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A New Kind of Value Meal: ETF Alternatives for Hot Stock Picks

This week we look at leisure, mid-cap, steel stocks and more

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Although last week was a volatile one, the S&P 500 still managed to gain 1.3% over five days of trading and it’s shaping up to be one of the best Septembers ever.

The index finished last week up more than 20% year-to-date and, with just one quarter to go, InvestorPlace contributors continued tossing out stock recommendations to close out the year. These ETF alternatives might be a safer way of going about those picks:

Capital Markets

This first exchange-traded fund actually bundles two stock recommendations from two different articles. First, Johnson Research Group recommended three heavily shorted stocks worth buying, one of which was Legg Mason (LM), an investment manager providing mutual funds, closed-end funds and institutional money management. Despite the company’s restructuring, the stock has gained over 30% year-to-date.

On top of that, Dan Burrows thinks TD Ameritrade (AMTD) is the best option among the big retail brokers. While the group has had a big run in 2013, TD Ameritrade is the only firm growing assets with any kind of regularity — the key to success in the brokerage business.

Both stocks are holdings of the SPDR S&P Capital Markets ETF (KCE), a modified equal weight portfolio of 45 stocks. Legg Mason and TD Ameritrade have weightings of 2.86% and 2.7%, respectively. Its annual expense ratio is 0.35%, with 0.91% in acquired fund fees and expenses. These fees are not incurred by the fund itself, but are expenses incurred through investment in various business development companies.

Casual Dining

Louis Navellier recommended three casual dining stocks — Sonic (SONC), Wendy’s (WEN) and Domino’s (DPZ) — last week, as he feels Americans are looking for faster, cheaper dining options. Plus, all three are kicking their earnings growth into high gear. That should mean continued appreciation the stocks, which are already up an average of 71% year-to-date.

The ETF alternative is a no-brainer. The PowerShares Dynamic Leisure and Entertainment Portfolio (PEJ) is a 30-stock portfolio of companies that provide leisure and entertainment for the American public. The top holding is Liberty Media (LMCA) — whose big investment is SiriusXM (SIRI) — but Sonic also weighs in at 2.96%, followed by Wendy’s at 2.86% and Domino’s at 2.80%.

Over the past five years, PEJ has achieved an annualized total return of more than 18%, is rated four stars by Morningstar, and has a reasonable net expense ratio of 0.63% that’s well worth it.


Gas prices have averaged more than $3 per gallon for over 1,000 consecutive days. According to energy expert Aaron Levitt, one of the major beneficiaries is HollyFrontier (HFC), as the company’s Midwest refineries keep costs low and profits per barrel high. With a dividend yield of 2.9%, Levitt sees this refiner as a very smart play.

Article printed from InvestorPlace Media,

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