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Posts Tagged ‘first-trust’

Apple Inc. (NASDAQ:AAPL): Using Short Strangles To Trade AAPL Options

October 17th, 2012

J.W. Jones: My last missive dealt with a simple trading plan for XOM using the straightforward easily managed and easily understood strategy of selling naked puts and either allowing assignment of the stock and entering a covered call campaign or closing the position after Read more…

OPTIONS, Technical Trading, Technology

Three ETFs Influenced By Accelerated Economic Growth

November 30th, 2010

Although it is hard to say that the US economy is in a sustainable recovery, there are plenty of signs showing that economic growth is accelerating, paving the path to opportunity for the Retail HOLDRs (RTH), the PowerShares Dynamic Retail (PMR) and the First Trust Dow Jones Internet Index (FDN).

The most promising and upbeat news recently came from a decline in new applications for jobless claims in the week ending November 20, 2010.  The 407,000 applications were far lower than expected and is aiding in easing concerns about job security and income growth.  This can further be supported by an increase in personal spending, which jumped to 0.4% in October, marking the fourth consecutive month of increased consumer spending. 

As for income growth, wages and salaries witnessed there largest jump in five months, increasing 0.6% while personal income jumped 0.5% in October.  This, in conjunction with non-existent inflation, is expected to increase purchasing power which is resulting in improved consumer sentiment.  According to the University of Michigan/Reuters consumer sentiment index increased to a 71.6 from 67.7, the highest level in nearly 20 months. 

To further support the notion that the US economy is in growth mode, many suggest that, aggregately, Americans have increased their credit-card debt for the first time in nearly two-years in such a manner that is consistent with increases in household income.  The consumer is such a critical factor in US economic growth because consumer spending constitutes nearly 70% of US GDP.

As mentioned above, three ETFs influenced by accelerated economic growth include:

  • Retail HOLDRs (RTH), which allocates a significant portion of its assets to Wal-Mart (WMT), Amazon (AMZN) and Target (TGT).
  • PowerShares Dynamic Retail (PMR), which allocates a significant portion of its assets to Bed Bath & Beyond (BBBY), Limited Brands (LTD) and Costco Wholesale Corp. (COST).
  • First Trust Dow Jones Internet Index (FDN), which boasts Amazon, eBay (EBAY) and Priceline (PCLN) as top holdings, all internet-based companies that are highly correlated with increased consumer spending.

Disclosure: No Positions

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Three ETFs Influenced By Accelerated Economic Growth




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ETF, Uncategorized

Go for the Gold with Mining ETFs

November 11th, 2010

Ron Rowland

Do you like to dig? I have to admit, it’s not my favorite thing. But if I knew there was gold in the ground I might think differently.

In fact, there is gold in the ground — and plenty of other valuable minerals, too. The hardest part is finding it. However, the digging gets a lot easier when you know where to aim.

Exchange-traded funds are a great way to guide your shovel toward profits in the mining sector. Today I’ll tell you why. I’ll also name several ETFs to consider if you want to get involved in this potentially highly profitable business.

Before we go any further, we need to make an important distinction …

Mining sector ETFs are not the same as ETFs that are based on physical metals. Mining stocks are still stocks. Their performance is related to the underlying commodities — but not always. For instance, gold and silver mining stocks can go down even if gold and silver bullion go up. Or the miners can be up when the metals are down.

There’s Gold in These ETFs

Gold is the ultimate store of wealth.
Gold is the ultimate store of wealth.

Gold’s allure is ancient. People have been searching for it, mining it, stealing it, and trading with it for thousands of years. Even in a world of paper and electronic currencies, gold is still widely accepted as the ultimate store of wealth.

Unfortunately, gold isn’t so shiny in its natural state. Usually it is found in tiny or even microscopic particles, deep underground or dispersed across large areas. This scarcity is what makes gold so valuable.

You might not be a prospector yourself, but you can still share in the profits by bankrolling today’s forty-niners. Here are three ETFs that focus on gold mining stocks:

  • Market Vectors Gold Miners (GDX) is the most-active ETF in this category and also the most liquid. It concentrates on the liquid, large-cap stocks of companies in the gold mining business.
  • Market Vectors Junior Gold Miners (GDXJ) zeros in on small-cap gold producers. These are riskier stocks, but they also have tremendous potential.
  • Global X Gold Explorers (GLDX) is a new fund that tries to get even more specialized. It owns early-stage companies that are still looking for gold — and haven’t necessarily found it yet. As you might imagine, this makes GLDX a high-risk play with potentially great rewards.

Gold isn’t the only precious metal, of course. Let’s widen our view to look at some others …

Silver, Platinum, Copper and More

Silver and platinum are also very rare, and throughout history they have been used in much the same way as gold. Silver is often thought of as the “poor man’s gold.” And platinum is even more valuable than gold in some ways.

