Three Most Impressive ETFs over Past Month

The 3rd week of July trading activity is going to get a lot of press. The Nasdaq hasn't seen a run this strong in this short of time since 2006. And the S&P all but wiped away a correction that had taken 4 weeks to play out.

The activity is in stark contrast to early parts of the 2007-2009 bear market. Every time that the market seemed to build a small bit of momentum over 6-8 weeks, it often took less than 1 month to destroy investor confidence.

This time around, advisers, fund managers and individual investors seem more willing to buy the dips. What's less certain is whether or not the U.S. market can break out of an 865-955 trading range that's effectively been in place for 12 weeks. (Note: Many might point to the fact that we are currently trading near the higher end of that range.)

Yet with all of the excitement surrounding the overall markets, I find the price movement of a select group of ETFs/CEFs even more compelling. Here's my list:

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1. Eaton Vance Tax-Managed Global Buy-Write Opportunities Fund. This fund invests in a diversified portfolio of well-known domestic, foreign and emerging stocks around the globe. Yet it seeks a high level of income through a popular "covered option call strategy called, "buy-write." One buys the investments for the purpose of holding it, while writing options to garner income premium.

The fund ETW goes one step further. Since income is being generated, it seeks to minimize and defer shareholder federal income taxes by evaluating returns on an after-tax basis.

What's particularly intriguing about ETW is that is actually trades at a 4% discount to its underlying net asset value (NAV). Moreover, since its 2006 inception, it has never failed to serve up its quarterly dividend of $0.45 per share. With a dividend distribution of 14.5%, it's a reasonable prospect for income alone, let alone an impressive 7% gain in the recent week.

2. Eaton Vance Risk Managed Equity Income Fund. Ironically, ETJ has a very similar "covered call" approach for the domestic marketplace. ETJ pursues an option income premium by holding common stocks where the value may be subject to writing call options.

Yet ETJ does something else with respect to risk-managed gains; that is, it also has the authority to write put options on individual stocks that the manager believes may become good purchase opportunities at prices below current levels.

ETJ is complicated... and it is not without its vocal critics. Yet its 6.5% weekly gain alongside a 10.4% income distribution is hardly something to ignore.

3. Market Vectors Small Cap Brazil. Since its inception, I gave a host of reasons why this fund might be an exceptional addition to a truly diversified portfolio. You may wish to revisit, "Small Cap Brazil ETF Diversifies Your Global Pie."

By way of review, large-cap Brazil funds like iShares Brazil (EWZ) focus heavily on the basic materials segment of the economy as well as large exporters. Meanwhile, Brazil Small Cap Fund holds companies that serve the up-n-coming middle class population, with a 30% weighting in consumer discretionary and a 10% weighting to consumer staples.

Equally worthy of note, in a month (6/18/09-7/17/09) that experienced a correction for stock assets and a one week turnaround, most of the conversation centered on the U.S. markets. Here are 3 ETFs with strategic vision as well as high income streams.

Disclosure: Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above.

Comments

[dickc:]

Interesting research especially on Brazil consumers.

Jul 19 11:20 AM

[GlobalTrekker:]

A little bit worrisome that a registered investment advisory would recommend a fund (ETW) based on its dividend without noting the huge percentage of the yield that is return of capital. This fund has underperformed the S&P since its inception a few years ago, so I'd take this advice under "advisement." Best to understand, first, what the dividends are comprised of, and second, what the ROC is comprised of.

Jul 19 12:48 PM

[hene57:]

writing put options as referenced under 2. ETJ is not buying insurance on the downside, it actually represents an obligation to buy a stock at a lower level. The premium earned can dampen a downside move, but only if the put is not exercised. To be correct it would have to say "buying put options".

Jul 19 03:29 PM