November is here and that means the start of the best six-month period in which to own stocks has also arrived.
Not all investors have subscribed to notion of seasonal investing, but that does not discount the strategy’s efficacy. Simply put, decades worth of data indicate there are better times of the year than others to own stocks. Just as important, there are sectors that outperform during those good times, so a tactical approach to strong seasonal trends is often warranted. [Materials ETFs Are November Buys]
For investors looking to use broader market ETFs to profit from the best six-month, there are myriad strategies to consider, including one for conservative investors that uses two large, familiar ETFs: The PowerShares S&P 500 Low Volatility Portfolio (NYSEArca: SPLV) and the PowerShares DWA Momentum Portfolio (NYSEArca: PDP). PDP recently topped $1 billion in assets under management. [Momentum ETF Tops $1B in AUM]
Dorsey Wright & Associates back-tested the S&P 500 Low Volatility Index, SPLV’s index, for the 1997 through 2011 time frame, noting that it returned almost 87% in the November 1-April 30 period, also known as the best six months for stocks.
On the other hand, PDP’s underlying index, the Dorsey Wright Technical Leaders Index jumped a staggering 465.5% in the best six-period from 1997 through 2011, according to Dorsey Wright data.
While PDP is a momentum play, it is tilted away from small-caps with a mid-cap bias. Mid-cap value and growth names combine for nearly two-thirds of PDP’s weight. Large-cap growth stocks command another 27%. Top-10 holdings include “momo” names like Apple (NasdaqGM: AAPL), Priceline (Nasdaq: PCLN) and Gilead Sciences (NasdaqGM: GILD).