Five ETFs To Watch As The Stock Market Rebounds
March 26th 2007 at 7:43am by Tom Lydon
Stocks have launched an impressive recovery in the past few weeks and some exchange traded funds (ETFs) have led the pack. There isn’t a lack for choice, as over 400 ETFs are available representing all asset classes, industry sectors and many global regions. The key is to hone in on those markets that have shown the most strength as this global market recovery takes shape. Here are five ETFs to keep on your radar screen:
iShares MSCI Netherlands (EWN)
The Netherlands has a prosperous and open economy, which depends heavily on foreign trade. The country has stable relations, moderate unemployment and is an important European transportation hub. The country continues to be one of the leading European nations for attracting foreign direct investment.
This ETF holds 27 of the top Dutch companies, with financial companies ING and ABN AMRO weighing in at 18% and 14% respectively. ING has a large presence in Asia, as well as markets around the world. ABN AMRO is currently in merger talks with Barclays, with the combined entity headquartered in Amsterdam. Philips Electronics and Unilever round out the top holdings.
EWN is up 8.5% year-to-date and was up 31.5% last year.
iShares MSCI South Africa Index (EZA)
Growth prospects in South Africa are solid, as South African Finance Minister Trevor Manuel presented a $75 billion budget for 2007. GDP rose at a rate of 4.9% last year and is expected to continue at 5% over the next 3 years. The country exports gold, diamonds, minerals, and metals. Top holdings are mining stocks, which include Sasol Ltd. at 9.34%; Standard Bank Investment with 8.35%; and Vail Resorts Inc. holds 7.98%.
The country has recorded its first ever economic surplus, and with gold on the rebound this ETF looks promising. EZA is up 5.4% for the year and was up 17.1% in 2006.
iShares S&P Latin America 40 Index (ILF)
Despite the expansion of Chavez’s powers throughout Venezuela and Ecuador, investor confidence need not be swayed away from Latin America. Brazil and Mexico represent the largest economies backed by pro-market politicians. The major economies are swinging to the left and as long as they continue to follow the free-market model, economies will continue to flourish.
The iShares S&P Latin America ETF rose 38% in 2006. Economists remark the growth will remain steady after such a large expansion and with lower commodity prices the reason for a slight slowdown. The leading sector is industrial materials, followed by telecommunication and energy. Top holdings are Companhia Vale; Petrolio Brasileiro;and Cemex. ILF is up 4.7% for 2007.
WisdomTree International Financial Sector (DRF)
This ETF consists of global banks in developed countries, other than the U.S., that are enjoying benefits of continued growth in foreign countries. Institutional holders include Goldman Sachs and Merrill Lynch. Top holdings are HSBC Holdings PLC at 6.37% and Royal Bank of Scotland Group with 3.38%. This ETF is up 3.3% for the year, it was launched in October 2006.
ProShares Ultra QQQ (QLD)
This leveraged ETF specializes in the Nasdaq 100 Index. The aggressive long strategy does impose some intense risk, but when short-term trades are implemented, results can be rewarding. The reason short-term is ideal is the cost of maintaining a leveraged position is an important consideration.
Technology stocks have led the latest market recovery, which is outlined in the increased beta in this ETF. ProShares Ultra QQQ grabs twice (200%) the daily performance of the Nasdaq 100 Index. The Nasdaq 100 is loaded with tech stocks and with these as the best performers during this recovery, this fund is on the top of the list. Since the low on March 5th, Nasdaq 100 is up 5%. QLD is up 10% during the same time period.
For full disclosure, some of Tom Lydon’s clients own ILF.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.