This fund is interesting because of the long/short approach it takes to a basket of commodities. Commodities tend to move on their own trends (for example, agriculture may be trending down while gold is hitting record highs), and this fund takes the differences into account. [How this fund works.]
Note that LSC is an exchange traded note (ETN). [The difference between ETFs and ETNs.]
- The indicator goes both long and short in six areas: energy (long or flat only), softs, grain, livestock, industrial metals and precious metals. Using a seven-month weighted moving average, the indicator then determines in what areas it will be long and where it will be short.
4. PowerShares DB G10 Currency Harvest (NYSEArca: DBV): up 22.2% in the last year. The ETF seeks to capitalize on the theory that currencies with high interest rates generally tend to rise in value relative to currencies that have low interest rates. DBV looks at the three-month interest rates of the G10 currencies and goes long on the three with the highest rates and short on the three with the lowest, making it a carry trade play. [ETF Spotlight: DBV.]
The carry-trade involves for selling a currency from a low interest rate country and using the proceeds to purchase a currency from a high interest rate country. The idea is not to capture big moves, but to exploit the spread between the two countries’ interest rates. [Playing carry-trades.]
- DBV can hold positions in any of the following 10 currencies: The U.S. Dollar, the Euro, the Japanese Yen, the Aussie, Canadian and New Zealand Dollars, the Norwegian Krone, the Swedish Krona, the British Pound and the Swiss Franc.
5. Claymore/Clear Global Exchanges, Brokers/Asset Managers (NYSEArca: EXB): up 66.7% in the last year. EXB tries to reflect the performance of the Beacon Global Exchanges, Brokers & Asset Managers Index. The Index is made of around 100 equity securities traded on global exchanges, including MLPs, ADRs and GDRs of companies that operate security exchange or brokerage/asset manage firms. The financial sector has seen a handsome recovery off the market’s March 9 low, with most ETFs up at least 100% since then. However, fourth-quarter earnings have provided mixed sentiments. [Financial ETFs, struggling but improving.]
This is a fund that could give broad, global exposure to the financial sector as the global economy continues to recover. Just watch that trend line. [How to follow trends.]
- Top countries: United States 61.8%, Japan 9.8%, Britain 6.0%, Germany 5.1%, Hong Kong 4.9%.
- 100% Financials
Max Chen contributed to this article.