ETFs are a good way for investors to capitalize on policy initiatives of the Obama administration while reducing the day-to-day volatility compared to other investment options, such as stocks, remarks Daniel Harrison for IndexUniverse. (Play Obama’s new energy plan).

Health Care opportunities. Jim Oberweis, chief executive of Oberweis Asset Management, believes that “there is a possible positive [outcome] for pharmaceutical companies” since sales of prescription drugs will increase as health care coverage widens. Furthermore, Oberweis argues that health care providers may benefit from more patient visits and biotechs are in a more positive position than previously thought. (More on the health care sector).

Broad-based and niche market ETFs that could benefit from the growth in the number of patients receiving coverage include:

• Health Care Select Sector SPDR (NYSEArca: XLV): up 14.3% year-to-date
• iShares Dow Jones U.S. Healthcare (NYSEArca: IYH): up 15.1% year-to-date
• iShares Dow Jones U.S. Medical Devices (NYSEArca: IHI): up 32.4% year-to-date; IHI is well-diversified, with 58% of assets under management in its top 10 holdings, and a maximum single-stock weighting of 10%. Companies included should benefit from the increase in the number of hospital patient visits.
• PowerShares Dynamic Pharmaceuticals (NYSEArca: PJP): up 10.3% year-to-date; PJP is a well-diversified ETF on large, mostly dividend-paying pharmaceutical companies that have lots of cash on hand and may see an increase in sales of core prescription drugs.
• SPDR S&P Pharmaceuticals (NYSEArca: XPH): up 19.2% year-to-date; XPH is more broadly diversified.
• iShares Dow Jones US Pharmaceuticals (NYSEArca: IHE): up 22.2% year-to-date; IHE focuses more on the oversold traditional pharma brands like PJP.
• SPDR S&P Biotech (NYSEArca: XBI): down 4.3% year-to-date; XBI is well-diversified, with 45% of its funds invested in its top 10 holdings. The fund is also mostly invested in nontraditional pharma companies.
• iShares Nasdaq Biotechnology (NasdaqGM: IBB): up 11.2% year-to-date; IBB has a higher weighting in its top holdings and it focuses exclusively on Nasdaq-listed securities; some large biotech companies may be excluded.

Clean energy. It is no big secret that clean energy is a big policy initiative of the Obama administration. The more notable technologies being pushed into the forefront of the sector are nuclear and solar energy. Solar tech investing is still considered risky because of the industry’s mini boom/bust cycles, but ETFs help minimize volatility. (More on alternative energy).

• Market Vectors Solar Energy ETF (NYSEArca: KWT): down 6.5% year-to-date
• Claymore/MAC Global Solar Energy (NYSEArca: TAN): up 0.3% year-to-date
• Market Vectors Nuclear Energy ETF (NYSEArca: NLR): up 19.7% year-to-date

Max Chen contributed to this article.

Warren Buffett’s company Berkshire Hathaway (NYSE: BRK-A) announced this week that it plans to buy Burlington Northern Santa Fe (NYSE: BNI) for $100 a share, writes Jack Hough for SmartMoney. Buffett named rail car loadings as his favorite economic indicator.

• iShares Dow Jones Transportation Average (NYSEArca: IYT): up 7.2% year-to-date ; BNI is 11.4%

According to records, Berkshire Hathaway sold shares of Moody’s (NYSE: MCO) after the ratings firm signed off on mortgage securities that turned toxic. During the second quarter, Berkshire dumped Constellation Energy (NYSE: CEG) and reduced holdings in ConocoPhillips (NYSE: COP), Home Depot (NYSE: HD) and United Health Group (NYSE: UNH). The money was used to purchase preferred shares of General Electric (NYSE: GE) and Harley Davidson (NYSE: HOG).

