Top ETFs to Buy Now
The U.S. stock market is in a strong bull trend and making highs daily, but as the markets move higher, so does the risk of a correction. But the “wall of worry” seems to build with every new crisis and is quickly overcome. Obviously, at some point stocks will take back a portion of the gains made since the breakout of Dec. 10. But when it comes, it will likely be quick and shallow.
This list of exchange-traded funds (ETFs) is chosen to represent those that could benefit from the current global economic situation. These ETFs were also screened for reasonably low expense ratios since high fees can result in reduced long-term performance. As noted, the present risk of a near-term correction is high, but so are the potential long-term rewards.
Here are the top ETFs to buy now:
iPath Dow Jones-UBS Agricultural ETN (JJA)
The iPath Dow Jones-UBS Agriculture Total Return Sub-Index ETN (NYSE: JJA) should reflect the returns that are potentially available through an unleveraged investment in futures contracts that comprise the index. The index is currently holding seven futures contracts on agricultural commodities traded on U.S. exchanges and should benefit from the rising price of grains.
It should be noted that futures contracts tend to be volatile, and with prices at all-time highs for grains, a correction could result in a pullback in the fund. Thus, rather than taking a full position in JJA, investors may play it safe with a half position now and a full position on a pullback to $60. But longer term, the world’s food shortages will probably result in higher grain prices and, thus, higher prices for JJA.
Guggenheim Frontier Markets ETF (FRN)
The Guggenheim Frontier Markets ETF (NYSE: FRN) is designed to perform in line with the Bank of New York Mellon Frontier CR Index. It is a non-emerging markets fund with its top holdings in Chile, Columbia, Egypt, Argentina and Peru.
Despite the recent pullback in emerging markets investments, FRN has appreciated by 16%. FRN has corrected down to its 200-day moving average where it is holding, and on Feb. 11, it reversed up from the line with a strong buy signal from our proprietary Collins-Bollinger Reversal (CBR) indicator.
The expense ratio for FRN is 0.7%. Buy now for a trade to $24 or as a long-term investment.
iShares S&P MidCap 400 Index ETF (IJH)
The iShares S&P MidCap 400 Index ETF (NYSE: IJH) seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the S&P MidCap 400 Index. We recommended IJH in September 2009, just after the breakout at $75-$78.
Since then, mid-cap stocks have had a major move, making new highs recently, and could be due for a correction. A half position now and a full position on a pullback may be a prudent way to participate in a continuing bull market in mid-cap stocks.
The expense ratio for IJH is 0.22%. Buy at $92 for a target of $105.
iShares Dow Jones U.S. Medical Devices Index ETF (IHI)
The iShares Dow Jones U.S. Medical Devices Index ETF (NYSE: IHI) seeks to mirror the performance of the Dow Jones U.S. Select Medical Equipment Index, and could benefit from the recent challenges to the Obama health care program.
In November, IHI broke above its 200-day moving average at $55 and jumped in two weeks to $59, breaking to another new high on Friday, Feb. 11. Heavy upside volume has accompanied the advance. A break above the November 2008 high of $65 could vault the stock to $80-$90. IHI has an expense ratio of 0.47%.
Market Vectors Environmental Services ETF (EVX)
The Market Vectors Environmental Services ETF (NYSE: EVX) seeks to replicate the performance and yield of the Amex Environmental Services Index. Some of its top holdings include Stericycle, Inc. (NASDAQ: SRCL), Waste Management, Inc. (NYSE: WM), Republic Services, Inc. (NYSE: RSG) and Newpark Resources, Inc. (NYSE: NR).
The ETF appreciated over 28% during the past year, with an expense ratio of 0.55%. EVX is in a powerful bull market that started in September at $44. It is supported by its 50-day moving average and its bullish support line, both at about $51.
A break from the current wedge pattern should vault EVX to $55 and a new leg higher. Buy at the market.