by Will Ashworth | September 9, 2013 3:03 pm
The S&P 500 gained 1.4% for the week of Sept. 2-6 despite a rather bleak jobs report.
The index’s total return is 17.8% year-to-date with more than three months left in 2013. Chances are good it will hit 20% by the end of the year. With that in mind, InvestorPlace contributors were busy trying to help readers get there.
Here are my ETF alternatives for broader plays on some of their recommendations:
Jeff Reeves discussed Groupon’s (GRPN) push into e-commerce September 2. Specifically, Jeff was referring to Groupon Goods, its direct-selling business, which generates 31% of its overall gross billings. The company has been much maligned for a coupon business that can’t possibly lead it to the promised land. Its move into Amazon’s space, although fraught with danger, could be a much better long-term bet. Investors are excited by recent moves, including hiring venture capitalist Eric Lefkofsky as its CEO and Ted Leonsis as chairman. It’s a potent one-two punch.
Tiger Global Management LLC, an $8 billion hedge fund, acquired 65 million Groupon shares in November 2012 for $202 million. In the second quarter of 2013, it sold 47 million of those shares as the stock jumped 45% between April and the end of June. We’ll see in November how many shares it’s still holding. Either way, the best way to play Groupon is to buy the Global X Social Media Index ETF (SOCL), a group of 28 holdings (Groupon is a 5.99% weighting) all involved in the social media industry. Despite the ETF’s red-hot performance since its inception in November 2011, you’d be wise to temper your expectations in the future.
Lululemon (LULU) was on a roll up until 2013, racking up four straight years of gains and an annualized total return of 127%. Then it hit the skids with a quality problem that led to its CEO, Christine Day, announcing in June that she was leaving the company. Alyssa Oursler discussed 3 Things to Watch when the yoga company announces its Q2 earnings this week. While she didn’t recommend LULU stock, she did suggest Gap’s (GPS) Athleta brand is turning up the competition. Let’s not mince words — Gap’s a superior company and superior stock at this point.
For those who agree — and those who don’t for that matter — your best bet is to pick up the Vanguard Consumer Discretionary ETF (VCR), which holds both Gap and Lululemon. Although consumer discretionary stocks are exhibiting weakness at the moment, any improvement in the economy plays directly into the sector’s hands. At 0.14% you’re getting very inexpensive passive management, not to mention some of the strongest brands in retail (35% of the portfolio) as well as other consumer-related industries. Long-term, it’s a winner.
I don’t usually get excited about large companies — except those with lots of interesting brands. Unilever (UL) is one such company. It’s the third-largest consumer staples company in the world, with 14 of its brands generating revenues of more than 1 billion euros annually. Tom Taulli discussed its pros and cons Sept. 3. The stock has done miserably in 2013, climbing through May until crashing back down to where it started the year. But that’s okay; Tom believes that its healthy dividend, combined with a strong presence in emerging markets, makes it very attractive for the long haul. I couldn’t agree more. It’s a great stock to own.
The SPDR S&P International Consumer Staples ETF (IPS) replicates the performance of the S&P Developed Ex-U.S. BMI Consumer Staples Sector Index, which represents the consumer staples sector outside the U.S. Although only up about 6% year-to-date, that’s still better than Unilever’s performance. With names like Diageo (DEO) and Anheuser-Busch (BUD) in the top 10 holdings I don’t think you can go wrong for the long-term. It’s more expensive than buying a U.S.-focused consumers staples ETF, but IPS probably gives you more upside in the next 12-24 months, especially if the European economy picks up.
Aaron “oil man” Levitt was busy discussing the merits of Norway’s Statoil (STO) September 4. The company made a huge find 300 miles off the Newfoundland coast. In fact, the 550 million barrels of oil discovered so far in 2013 is more than any other energy company. Exxon Mobil (XOM) in recent years has had a tough time replacing its reserves so Statoil’s progress is doubly encouraging. Most importantly, Aaron finds its stock is dirt cheap compared to Exxon, especially when you consider the Norwegian firm is growing much faster and it pays a 5% dividend yield.
Going international once more, I’ll recommend the PowerShares International Dividend Achievers Portfolio (PID) as a good alternative to Statoil because all 59 holdings have increased their dividend in each of the last five years or more. Statoil is the fifth-largest holding with a weighting of 3.45%. It’s been a real underachiever since its inception in 2005, but I believe that reversion to the mean is about to take hold. Owning PID gives you a decent 30-day SEC yield of 2.54% as well as some of the best stocks in both the U.S. and abroad.
Last up, I’m going with Ethan Robert’s pick of Dollar General (DG) and other discount stores. Roberts mentions same-store sales improvement, new store openings, share repurchases along with a struggling economy as reasons why the Tennessee-based company will continue to do well in the coming quarters. Buying a proxy to Dollar General in this situation is an easier proposition than most as all of the big players in the dollar-store business are held by one or more ETFs.
My ETF alternative is the Guggenheim S&P 500 Equal Weight Consumer Discretionary ETF (RCD), a fund with 83 holdings including Dollar General at a weighting of 1.28%, one basis point less than Family Dollar Stores (FDO) and three basis points greater than Dollar Tree (DLTR). Its annual expense ratio of 0.50% is about the average for equity ETFs.
As of this writing, Will Ashworth did not own a position in any of the aforementioned securities.
Source URL: http://investorplace.com/2013/09/etf-alternatives-week-of-september-2-6/
Short URL: http://invstplc.com/1fpjYeN
Copyright ©2014 InvestorPlace Media, LLC. All rights reserved. 700 Indian Springs Drive, Lancaster, PA 17601.