Fly With a JetBlue Fund: ETF Alternatives for Hot Stock Picks

by Will Ashworth | May 6, 2013 1:47 pm

Last week was another good one as the S&P 500 gained over 2% to close at a record high. The index has gained over 13% year-to-date and, improving employment numbers should keep the rally going.

With that in mind, InvestorPlace contributors were busy coming up with stock picks to get you through the summer. Here are my ETF alternatives to those stock recommendations:


To start, James Brumley discussed three tech companies[1] last week that are all potential breakout companies: 3D Systems (NYSE:DDD[2]), Checkpoint Systems (NYSE:CKP[3]) and Sierra Wireless (NASDAQ:SWIR[4]). Of the three, 3D Systems seems to be getting the most attention. Its printers are all the rage these days and are available at a cost below $1,000. Estimates put the 3D printer market at $3 billion by 2018, with 3D Systems playing a big part in that.

The best ETF available to play this trio is the S&P SmallCap Information Technology Portfolio (NASDAQ:PSCT[5]) — a fund with 127 information technology stocks that are part of the larger S&P SmallCap 600 Index. Underperforming both the S&P SmallCap 600 and S&P 500 since its inception in April 2010, it’s time for it to come alive. 3D Systems is the second largest holding at 3.09% while Checkpoint Systems has a weighting of 0.45%. And although Sierra Wireless isn’t a part of its holdings, PSCT has plenty of interesting information technology companies to take its place.

Bristow Group

Up next, Aaron Levitt focused on some of the transportation service companies that keep the offshore oil industry[6] running efficiently. Of the three Levitt mentioned, Bristow Group (NYSE:BRS[7]) seems the most interesting. It has a fleet of 556 helicopters that ferry oil rig workers to their job from land. Apparently, it is the second largest air-force in the world out side the U.S. military. With strong revenue and earnings growth, this is a tempting stock to own all on its own.

However, the point of ETF alternatives is to reduce the company risk of investing in a single security. With that in mind, I’m going to suggest investors have a look at the Oil & Gas Equipment & Services SPDR (NYSE:XES[8]), which holds both Bristow Group at a weighting of 2.47% and Era Group (NYSE:ERA[9]) at 0.99%. The XES gives you a great cross-section of companies operating in the very competitive oil & gas services industry. At an annual expense ratio of 0.35%, its management fees are what I would consider reasonable, if not cheap. It’s also ahead of the broader S&P so far this year.

Preferred Shares

Now that we’re well into the month of May, investors contemplate whether to exit the markets for the summer in order to avoid the usual swoon. While I don’t subscribe to “Sell in May and Go Away,” some do … and that’s why Lawrence Meyers sees preferred shares[10] as an excellent alternative. He especially sees the need for income investors who depend on a monthly income stream and provides readers with several specific preferred shares worth considering. Meyers  himself owns Ashford Hospitality Trust‘s (NYSE:AHT[11]) D Series of preferred shares, which pay an annual dividend of $2.11 per share.   

Personally, though, I see an ETF alternative in this situation to be a much smarter choice. The iShares U.S. Preferred Stock ETF (NYSE:PFF[12]) replicates the S&P Preferred Stock Index, a portfolio of 323 preferred shares including Ashford Hospital Trust (E Series), paying a 30-day SEC yield of 5.62%. As Meyers mentions in his article, preferred share prices don’t move very much, trading much like bonds. The PFF increased 2.4% between April 30, 2012, and September 30, 2012. That’s less than one-half a percentage point per month. In other words, they’re not very volatile.


The Johnson Research Group had a hankering for low-priced stocks April 30, recommending three stocks under $10[13] worth considering. The one that caught my attention was JetBlue Airways (NASDAQ:JBLU[14]), which is trading for less than $7.

For those looking for a safer play, I recommend the Transportation SPDR (NYSE:XTN[15]), a modified equal weight index which invests in the various sub-industries that represent the transportation sector in the S&P Total Market Index. It has 40 holdings, with airlines at 26% of the portfolio and JetBlue weighted at 3.41%. The XTN has significantly outperformed the S&P 500 in the past year and, with trucking the largest piece of the portfolio at 34%, any improvement in the economy is going to mean further upside for XTN.

Portfolio Recovery Associates

My final pick from last week comes again from Meyers who talked about the cash cow that is Portfolio Recovery Associates (NASDAQ:PRAA[16]). With the abundant availability of bad debt[17], it’s growing earnings at a much faster rate than its P/E ratio, which makes it a very attractive investment at this point.

A good fund to play it: the PowerShares S&P SmallCap Financials Portfolio (NASDAQ:PSCF[18]). Portfolio Recovery Associates is one of 108 financial sector holdings in the S&P SmallCap 600. With a 30-day SEC yield of 2.52%, this fund is an excellent way to take advantage of the many smaller financial services companies operating in the U.S. today. Plus, it’s achieved a 3-year annualized total return of 11.6% through May 3 — 740 basis points higher than the iShares Dow Jones US Financial  Services ETF (NYSE:IYG[19]), the fund many investors choose when considering financial stocks.

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

  1. three tech companies:
  2. DDD:
  3. CKP:
  4. SWIR:
  5. PSCT:
  6. offshore oil industry:
  7. BRS:
  8. XES:
  9. ERA:
  10. preferred shares:
  11. AHT:
  12. PFF:
  13. three stocks under $10:
  14. JBLU:
  15. XTN:
  16. PRAA:
  17. abundant availability of bad debt:
  18. PSCF:
  19. IYG:

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