• Vanguard Industrials ETF (NYSEArca: VIS): up 12.5% year-to-date; GE is 12.5%

• First Trust Large Cap Value Opp AlphaDEX (NYSEArca: FTA): up 28.5% year-to-date; HOG is 1%

Berkshire also bought two common stocks that are more widely available: Becton Dickinson (NYSE: BDX), distributor of medical supplies,  and Johnson & Johnson (NYSE: JNJ), maker of drugs, consumer products and medical supplies. Value investors should noted that both BDX and JNJ have increased dividends each year for more than three decades. (How healthcare overhaul affects ETFs)

• iShares Dow Jones U.S. Healthcare (NYSEArca: IYH): up 10.3% year-to-date; BDX is 1.2%

• Pharmaceutical HOLDRs (AMEX: PPH): up 3.5% year-to-date; JNJ is 25.2%

Max Chen contributed to this article.

Although several sectors have notched strong third-quarter performance, the ones listed below are among the standouts. For more stories on sector ETFs, visit our sector ETF category.:

1. Technology. Apple (Nasdaq: AAPL) is the latest big tech name to post strong earnings. The maker of the popular iPhone posted a 47% gain in profit, taking investors and analysts by surprise. Shares were up 5.4% as of Tuesday, reports Jessica Mintz for the Associated Press.

Other technology companies posted strong earnings, as well. (Read about them here).

• Technology Select Sector SPDR (NYSEArca: XLK): up 40.3% year-to-date; Apple 8.1%

• FirstTrust NASDAQ -100 Tech Index (NYSEArca: QTEC): up 67.6% year-to-date; Apple 2.7%

2. Pharmaceuticals. The sector came out a winner in the health care bill that went through the finance committee last week. Pfizer (NYSE: PFE) reported a 26% higher profit, but lower sales. The world’s largest drug maker posted net income of $2.88 billion, or 43 cents a share, even as many patents have been expiring, reports Val Kennedy for MarketWatch.

• iShares Dow Jones U.S. Healthcare (NYSEArca: IYH): up 14.2% year-to-date; Pfizer is 10.6%

• Vanguard Health Care (NYSEArca: VHT): up 15.3% year-to-date; Pfizer is  7.5%

3. Fast Food. McDonald’s (NYSE: MCD) and Yum Brands (NYSE: YUM) have weathered the recession nicely, as price-aware consumers stop going out to sit-down restaurants. Yum Brands has continues to thrive; its third-quarter earnings rose 18% thanks to lower costs that helped the company earn a profit in both the United States and China. McDonald’s announces earnings on Thursday.

• PowerShares Dynamic Food And Beverage (NYSEArca: PBJ): up 10.8% year-to-date; Yum 4.7%; McDonald’s 4.5%

Health care reform has been centered around the passage of a “public health care option” which ultimately means that Americans would have the right to choose whether they want public health insurance.

Khronostock on Daily markets reports that having the public health insurance option means that Americans would have a choice of keeping the health insurance they currently have, buying health insurance from one of the many private health insurance companies, or choosing a public health insurance plan.

The so-called August offensive is launched by the Democrats against the insurance industry, as Republicans remain opposed to the proposed health care overhaul. The main message of the campaign is that by making over the health care system, consumers will be protected against unscrupulous health care practices, such as refusing patients with pre-existing conditions, reports Sheryl Gay Stolberg and David M. Herzenhorn for The New York Times.

President Barack Obama’s plan involves a  government-run health insurance plan that will compete with the private sector, but in the meantime, should not hurt those who are already insured.

Wherever health care goes, be sure to watch the trend lines for signs of any potential long-term uptrend (or vice versa).

• iShares Dow Jones U.S. Healthcare Sector (IYH): up 7.8% year-to-date

• Vanguard Health Care (VHT): up 7.8% year-to-date

• Health Care Select Sector (XLV): up 7% year-to-date

For more stories about health care, visit our health care category.

The U.S. dollar gained ground on most major currencies despite expectations that massive U.S. fiscal and monetary stimulus would hasten a decline in the dollar.  The sent the PowerShares DB US Dollar Index Bearish (UUP) up nearly 1% in morning trading.

