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Mine the Bakken Oil Surge: ETF Alternatives for Hot Stock Picks

ETF plays for gun stocks, the Bakken and more

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The government shutdown was popular conversation this past week.

In the end, it didn’t seem to rile the markets much, as the S&P 500 was off just 0.1% for the five days of trading. With the stock picking getting increasingly difficult, InvestorPlace contributors went to work finding some solid recommendations. Here are my ETF alternatives.


With the federal government was in the spotlight this past week, Hilary Kramer focused on Virginia-based Maximus (MMS), a provider of processing services to government health and human services agencies in the US, Canada and elsewhere. Administrative services for Medicaid and Medicare programs are one of its specialties. Its economies of scale allow it to more efficiently process paperwork than governments can — a big reason why its services are in high demand. This is one small-cap expected to benefit from Obamacare.

With a market cap of $3.2 billion, I wouldn’t consider Maximus a small-cap (I view mid-caps as $2 billion to $10 billion) but the S&P SmallCap 600 Capped Information Technology Index does, so I’m going with the PowerShares S&P SmallCap Information Technology Portfolio (PSCT), which seeks to replicate the performance of the index. PSCT is a group of 125 holdings related to the information technology field, and Maximus is the second-largest weighting at 2.67%. In existence since April 2010, its performance since its inception is slightly lower than the entire S&P SmallCap 600, but much higher than the S&P 500. Especially attractive is its annual expense ratio which is just 0.29%. That’s very good for a small-cap fund.

Gun Stocks

On the first day of October, Jim Woods was talking about guns. Specifically, he’s interested in Sturm, Ruger & Co (RGR) and Smith & Wesson Holding (SWHC), two gun manufacturers that have done very well in recent years. Woods believes that Americans will continue to hoard guns as long as the federal government seeks to restrict their use through tighter controls. As a result, both stocks have done very well the past three years with Ruger achieving a 75% annualized total return and Smith & Wesson and equally impressive 44%. With the political scenario regarding guns not expected to change, Jim sees more gains in the future.

A great way to play the entire defense industry is to buy iShares’ U.S. Aerospace & Defense ETF (ITA), which is just as much about commercial airplanes as it is guns and fighter planes. ITA holds a total of 38 stocks, including the two gun manufacturers whose weightings are 1.32% (Ruger) and 0.91% (Smith & Wesson). The top 10 holdings represent 56.7% of the fund’s $187 million in total net assets, which fits nicely between too focused and too diversified. Its biggest holding at 9.55% is Boeing (BA), a stock I wholeheartedly recommend for long-term investors. The ITA is a good secondary fund to hold in addition to core investments like the SPDR S&P 500 (SPY).

The Bakken

I don’t know about you but I just love saying the word “Bakken.” I might not be an oil expert like Aaron Levitt, but I can spot an opportunity a mile away. Last week, Aaron’s article “3 Stocks to Cash In on the Surging Bakken” recommended Continental Resources (CLR), Oasis Petroleum (OAS), and Oneok Partners (OKS). The first two are oil producers while the third is a pipeline company. All three look like good long-term picks given the strength of the Bakken (I said it again) production today and in the future. America’s energy independence is absolutely reliant on the Bakken’s production.

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