Tag Archives: disney

3 Under-The-Radar ETF Breakout Contenders

Summary With the market trading in a wide range since the beginning of the year, many momentum investors may be searching for signs of life in alternative areas. Several ETFs are showing positive technical divergences or signs of breakout that may warrant closer scrutiny. Solar stocks, consumer discretionary, and mid-cap stocks are excellent contenders. With the SPDR S&P 500 ETF (NYSEARCA: SPY ) trading in a wide range since the beginning of the year, many momentum investors may be searching for signs of life in alternative areas of the market. Just because the broad measure of U.S. stocks is waffling sideways, doesn’t mean that there aren’t suitable ETF candidates to add to your watch list at this juncture. The following funds are just a few of the ETFs I have been monitoring over the past several weeks as they show positive technical divergences from their peers. Guggenheim Solar ETF (NYSEARCA: TAN ) Solar stocks had a horrific year in 2014 that included various whipsaws and other erratic price action. They finished the year markedly lower despite positive net strength in large-cap indices such as SPY. However, they may be looking to turn those fortunes around in 2015 and have been showing a bias towards higher prices since bottoming in January. TAN is the largest renewable energy ETF with over $300 million in total assets. This fund tracks 29 global solar energy companies engaged in the manufacture, installation, and maintenance of solar power equipment. The index is composed of 47% U.S.-based companies, with the remaining allocation spread amongst China, Hong Kong, and other smaller nations. As you can see on the chart below, TAN had some brief consolidation at its 50-day moving average and is now marching back towards its long-term 200-day moving average. Since the beginning of the year, this ETF has gained more than 9% and is continuing to show positive relative strength versus many sector alternatives. Aggressive growth investors who can stomach heightened volatility may want to research solar ETFs as a possible comeback story for 2015. Consumer Discretionary Select Sector SPDR (NYSEARCA: XLY ) Consumer discretionary stocks are another area of the market that has shown strong momentum through earnings season. XLY is heavily dominated by media, specialty retail, and other luxury goods sellers such as Walt Disney (NYSE: DIS ) and Home Depot (NYSE: HD ). This ETF contains 87 large-cap stocks and charges an expense ratio of 0.15%. The strong vote of confidence for this sector came when it recently broke out above its 2014 highs and is continuing to show impressive overall strength. Many investors consider this ETF to be an indicator of consumer health, and judging by the price action, the trend of consumer spending habits continues in earnest. XLY will certainly be an important sector of the market to watch as a potential growth-focused momentum trade in 2015. iShares Core S&P Mid-Cap ETF (NYSEARCA: IJH ) Mid-cap stocks are another area of the market, similar to XLY, which has newly peeked out above its 2014 highs. IJH is the largest ETF in this space that tracks 400 mid-sized companies with market capitalization between $1.5 billion and $5 billion. This fund has over $24 billion in total assets and charges a modest expense ratio of 0.12%. While mid-cap stocks don’t always get as much recognition as their large or small-cap peers, they do have the potential to be successful long-term growth candidates. The positive technical move in this space should be viewed as a sign of building momentum that may lead to outperformance versus SPY in 2015. For my growth clients, I am accessing the mid-cap space through the Vanguard Mid-Cap ETF (NYSEARCA: VO ). This passive index follows a similar basket of 375 stocks and includes a lower expense ratio at 0.09%. The Bottom Line These growth themes show promising characteristics of momentum and strength versus plain-vanilla ETF alternatives. However, any new entrants in these ETFs should implement a stop loss or sell discipline to define your risk management strategy. In addition, when starting a new position, I typically recommend breaking up the trade in pieces so that you can add slowly over a limited time. This allows you to better control your cost basis and allocation size. Disclosure: The author is long VO. (More…) The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article. Additional disclosure: David Fabian, FMD Capital Management, and/or clients may hold positions in the ETFs and mutual funds mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell, or hold securities.