In conjunction with a rising dollar, crude oil dropped for the second straight day.  Black gold fell dipped $71/barrel in electronic trading on the New York Mercantile Exchange.  In general, crude oil trades inversely to the U.S. dollar. Oil is priced in dollars, so as the dollar weakens, it makes oil and other dollar-denominated assets cheaper for overseas buyers; the reverse is also true.  This sent the US Oil Fund (USO) down about 3% in intraday trading.

In an attempt to gather more support for his health care reform, President Barack Obama will urge doctors to support wider insurance coverage and targeted federal spending cuts.  The reform anticipates heavy spending to cover the nearly 50 million Americans who lack health insurance. It will also emphasize that current health care programs are too inefficient.  The news sent the iShares Dow Jones US Healthcare (IYH) down nearly 2.5% in morning trading.

Foreign demand for long-term U.S. assets seems to be slowing down.  The nation’s two largest debt holders, Japan and China, trimmed their holdings of U.S. Treasuries sending the net purchase of stocks, bonds, and notes purchased by all foreigners down to $11.2 billion in April from $55.4 billion in March, reports Martin Crutsinger of the Associated Press.  As the United States continues to need more money from foreign investors to fight the recession and rebuild an ailing economy, a weak interest in U.S. assets could potentially send interest rates up.

Overall, the U.S. markets followed all other global markets by trading down.  The Dow Jones Industrial Average dropped 2.3%, the S&P 500 declined by nearly 2.5% and the Nasdaq tumbled by 2.8% in morning trading.

For more stories on health care, visit our related category.

Kevin Grewal contributed to this article.

In turn, companies that are cutting costs do so at the health care expense of their employees. Employers’ contribution to their employees’ monthly insurance premiums rose by 5.4% during the past year, while employees’ contributions surged 14.7%.  Double-digit increases have occurred for three years straight.

The Obama administration needs to tackle this issue before the year’s end, as 2009 has presented the worst year yet for health care costs.

• iShares Dow Jones U.S. Healthcare Sector Index Fund (IYH): down 3.9% year-to-date



• Vanguard Health Care Fund (VHT): down 3.8% year-to-date

This bear market has been an exceptional one, and equity investors are left with virtually no place to hide out. Stocks are still in dangerous territory, as recent performance of the S&P 500 has proved. Investment News believes that for those investors who are reluctant to give up equities altogether, there are opportunities within health care-related ETFs.

Health care has generally been viewed as a defensive sector, meaning that health care sector stocks have held up better than the overall stock market during major bear markets. The current bear market is no exception. People are just not going to stop needing health care, and the majority are not going to go without decent coverage. For this reason alone, many profits within this sector remain.

Of the dozen or so U.S.-based health care ETFs, the performance is has been equal over the past three and five years. Also, what the health care industry and ETFs have going for them is a solid population of aging baby boomers in the United States.

• iShares Dow Jones U.S. Health Care Sector Index Fund (IYH): down 7.8% year-to-date

• Vanguard Health Care (VHT): down 7.5% year-to-date

In the last few years, health care stocks have performed relatively the same as their related ETF in the S&P, Health Care Select Sector SPDR (XLV), writes Ron DeLegge for ETF Guide.

Now, the sector is seeing increased activity with mergers and takeovers, and more buyout deals could be on the way. Health care stocks also have pretty enticing valuations with current P/E ratios of around or below 10 compared to the S&P 500’s 11.9 multiple. Watch the trend lines, though:  most of these funds are close to their short-term trend lines, and none have crossed their 200-days.

Interested in health care ETFs but don’t know of any? Well here are a couple for you to ponder over:

• iShares Dow Jones U.S. Healthcare Sector Index Fund (IYH): down 8.6% year-to-date. The ETF is based on the Dow Jones Index and has 139 health care stocks. Stocks of companies are selected passively and weighted to their market capitalization or size, the medium size is just over $2 billion.