Then there is copper …

Wire products are a major user of copper.
Wire products are a major user of copper.

Used primarily for industrial purposes, copper is often found alongside silver. For this reason it is sometimes thought of as a semi-precious metal. Pennies used to be pure copper; today they are mostly zinc with a thin copper plating.

You’ve probably heard a lot of buzz lately about “rare earth” metals. These are super-rare minerals needed for high-tech manufacturing. Some of them are extremely valuable — and extremely scarce. Mining for them can be a very profitable business.

You can take your pick of mining stocks focused on all these metals. If you want to go the ETF route — which I highly suggest — here are some to consider:

  • Global X Silver Miners (SIL)
  • First Trust ISE Global Platinum (PLTM)
  • Global X Copper Miners (COPX)
  • First Trust ISE Global Copper (CU)
  • Market Vectors Rare Earth/Strategic Metals (REMX)

The Hottest Metal: Uranium!

Uranium is found in low levels within rocks, soil and water and is more common than silver. The ore is crushed and refined into the pure metal.

Today uranium’s primary use is in nuclear reactors. One kilogram of uranium can provide as much energy as tons of coal. That’s a lot of power!

Yes, there are some environmental and safety concerns. But fossil fuels aren’t so clean, either.

Uranium is a big source of electricity.
Uranium is a big source of electricity.

As a result, I expect uranium demand will continue to increase — and the companies involved in producing it will continue to profit. Which stocks?

Right now the uranium industry is dominated by a handful of companies. This could change quickly as the business matures.

A good way to cover all the bases in uranium is with a new ETF, Global X Uranium (URA). URA just came out last week but trading has been heavy so far.

There are many other ETFs with varying levels of exposure to the mining sector. Those I’ve named here are only a small sample. The list is growing quickly as ETF sponsors try to get a piece of this fast-growing niche.

Be aware that mining stocks, other than a few in the large-cap category, tend to be small and illiquid. The same applies to the ETFs that own these stocks. Watch the trading volume and use a limit order whenever you buy or sell.

Best wishes,

Ron

P.S. To all you veterans out there, Happy Veteran’s Day! Thank you for your service.

Related posts:

  1. Gold Mining Stocks on Verge of Breaking Out!
  2. ETFs for the Gold Bull Market
  3. Three Ways into South America with ETFs

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Go for the Gold with Mining ETFs

Commodities, ETF, Mutual Fund, Uncategorized

Three ETFs To Play Electric Vehicles

October 18th, 2010

As President Obama continues to place an importance on energy efficiency and lowering carbon emissions, demand for electric vehicles is expected to spike paving the path to prosperity for the First Trust Smart Grid Infrastructure ETF (GRID), the Utilities Select Sector SPDR (XLU) and the Global X Lithium ETF (LIT).

The National Highway Safety Commission forecast that nearly 20% of all automobiles in the US will be running on some sort of a hybrid mechanism by 2015.  Furthermore, Aaron Levitt of Investopedia states that the U.S. has committed $2 billion in Recovery Act spending for advanced batteries production and nearly $25 billion for programs to promote car makers to retool their production lines for production of more fuel-efficient vehicles. 

As a result, many carmakers are starting to make changes to their lineups and offer these hybrid vehicles.  The most recent change came from General Motors as it announced the upcoming release of the Chevrolet Volt, which is an electric vehicle that runs on a battery and electricity generated from a gas-generator.  Additionally, German automaker Volkswagen plans on releasing all-electric within the next year or two. 

This phenomenon of electric vehicles has already been somewhat of a hit with consumers, illustrated by the performance of Tesla Motors (TSLA), which has witnessed insatiable demand for its Tesla Roadster.  As a result, Tesla expects to start production of a five-seat family sedan next year to tailor to expand its lineup.

At the end of the day, as governments continue to push for cleaner energy and lower carbon emissions, electric vehicles are expected to gain popularity giving support to the aforementioned ETFs.

  • First Trust Smart Grid Infrastructure ETF (GRID) is bound to reap the benefits of the infrastructure improvements and developments that will be required to sustain an electric cat movement, such as new transmission lines, power plants and charging stations.
  • the Utilities Select Sector SPDR (XLU), which will likely reap the benefits of increased electricity consumption
  • the Global X Lithium ETF (LIT), which will likely reap the benefits of increased demand of lithium-ion batteries, which are essential in electric and hybrid vehicles

Disclosure: No Positions

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Three ETFs To Play Electric Vehicles




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ETF, Uncategorized

Three ETFs To Play Electric Vehicles

October 18th, 2010

As President Obama continues to place an importance on energy efficiency and lowering carbon emissions, demand for electric vehicles is expected to spike paving the path to prosperity for the First Trust Smart Grid Infrastructure ETF (GRID), the Utilities Select Sector SPDR (XLU) and the Global X Lithium ETF (LIT).

