Trying to corral all three in one ETF is near impossible with the exception of a total market fund, so I’m not even going to try. Instead, I’m going to recommend that you look at the SPDR S&P Oil & Gas Exploration & Production ETF (XOP), which seeks to replicate the performance of the oil and gas exploration and production industry. With almost $1 billion in total net assets, the modified equal-weight ETF has 71 holdings including OAS at a 1.69% weighting and CLR at 1.52%. In the last three months alone, the XOPs achieved a total return of 16.1% through October 4, almost 11 percentage points higher than the SPY. Long-term, the energy industry is always a good bet.
Jeff Reeves believes turnarounds are a good way to win in the markets. Buying today’s dogs early in their recoveries can be even more lucrative than riding momentum investments like Tesla (TSLA), which is up 540% in the past year alone. Of the five turnaround players Jeff highlights, Netflix (NFLX) or Best Buy (BBY) would be my two choices. Netflix because its business model of original content mixed with new, not-so-new and old material seems to working; and Best Buy because its CEO Hubert Joly is doing his darnedest to ensure it doesn’t become irrelevant.
The ETF to own that gets you both of these stocks and a lot of good consumer discretionary companies to boot is the First Trust Consumer Discretionary AlphaDEX Fund (FXD), which is based on The StrataQuant Consumer Discretionary Index. The index itself ranks stocks from the Russell 1000 using both value and growth factors. Taking the top 134, it then divides then into quintiles equally weighting each of the stocks within each quintile. It then reconstitutes and rebalances quarterly. Currently, Netflix is the second-largest holding at 1.34% and Best Buy slightly lower at 1.29%. Although its expense ratio is higher than the average ETF at 0.70%, its ranking methodology warrants a higher investment management fee due to its complicated nature.
Although certain alcohol-related stocks have had good year on the markets — think Boston Beer (SAM) and Constellation Brands (STZ) — they’ve generally underperformed as a group when compared to the S&P 500. Beer stocks even more so than distilleries and wineries, which makes sense given that traditional beer companies seem to be losing ground to almost anyone selling a premium product. Charles Sizemore feels Ambev (ABV) is one beer company that’s actually expensive right now, preferring Anheuser-Busch (BUD), its majority owner, or Heineken (HEINY) if a beer stock is on your radar.
To capture both stocks with a decent weighting in each, one must look to Europe. The fund that interests me in this situation is the WisdomTree Europe Hedged Equity Fund (HEDJ), which seeks to invest in some of the biggest European-based global companies while mitigating the risk of investing in Euro-denominated stocks. Take BUD for example. It generates 87% of its revenue outside Europe, yet because it’s based in Belgium, it’s positively or negatively affected by currency translation the same way that US companies who do a large amount of business outside America are affected by the US dollar’s appreciation or depreciation against the currencies where it does business. Hedging attempts to lower the risk of investing in European equities. BUD is the second-largest holding at 5.76% while Heineken’s weighting is 1.14%.
As of this writing, Will Ashworth did not own a position in any of the aforementioned securities.