• Health Care Select Sector SPDR (XLV): down 10% year-to-date. It is made of health care stocks within the S&P 500. It is the largest health care ETF with around $2 billion in assets. Companies included deal in health care equipment and supplies, health care providers and services, biotechnology and pharmaceuticals. The health care sector, the second largest of the sectors,  is around 15% of the S&P 500’s overall sector weighting.

• Vanguard Healthcare ETF (VHT): down 9% year-to-date. VHT tries to mirror the MSCI US Investable Market Health Care Index. The ETF contains 297 holdings, each with a median market size of around $45 billion, and it is seen as the most diversified of the available health care ETFs.

• Rydex S&P Equal Weight Health Care ETF (RYH): down 5.4% year-to-date. RYH follows S&P 500 health care stocks, but it weights each stock equally. This usually causes a bias toward mid- and small-company stocks.

• PowerShares Dynamic Healthcare Sector Portfolio (PTH): down 11.1% year-to-date. PTH may be more useful for a portfolio strategy. It tries to outperform the performance of major health care equity benchmarks. Stocks are picked out by using a quantitative formula that looks for fundamental growth and valuation.

Read the disclaimer, as Tom Lydon is a board member of Rydex Funds.

Max Chen contributed to this article.

Sectors That Blossomed. In a research study conducted by Bespoke Investment Group, there were only two groups that were winners during the time span that passed from Election Day to Inauguration Day  – consumer services and power producers.  Of these two groups, the only sectors that showed positive returns were utilities, health care, consumer staples and telecommunications.

Winning Stocks: To break it down even further, of all the stocks that are publicly traded, only 11 posted double-digit gains, one of which is Newmont Mining Corp. (NEM),which is 9.6% of the Market Vectors Gold Miners (GDX). NEM had 35.5% in gains in that time period.

Looks like there is some optimism left in the markets, at least when it comes to certain sectors. Could it be all the anticipation about just who Obama’s stimulus plan could benefit?  This just proves that there is always a sector, or two, that will enable investors to gain some ground even in a down market.

This hasn’t translated into ETF success just yet – most of the funds focused on these sectors are down in this time frame. But will this news be a sign of good things up ahead? Meanwhile, one fund is clearly tops between election and inauguration:

• Market Vectors Gold Miners ETF (GDX): up 47% between election and inauguration

For the past 52 weeks, these shares have lost an average of 24%, so are the related ETFs a true value? Health care stocks are typically defensive, but have fallen on the wayside as of late. Ron DeLegge for ETFGuide reports that the decline has made for some nice valuations within the sector, and has caught the interest of many alert investors. President Barack Obama’s administration intends to make health care a priority, as well, which could give the industry an assist.

It is important for investors to watch the trend lines before jumping into any stock or ETF, and to enter with a solid strategy they can stick to. Here is a look at a few health care ETFs and take note of their differences, as they all have something different to offer:

iShares Dow Jones U.S. Health Care (IYH) down 4.4% over past three months; gives exposure to 139 stocks in the health care sector and are chosen based upon market share or size. The average market cap of selected stocks is at $2 billion.The expense ratio is 0.48%.

Health Care Select Sector SPDR (XLV) down 3.5% over past three months; represents health care stocks found within the S&P 500. This is the largest ETF in the sector and it focuses on companies involved in health care equipment and supplies, health care providers and services, biotechnology, and pharmaceuticals makers. XLV’s annual expenses are being cut to 0.21% beginning Jan. 31.

Rydex S&P Equal Weight Health Care ETF (RYH): down 7.4% over past three months; This ETF follows the health related stocks within the S&P but stocks are weighted equally, rather than by market cap. The lean is toward small to mid-size companies. The index is rebalanced every quarter. RYH’s annual expense ratio is 0.50%.

And while the new administration could someday have an impact upon health care stocks; as of right now, nobody knows what will happen. The sector at large is appealing to a value-based investor and the differences within each ETF should help discern which one is right for your investment needs.

Read the disclosure, as Tom Lydon is a board member of Rydex Funds.