A Stock Picker Establishing An ETF Portfolio: My Plans For A Roth IRA

Summary Building a global portfolio with ETFs within a Roth IRA. A “set it and forget it” portfolio to supplement individual stock picks in a taxable account. Diversification amongst sectors, market caps, geographical regions, and asset classes. With tax season around the corner, and as one of the lucky souls who will likely receive a refund this year, I’ve decided it’s time to consider funding a Roth IRA with the proceeds. My current idea is to build a “worry free” global equity portfolio with low-cost exchange-traded funds, coupled with a core bond holding to help smooth out volatility and build a source of income. Pruning the portfolio of individual stocks I consider myself a value investor at heart, with a soft-spot for dividend growth investing. My individual account is filled primarily with dividend-paying, large-cap blue chips. I’ve recently liquidated some positions (Kraft (NASDAQ: KRFT ), General Mills (NYSE: GIS ), Chevron (NYSE: CVX ), Exxon Mobil (NYSE: XOM ), and ConocoPhillips (NYSE: COP ), to be exact) in my portfolio since my last update , and I’m now holding 23 companies. I decided to limit my exposure to some overvalued, highly-leveraged staples, due to my previously overweighted exposure to the sector. I’m also primarily “ex-oil” at this point, with the exception of BP (NYSE: BP ), which I still think has some value left. I decided to limit my exposure to oil despite considering Chevron as a “top pick” in the beginning of the year, because I’m not convinced oil will double to rebound near $100/barrel anytime soon, and despite much lower earnings prospects, the companies I once owned still trade near where they did when oil was much, much higher. I believe a time will come when I will be able to buy them back at much better prices. Most of the proceeds were rolled into Disney (NYSE: DIS ) and Gilead (NASDAQ: GILD ) pre-earnings, with the rest used to re-establish a position in Cisco (NASDAQ: CSCO ) and add to an existing position in Microsoft (NASDAQ: MSFT ), after a large, earnings-related sell-off. MetLife (NYSE: MET ) was also added, and I plan to continue to gobble up shares of cheap financial companies as the Fed prepares to raise rates. A paradigm shift After “cutting the fat” and changing my view on oil so suddenly, I decided that maybe I should “hedge my bets” a little by dedicating some capital to more passive investments. Sure, I’m doing fine so far with my picks while building a nice stream of dividends, but what if I’m not always so lucky? I also noticed that I was invested mostly, if not only, in large to mega caps within the U.S. as well, which may not necessarily be a bad thing. In today’s market environment, these types of companies tend to outperform, but this may not always be the case if rates normalize and bonds start paying respectable yields again. Then small caps may see their time in the sun again as well. So the first ETF I am considering will include smaller companies. The U.S. equity portion For the domestic portion of my ETF portfolio, I am currently considering the Vanguard Total Stock Market ETF (NYSEARCA: VTI ). This fund has a rock-bottom expense ratio of just 0.05% and covers a wide spectrum of U.S. stocks, including a 6.5% exposure to small caps and a 19% weighting assigned to mid caps. To complement VTI, I plan to add an allocation to real estate with the Vanguard REIT ETF (NYSEARCA: VNQ ). This will add another layer of diversification to my Roth IRA, as well as a higher yield of about 3.37% to offset the miniscule yield of roughly 1.88% offered by VTI. I plan to equally weight these two ETFs, and together they will compose about 36% of the overall portfolio and half of the overall equity portion of the portfolio. Moving overseas To gain exposure to international equity markets, I plan to equally weight the Vanguard FTSE Developed Markets ETF (NYSEARCA: VEA ) and the Vanguard FTSE Emerging Markets ETF (NYSEARCA: VWO ). These two funds will fill the other half of my equity allocation within my Roth. VEA carries a low expense ratio of 0.09% and VWO’s expense ratio sits at 0.15%. VEA gives me exposure to Europe, with core holdings such as Nestle ( OTCPK:NSRGY ) and Novartis (NYSE: NVS ), as well as Japanese markets with companies like Toyota (NYSE: TM ). Japan, the United Kingdom, and Switzerland make up half the geographical allocation of the fund, with countries like Germany, Australia, and other developed markets making up the rest. To offset slower-growing foreign markets, VWO offers more risk and potentially more reward, with over 20% of the weighting placed in China and almost 12% exposure to India. These markets should continue to grow at a rapid pace, and this fund gives me lower-risk exposure to this growth without the headaches of selecting individual companies in these countries. Holding my nose and buying bonds The last ETF I plan on adding to my Roth to round out the overall portfolio is the Vanguard Total Bond Market ETF (NYSEARCA: BND ). This will be my first foray into bonds, and I think this fund is a good anchor to begin the process of establishing an allocation to fixed income. The fund tracks the performance of the Barclays U.S. Aggregate Float Adjusted Index. The reason I selected this fund is due to its lower expense ratio of just 0.08%, as well as its lower duration of roughly 5.6 years. The low expenses are extremely important for a bond fund, and the low duration is important to limit risks related to rising interest rates. The fund also holds only high-quality bonds credit-wise with about 42% of the fund in investment-grade government bonds, roughly 23% in investment-grade corporates, and 20% in agencies. BND will be the anchor of my fixed income allocation for now, and when rates do begin to normalize, I may consider extending the duration and increasing the yield of my overall bond portfolio. I’ll accomplish this by adding shares of the iShares 7-10 Year Treasury Bond ETF (NYSEARCA: IEF ), and then even longer-dated treasuries with the iShares 20+ Year Treasury Bond ETF (NYSEARCA: TLT ). BND will account for about 27% of the overall portfolio, equal to my age of 27 years old. Conclusion Once funded, I plan to add these 5 ETFs to my newly established Roth to offset some of the risk of the individual stocks in my taxable account. As a retirement account, I want a globally diversified equity portfolio, anchored with investment grade bonds with only moderate exposure to rising rates. I believe the above-mentioned funds can achieve this goal in a simple, cost-effective way, and also in a way that allows me to easily rebalance if need be. While this ETF portfolio may be far from perfect, and now may not be the optimal time to be buying into these funds, I have a 30+ year timeline to let them marinate. I plan to rebalance at least annually as well. I also plan to shift more towards bonds the older I get, essentially creating my own “target date” fund. I decided to write up this portfolio concept to share it with the Seeking Alpha community, hopefully receiving some constructive criticism along the way. What do you think? Please let me know in the comments section below. Disclosure: The author is long BP, DIS, GILD, CSCO, MSFT, MET. (More…) The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article. Additional disclosure: Articles I write for Seeking Alpha represent my own personal opinion and should not be taken as professional investment advice. I am not a registered financial adviser. Due diligence and/or consultation with your investment adviser should be undertaken before making any financial decisions, as these decisions are an individual’s personal responsibility.