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Top 5 ETFs to Buy in April

Building, shipping and health care funds top this month’s list

By Sam Collins, InvestorPlace Chief Technical Analyst

Stocks have been rising since the bottom made in October 2011, and this year the Dow has gained 8%, the S&P 500 is up 12%, the Nasdaq is up 18%, and the Russell 2000 has gained 5%.

Despite the fact that the Federal Reserve may not attempt QE3, the notes from the latest FOMC meeting indicated that the Fed will continue to be supportive of low interest rates and “will step in if necessary.”

While second-half earnings are in question and volume and breadth suggest that a consolidation is due, the bull market is still in its infancy. The public has mostly been absent, put off by a “wall of worry” that appears to be growing — and that is a positive for stocks.

The economy is growing more modestly than we would like, but there are many opportunities in the exchange-traded fund (ETF) area from which investors can benefit, especially in the building and health care sectors.

Here are the top ETFs to buy for April:

ETF to Buy #1 – EssexProperty Trust (ESS)

Essex Property Trust (NYSE:ESS) is a self-administered and self-managed Real Estate Investment Trust (REIT). It is the owner, developer and manager of 159 communities with a total of 32,753 units located on the West Coast.

Technically the fund broke from a triple-top in March, and following a consolidation should continue its bull market run.

The current dividend yield on ESS is almost 3%, and our technical target is $175.

ESS Chart
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ETF to Buy #2 – Guggenheim Shipping ETF (SEA)

The Guggenheim Shipping ETF (NYSE:SEA) is designed to benefit from the high-dividend-paying companies in the shipping industry. It has a distribution yield of 5.48%.

The recession forced bulk ships like those owned by Teekay Shipping (NYSE:TK) and others to tighten operations. Thus, many are cash heavy and looking for undervalued ships to take advantage of an expected hike in tanker rates in 2013.

Fundamental analysts like Credit Suisse have a target of $32 for this ETF. The fund broke from a triple-top and a saucer formation in late January, and began trading within a bull channel. Buy under $18 for a three-month target of $25.

SEA Chart
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ETF to Buy #3 – iShares Dow Jones U.S. Healthcare Providers Index Fund (IHF)

The iShares Dow Jones U.S. Healthcare Providers Index Fund (NYSE:IHF) invests at least 90% of its assets in the health care sector including HMOs, hospitals, clinics, dental and eye care facilities, nursing homes, and rehabilitation and retirement centers.

With an aging population and a government health plan of some sort pending, this ETF is an ideal way to invest in the growing demands associated with the baby-boomer generation.

Technically IHF broke from a huge triple-top at $65 in March, with a long-term target of $100. But since it is overbought in the short term, our buy under price is $65.

IHF Chart
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 ETF to Buy #4 – Market Vectors High-Yield Municipal Index Fund (HYD)

Over a year ago, many analysts were steering investors away from municipal bonds suggesting a massive default by local communities. The defaults did not occur, and tax-free munis rallied.

The Market Vectors High-Yield Municipal Index Fund (NYSE:HYD) invests at least 80% in U.S. dollar-denominated, high-yield, long-term, tax-exempt bonds. The distribution yield for HYD is 6.6%, most of which is free from federal income tax. Morningstar rates HYD a “four-star” ETF.

Since the low in early 2011, HYD has traded in a tight bull channel, and this year volume has substantially increased as high-income investors seeking tax-free bonds have found it difficult to buy individual bonds at reasonable prices.

HYD Chart
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ETF to Buy #5 – PowerShares Preferred Portfolio ETF (PGX)

The PowerShares Preferred Portfolio ETF (NYSE:PGX) invests in the BofA Merrill Lynch Core Fixed Rate Preferred Securities Index. The fund’s holdings are primarily (98%) in preferred stocks in the financial services industry.

Thus, this investment is appropriate for investors who anticipate better growth for the banks and also wish to receive a high dividend return. The distribution yield from PGX is 6.46%.

Technically a new uptrend began when prices rose through the 50-day and 200-day moving averages on Jan. 3. Note the buy signal from the stochastic and the current support from the 50-day moving average at $14.35 to the support line at $14.22.

PGX Chart
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