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A Shot of Diageo: ETF Alternatives for Hot Stock Picks

This week we look at small-cap, media, European, tech and real estate stocks

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Last week, the S&P 500 gained 0.5%, powering forward for a fifth consecutive week. Stocks are still red-hot in 2013, with the index up 26.3% year-to-date through November 8. While it’s getting harder to find value out there, InvestorPlace contributors were busy last week looking for good picks in Q4. Here are my ETF alternatives.

Small-Cap Stocks

Many investors avoid small-cap stocks fearing they’re much too volatile. So you can imagine the reaction of some investors to Tim Melvin’s two small-cap recommendations for companies in Canada and Bermuda. Tim’s been investing a long time, so he knows a thing or two about value. However, most investors would be wise to surround their small-cap investments with bigger, more stable stocks.

Or you could hand the small-cap stock picking to an ETF like the First Trust Developed Markets ex-US Small Cap AlphaDEX Fund (FDTS), which employs the AlphaDEX stock selection methodology to pick small-cap stocks from the S&P Developed Markets ex-US Broad Market Index. Using enhanced indexing, the AlphaDEX selects those stocks exhibiting greater potential capital appreciation. The FDTS is a group of 392 holdings with stocks from Japan, South Korea, Canada, UK, and Hong Kong representing  68% of the portfolio. You’ll especially like this fund if you believe Japan’s renaissance will continue, as the country has the largest weighting at 34.04%. The downside — its expense ratio is an eye-popping 0.80%.

Time Warner Cable

Anytime John Malone’s name is mentioned in the media I’m always interested in seeing what’s being said about the billionaire — he’s a smart cookie. So, when Jonathan Berr wrote about all the interested parties in Time Warner Cable (TWC) last week, I was hooked immediately. Deutsche Bank analyst Brian Russo feels Charter Communications (CHTR) will be the successful in its attempt to merge with TWC. Regardless of whether this happens, Berr sees TWC getting bigger one way or another.

For those who expect TWC to get bought, your best ETF alternative is the PowerShares Dynamic Media Portfolio (PBS), which has the cable company as its fourth-largest holding, at a weighting of 5.04%. PBS invests in 30 of the biggest media companies in the US, spread across all market caps to provide investors with good diversification. Its performance in recent years has been far superior to that of the S&P 500. With all that’s happening between the content creators and the content distributors, PBS helps ensure you’re on the winning side of this battle.

Article printed from InvestorPlace Media,

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