The National Highway Safety Commission forecast that nearly 20% of all automobiles in the US will be running on some sort of a hybrid mechanism by 2015.  Furthermore, Aaron Levitt of Investopedia states that the U.S. has committed $2 billion in Recovery Act spending for advanced batteries production and nearly $25 billion for programs to promote car makers to retool their production lines for production of more fuel-efficient vehicles. 

As a result, many carmakers are starting to make changes to their lineups and offer these hybrid vehicles.  The most recent change came from General Motors as it announced the upcoming release of the Chevrolet Volt, which is an electric vehicle that runs on a battery and electricity generated from a gas-generator.  Additionally, German automaker Volkswagen plans on releasing all-electric within the next year or two. 

This phenomenon of electric vehicles has already been somewhat of a hit with consumers, illustrated by the performance of Tesla Motors (TSLA), which has witnessed insatiable demand for its Tesla Roadster.  As a result, Tesla expects to start production of a five-seat family sedan next year to tailor to expand its lineup.

At the end of the day, as governments continue to push for cleaner energy and lower carbon emissions, electric vehicles are expected to gain popularity giving support to the aforementioned ETFs.

  • First Trust Smart Grid Infrastructure ETF (GRID) is bound to reap the benefits of the infrastructure improvements and developments that will be required to sustain an electric cat movement, such as new transmission lines, power plants and charging stations.
  • the Utilities Select Sector SPDR (XLU), which will likely reap the benefits of increased electricity consumption
  • the Global X Lithium ETF (LIT), which will likely reap the benefits of increased demand of lithium-ion batteries, which are essential in electric and hybrid vehicles

Disclosure: No Positions

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Three ETFs To Play Electric Vehicles




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ETF, Uncategorized

Three Quant ETFs Outperforming Their Respective Markets

September 10th, 2010

Over the past few years, investors have been searching for investment tools that are “outside the box” to boost returns and add diversification, which has enabled quantitative exchange traded funds (ETFs) to grow at an exponential rate. 

In and of itself, the vast majority of ETF assets are still held in traditional beta funds which track well-known benchmarks like the S&P 500, the Russell 2000 or the MSCI Emerging Markets Index.  In fact, the SPDR S&P 500 (SPY), the iShares Russell 2000 Index (IYW) and the iShares MSCI Emerging Markets (EEM) continue to remain the most actively traded ETFs and make up a significant percentage of total assets that are invested in ETFs.

However, some ETF providers, like PowerShares, First Trust and Claymore have taken their offerings a step further by utilizing fundamental analysis and other quantitative methodologies to generate excess returns by identifying securities which are set to outperform the broader markets and experience above-average capital appreciation. 

One such ETF is the PowerShares Dynamic Large Cap Value Portfolio (PWV), which is designed to evaluate large-cap stocks and seeks to replicate the Dynamic Large Cap Value Intellidex Index, which is designed to select companies poised to outperform broad market benchmarks while maintaining consistent stylistically accurate exposure.   PWV boats Verizon Communications (VZ) and Coca-Cola Company (KO) as its top holdings.  Over the past three years, PWV has outperformed its competitor, the iShares Russell 1000 Value Index (IWD), which is a beta fund that tracks the Russell 1000 Value Index, by nearly 10 percent.

Another notable mention is the Claymore/Zacks Mid-Cap Core ETF (CZA), which utilizes quantitative methodologies to identify a group of roughly 100 securities that have the potential to outperform the Russell Midcap Index or the S&P 500 MidCap 400 Index.  Over the past year, CZA has outperformed both the SPDR S&P MidCap 400 (EDY) and the iShares Russell Midcap Index Fund (IWR) by nearly 5% and 6%, respectively. 

A third ETF that utilizes fundamental analysis is the First Trust Health Care AlphaDEX (FXH).  FXH is linked to the StrataQuant Health Care Index that determines holdings by rankings on growth factors such as sales to price ratios and 12-month price appreciation as well as value factors such as cash flow to price, return on assets and book value to price.  Furthermore, the stocks that are selected in the Index are further split into quintiles based on their ranking, with the top ranked quintile receiving a larger weight within the index.   FXH, which has a heavier concentration on mid-cap growth orientated health care securities than either the iShares Dow Jones US Healthcare (IYH) or the Healthcare Select Sector SPDR (XLV) and has outperformed both IYH and XLV over the past year by nearly 12% and 13%, respectively.   

Although these three ETFs which utilize quantitative methodologies to choose their holdings appear to be outperforming their respective broader markets, it is equally important to consider the risks that they carry.

A good way to protect against these risks is the use of an exit strategy which identifies specific price points at which downward price pressure is likely to exist.  Such a strategy can be found at www.SmartStops.net.

Disclosure: No Positions

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Three Quant ETFs Outperforming Their Respective Markets




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ETF, Uncategorized

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