The sell-off in equities has some investors drawing up lists of sector exchange traded funds to buy in industries that are offering fundamental value at these prices.
Some investors are hoping to buy market sector with ETFs at bargain prices.
“This correction was so broad that it created some great opportunities,” said Jeannie Wyatt, head of South Texas Money Management, on TheStreet. “You could have a field day buying o a lot of things. The stock market will be a much better place to find yield, so with the sell off, you can now easily find yields that exceed the U.S. Treasury.”
When it comes to unloved sectors, an ETF tracking U.S. financial stocks dropped nearly 6% on Monday. Top holding Bank of America (NYSE: BAC) was under attack following news American International Group (NYSE: AIG) is seeking more than $10 billion in mortgage-related losses. [Financial ETFs Tumble]
Trying to catch a falling knife is dangerous, but some see value in financial stocks.
“The bank CDS spreads are what we look at closely as a good measure of risk,” Wyatt says. “U.S. bank CDS spreads, unlike European banks, are not blowing out. In fact, they’ve improved a great deal since 2009.”
Technology ETFs such as SPDR Select Sector Technology (NYSEArca: XLK) are another barometer of risk appetite in markets. These sector ETFs give top weighting to Apple (NasdaqGS: AAPL) and IBM (NYSE: IBM), two companies that have attractive valuations, Wyatt said in TheStreet report. Technology companies are also set to benefit from a bill passed in Washington last year that allows companies to invest in their own, and then write that off. [Tech ETFs: Are Valuations Running Out of Hand?]
Most of all, it is important to have an investment strategy and stick with it. A strategy based around the 200 day-moving-average is recommended, with a definite exit strategy in place. [An ETF Trend Following Plan for All Seasons]
Tisha Guerrero contributed to this article.
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.