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ETF Alternatives for Last Week’s Hot Stocks

This week we look at picks in gaming, energy and technology


The Cyprus bailout kept the markets in negative territory most of last week — including the S&P 500, which lost 0.24% — as investors debated what this latest batch of financial woes means to Europe and the rest of the world.

Granted, with almost one-third of the year in the books, the S&P 500 is up impressively at more than 9%, but picking stocks at this point has gotten a little trickier. Here are some ETF alternatives to some of last week’s InvestorPlace stock recommendations:

Melco Crown Entertainment

On March 19, James Brumley contemplated what to make of the poor Macau results for January and February in light of March’s 34% year-over-year increase in gaming activity through the first 17 days of the month. While it’s too early to be certain, Nomura believes the 12% consensus estimate for revenue growth in Macau in 2013 is far too conservative. With that in mind, James had several suggestions to capture this growth — most notably Melco Crown Entertainment (NASDAQ:MPEL), which is busy developing Cotai’s Studio City as well as a new casino in the burgeoning Philippines market.

The obvious investment in this instance is the Market Vectors Gaming ETF (NYSE:BJK), the only pure-play gambling ETF. The BJK is a portfolio of 47 holdings including Melco Crown at a weighting of 2.7%. All three of James’ other recommendations are top 10 holdings, and China represents 24% of the ETF’s $47 million in total net assets. When compared to something like the SPDR S&P 500 (NYSE:SPY), it doesn’t have much volume, but it has enough if you’re planning to hold for the long-term.


Cyber threats are becoming so commonplace, noted Hillary Kramer, that both the government and corporations are spending billions to keep their computer systems safe from online criminals. Kramer suggests the cyber security market will be an $80 billion global market within the next five years. It goes without saying that the companies participating in this industry will benefit greatly by the need to protect systems and information. Whether it be software, hardware, cloud computing or other technology, product and service providers like Symantec (NASDAQ:SYMC), Fortinet (NASDAQ:FTNT) and Sourcefire (NASDAQ:FIRE) should win big.

You can buy all three of those stocks or you can buy one ETF — the iShares North American Tech-Software ETF (NYSE:IGV) — that owns all of them along with 58 other North American software stocks. Symantec is the sixth-largest holding in the fund at 5.75%, Fortinet is farther down at 1.04% and Sourcefire is at 0.6%. Long-term performance has been excellent, averaging an annualized total return of 10.07% during the past 10 years — 229 basis points higher than the SPY. Its expense ratio at 0.48% is about the national average.


One of the better-performing industries over the past year has been booze, and Tom Taulli considered the pros and cons of Diageo (NYSE:DEO), the world’s largest distiller whose shares are up 28% over the past 52 weeks. Very few industries can claim such consistent financial and stock performance. With big things happening in Africa and other parts of the world, there’s always some place for Diageo to grow. Sure, its valuation isn’t cheap, but you have to pay more for quality.

There’s really no easy way to capture Diageo if you live in the U.S., but the RevenueShares Navellier Overall A-100 Fund (NYSE:RWV) gives you the best chance of capturing Diageo’s future success. The fund is based on Louis Navellier’s A-100 Index, which whittles down a list of 5,000 stocks to 100 that meet his criteria for revenue and earnings growth, along with other fundamental factors such as cash flow. The big difference between the fund and the index is that the fund ranks the 100 by revenue rather than market capitalization. Therefore, Diageo has a weighting of 3.26% in the fund, even though it represents 11.83% of the index. Be forewarned: It has average daily volume of roughly 3,000, making it extremely illiquid and putting it on the ETF Deathwatch for some time.

Anadarko Petroleum

Aaron Levitt tells us that Anadarko Petroleum (NYSE:APC) has drilled a well that is 1,000 feet thick and could produce 750 million barrels of crude oil. Originally, the independent oil and gas producer thought the find was 300 feet deep, meaning this well is more than three times larger than expected. The find adds $3 per share in value with its target price, which is $20 higher than where it’s currently trading. Attractive to firms like Exxon Mobil (NYSE:XOM), Anadarko’s stock is sure to gain momentum.

If you want some diversification beyond owning Anadarko, your best bet is to buy the iShares U.S. Oil & Gas Exploration & Production ETF (NYSE:IEO), which has the oil producer at a weighting of 7.97% — its second-largest position behind Occidental Petroleum (NYSE:OXY). A second fund to consider is the Market Vectors Unconventional Oil & Gas ETF (NYSE:FRAK), which also has Anadarko as its second-largest holding at 7.91%. However, its management expense ratio is 8 basis points higher, at 0.54%; more importantly, its liquidity and assets under management are far smaller than the IEO. I’d go with the iShares fund on this occasion.

Women-led Companies

Women in the boardroom: It’s a popular topic of late. Facebook (NASDAQ:FB) COO Sheryl Sandberg believes more women should occupy the top corporate jobs in America and that it’s a good thing for talented women to strive for the corner office. InvestorPlace editorial assistant Alyssa Oursler picked four girl-powered stocks March 22 that have done well in the past year and that should continue to do so in the future — in part because of their female leadership.

Normally in this spot I’d come up with an ETF alternative for Alyssa’s four stock recommendations. However, I have an even better option — one that gives you a girl-powered portfolio and then some. It’s from a relatively new company called Motif Investing, which has created technology that allows investors to play investing ideas like Alyssa’s very inexpensively. Its “No Glass Ceilings” motif is a portfolio of 19 U.S. companies currently run by women. It’s up 14.4% year-to-date through March 22 compared to 7% for the S&P 500. Best of all, you can own all 19 stocks for a single $9.95 commission. It’s a truly innovative idea in financial services.

As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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