3 Contrarian ETFs to Consider During the Coronavirus

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Contrarian ETFs - 3 Contrarian ETFs to Consider During the Coronavirus

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Currently, the markets are in a frenzy due to the coronavirus from China pandemic. Investment markets hate uncertainty, and this environment qualifies. However, coronavirus investing now might make you wealthier tomorrow — especially in something like contrarian ETFs.

The current spreading of and reactions to the virus have created fear and massive visits to the stores to stock up on a variety of products. With self-quarantine and compromised supply chains, consumers are rushing to buy staples, household items and non-perishable food. Large events are being cancelled as workers are advised to work from home.

These factors are creating economic stress on the environment which may lead to a recession in the near future.

Brave investors and those with a long time horizon might want to begin dipping their toes in the most battered sectors. Historically, investors who are courageous during times of economic downturns, and buy into the markets near the bottom, have been richly rewarded.

There’s no way to know where the bottom of the market is, but for investors with a long time horizon, willing to begin buying, there are many sectors that will likely be worth much more in 5 to 10 years than they are worth today.

Or, if you’re not up to picking a sector fund or two, consider using a low fee investment manager to divvy up your resources across the board. Investing near market bottoms is a great way to grow your wealth long term.

Some of the industries that are and will be hardest hit by the coronavirus outbreak may be the best performers going forward. After all, the travel and hospitality industries will be battered as consumers stay home. But at some point, consumers will resume their vacations and business trips.

Will all that in mind, here are three contrarian ETFs for coronavirus investing that might be worth a look.

Contrarian ETFs to Consider: U.S. Global Jets ETF (JETS)

Contrarian ETFs to Consider: U.S. Global Jets ETF (JETS)

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With airlines cutting routes and passengers staying home, the formerly strong U.S. Global Jets ETF (NYSEARCA:JETS) is being slammed by coronavirus worries. Even Warren Buffett is buying up shares of Delta. With the possibility of a government bailout, this sector is a great contrarian ETF to play the coronavirus market drop.

This all airline ETF is down about  60% within the last month and may fall even further. Yet, it’s likely that once the coronavirus is under control and economic spending resumes investors will resume travel. That said, this all airline stock ETF is a perfect way to play the coronavirus infected airline industry.

The fund tracks the U.S. Global Jets Index, and currently has 38 total holdings. The fund is fundamentally strong with an average return on equity of 46.88, a low price-earnings (P/E) ratio of 7.17 and price to book value of 1.71. Moreover, the airlines are major companies with a weighted average market cap of $15.93 billion.

Currently, the top five holdings of JETS are American Airlines (NASDAQ:AAL), Delta Air Lines (NYSE:DAL), Southwest Airlines (NYSE:LUV), United Airlines (NASDAQ:UAL) and JetBlue (NASDAQ:JBLU). These holdings comprise more than 50% of the portfolio assets.

Although no one can predict the market bottom, slowly buying shares in JETS offers a pure airline stock play for contrarian investors. Coronavirus investing takes courage, but may pay off handsomely in years to come.

Financial Select Sector SPDR Fund (XLF)

Contrarian ETFs to Consider: Financial Select Sector SPDR Fund (XLF)

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The Financial Select Sector SPDR Fund (NYSEARCA:XLF) is down roughly 40% this month. And while the financial sector has been on a tear in recent years, this pull back might provide an opportunity to buy bargain financial stocks. The ETF tracks the Financial Select Sector index which includes diversified financial services companies, insurance firms, banks, mortgage real estate trusts, consumer finance companies and more.

Clearly, an economic slowdown is in progress — and a recession may follow. During times of economic downturn, consumers refrain from borrowing, buying homes and may even default on loans. This type of scenario will temporarily hurt the financial services industries. Although, as the economy rebounds, so will this sector.

XLF has a current yield of 2.16%, after it’s huge decline. The 67 total holdings within the portfolio are distributed with 38% in banks, 20% in capital markets, 18% in insurance companies and the remainder in diversified and consumer finance firms. The 0.13% expense ratio is also quite reasonable.

Fidelity MSCI Information Technology Index (FTEC)

Contrarian ETFs to Consider: Fidelity MSCI Information Technology Index (FTEC)

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The Fidelity MSCI Information Technology Index (NYSEARCA:FTEC) has fallen along with the rest of the stock market after stellar performance for many years. With historical earnings growth of 21% and a 1.1% yield, the industry is compelling.

From the mid-February high of $80.99, the ETF is down more than 30%. With expected supply chain bottlenecks, this industry is expected to experience further pain. Although, even now, it’s not as cheaply valued as some of the other ETFs we’ve mentioned. An advantage of FTEC is the low the 0.084% expense ratio..

FTEC tracks the performance of the MSCI USA IMI Information Technology Index. This benchmark follows the information technology index with well-known companies such as Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Visa (NYSE:V) and Mastercard (NYSE:MA) in its top positions. Be aware that this fund, like some if its competing technology ETFs, is highly concentrated in the top two holdings: Apple and Microsoft, which make up 36% of the fund.

So for investors looking to buy technology stocks on sale, it may be the time to explore a technology ETF.

An alternative to this market capitalization weight ETF is the Invesco S&P 500 Equal Weight Technology ETF (NYSEARCA:RYT). This fund weights technology companies equally and not by market capitalization. This will even out the concentration with the fund, of the biggest tech companies.

Barbara A. Friedberg, MBA, MS is a veteran portfolio manager, expert investor, and former university finance instructor. She is editor/author of Personal Finance; An Encyclopedia of Modern Money Management and two additional money books. She is CEO of Robo-Advisor Pros.com, a robo-advisor review and information website. Additionally, Friedberg is publisher of the well-regarded investment website Barbara Friedberg Personal Finance.com. Follow her on twitter @barbfriedberg and @roboadvisorpros. As of this writing, she did not hold a position in any of the aforementioned securities.

Barbara A. Friedberg, MBA, MS is a veteran portfolio manager, expert investor, and former university finance instructor. She is editor/author ofPersonal Finance; An Encyclopedia of Modern Money Management and two additional money books.She is CEO of Robo-Advisor Pros.com, a robo-advisor review and information website. Additionally, Friedberg is publisher of the well-regarded investment website Barbara Friedberg Personal Finance.com. Follow her on twitter @barbfriedberg and @roboadvisorpros. As of this writing, she did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2020/03/3-contrarian-investment-picks-to-consider-during-coronavirus/.

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