.14%. General Electric is the top holding with a weighting of 12.8%, almost three times the next-largest holding. The top 10 holdings account for 40% of the fund’s $720 million in total net assets. Year-to-date, VIS is up 12.1% through the end of March. While investors can’t expect it to deliver this kind of performance every quarter, it’s good to know it’s keeping pace with the indices.
Francesca’s (NASDAQ:FRAN) is a women’s apparel and accessories chain that Lawrence Meyers points out is growing by leaps and bounds. Keeping its stores small and its sales high, FRAN is able to deliver greater profitability. Francesca’s first-day return when it went public in July 2011 saw its stock jump 63% to $27.65, exactly where it sits today. With earnings per share growing at a 25% clip, you’re looking at growth at a reasonable price.
For those wanting to spread the risk a little, you’ll want to check out the 96-stock Retail SPDR (NYSE:XRT), including Francesca’s at a weighting of 1.12%. Although it’s not a top-10 holding, it’s not a big deal because the index itself is equal-weighted, meaning the No. 1 holding, SuperValu (NYSE:SVU), has a weighting just 15 basis points higher. The holdings are rebalanced quarterly to 1.04% and then left to their own devices for the next three months. As a result of Supervalu’s asset sales, its stock has gained the most over the past three months, which has resulted in a higher weighting. At 0.35%, the XRT is an inexpensive way to invest in the retail sector.
Finishing the week on a healthy note, Louis Navellier was busy recommending two healthcare stocks — SurModics (NASDAQ:SRDX) and AMN Healthcare Services (NYSE:AHS) — that he believes are a couple of the best in the sector. SurModics provides its customers with specialized coatings for their medical devices, and AMN Healthcare Services helps the healthcare industry with the staffing needs. Given the aging population, healthcare stocks are sure to benefit in the years to come.
One way to play these two stocks without necessarily investing in a healthcare ETF is to buy the First Trust Value Line 100 ETF (NYSE:FVL), which invests in 100 companies that Value Line ranks as very timely purchases. Starting from a list of 1,700 stocks, Value Line culls the list down to 100 it feels will outperform over the next six to 12 months. Investing an equal-dollar amount in all 100 stocks, it rebalances on the last Thursday in March, June, September and December. As of March 28, AHS was the second-largest holding at 1.39% while SRDX was slightly lower at a weighting of 1.09%. The big caveat: while the ETF has been around since June 2003, its performance has significantly underperformed the Russell 3000. Only buy this fund if you think reversion to the mean will right the ship in the future.
As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.
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