The last few months have been characterized by insane market volatility and rallies leaving many investors with upset stomachs and frustrated, however, there are some stocks and exchange traded funds (ETFs) that can be picked up at a discount.
Simon Maierhofer of ETF Guide recommends five ETFs, all high beta ETFs giving an upside potential in exchange for an extra dose of volatility that are at a discount. While there are some interesting picks and these funds may show potential in coming months, this differs from our strategy of determining when we should be in.
We still suggest using the 50-day and 200-day moving averages to determine when to be in or out, rather than attempting to call a bottom that may not be there yet. We are still in a very volatile market, after all.
The first pick is the PowerShares WilderHill Clean Energy Portfolio (PBW) because of its higher than average beta of 1.90, its composition of companies that focus on reducing pollution and carbon from current energy sources, and the terrible performance of the sector over the past six months.
The second pick is the Market Vectors Global Alternative Energy ETF (GEX), in the same industry as PBW, because it consists of companies focused on generating power from alternative sources and is selling at a 75% discount from its pre-summer prices.
The third recommendation is the United States Oil Fund (USO) based on the disposition that $50/barrel crude oil will serve as a springboard for oil prices to climb once again.
The fourth is ProShares Ultra S&P 500 ETF (SSO) because of the low levels of the Dow and the objective of the ETF to deliver twice the daily performance of the S&P.
The last recommendation is to lighten up on short ETFs like the ProShares UltraShort Financials (SKF) and ProShares UltraShort Real Estate (SRS), because they have dropped as much as 80% in short periods of time and chances are that they will be worth less in a month than today.