The debt ceiling took over investor consciousness last week, leading to a 1.1% decline in the S&P 500 — its first weekly loss in the past four weeks. Experts suggest that until this issue is resolved, the markets are going to be extremely choppy.
Fear not: InvestorPlace contributors were busy this past week coming up with ways to beat this indecisive market. Here are my ETF alternatives:
Three particular midcaps were on the mind of Alyssa Oursler last week. Of the three, Hasbro (HAS) holds the most interest for me. HAS currently yields 3.3%, its operating cash flow has more than doubled since 2009, and its net debt is less than one times EBITDA. It can easily afford to keep increasing its dividend annually, which is great news for income investors. In addition, midcaps historically outperform both small- and large-caps.
At first I thought a good alternative would be a dividend-related fund, but then it occurred to me that most investors don’t have nearly enough midcap exposure. Therefore, I’m going with the WisdomTree MidCap Dividend Fund (DON), which gives you a little of both. DON has 368 holdings, including Hasbro at 0.7%. Sure, its 30-day SEC yield is 70 basis points lower than Hasbro’s, but it delivers much greater diversification, its expense ratio is just 0.38% and its performance over the long-term is superior to the S&P 500.
Dan Burrows believes that even though LinkedIn (LNKD), Netflix (NFLX) and Tesla (TSLA) have respectively doubled, tripled and quintupled in price this year, they’ve still got upside ahead. Technical analysis suggests these are momentum plays of the highest order. While this means there’s money to be made here — there’s the potential for money to be lost. For this reason, an ETF alternative in this situation makes all the sense in the world.
Unfortunately, Tesla throws a bit of a wrench into the proceedings, so I actually have to recommend two ETFs. The first is the First Trust Dow Jones Internet Index Fund (FDN), a Morningstar-ranked five-star fund of 41 Internet-related holdings including NFLX at a weighting of 3.52% and LNKD at 3.71%. For TSLA, I recommend going with the First Trust US IPO Index Fund (FPX), which also gets five stars. If you use ETFs exclusively, I’d consider the latter a core holding for your portfolio.
Carnival (CCL) is down almost 9%, which Jonathan Berr sees as the perfect opportunity to buy the cruise line’s stock — when it’s cheap. Righting the Costa Concordia was a brutal reminder of how bad things have been in recent years. A $10,000 investment in Carnival five years ago is worth $10,400 today. That’s called flat-lining. Still, one-fifth of travel agents surveyed feel 2013 is going to be their best year ever for cruises, so get in now while stock pessimism reigns supreme.