In a world where the downs and ups of the U.S. dollar have the largest effect on stock price movement, does it even make sense to look at so-called fundamentals? Sure it does!
Fundamental valuation may have gone “MIA” during the global credit catastrophe. Still, the sun will eventually shine on “fair value” estimates again. (Perhaps it’ll even happen in 2010.)
I decided to screen on 3 criteria that risk-wary investors often find intriguing. Specifically:
1. Current Price/Morningstar Fair Value. Granted, Morningstar’s proprietary fair value prices are hardly “gospel.” Nevertheless, they are conservative in nature, making a screen for P/FV values below .90 all the more valuable to conservative folks. (Here there may be the potential for a 10% price discount.)
2. Beta, Beta, Beta. Investors may spend enormous effort seeking alpha — the reward potential that is unrelated to the market’s machinations. Nevertheless, investors who pursue low-risk strategies are often interested in identifying when an ETF’s market-related risk is less than the market’s 1.0.
3. Trade-ability. Your ETF investment won’t mean a thing if it aint got that swing. And that means, you need an investment that has enough outstanding shares as well as enough investor interest in trading those shares. (I screened for ETFs with market caps above 10 billion.)
Here are the results:
|5 ETFs With Attractive Prices And Low Betas|
|SPDR Consumer Staples (NYSEARCA:XLP)||.65||.89|
|iShares Telecom (NYSEARCA:IYZ)||.68||.87|
|iShares Global HealthCare (NYSEARCA:IXJ)||.71||.89|
|iShares Pharmaceuticals (NYSEARCA:IHE)||.72||.89|
|PowerShares Dynamic Large Value (NYSEARCA:PWV)||.94||.88|
Disclosure Statement: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. The company and/or its clients may hold positions in the ETFs, mutual funds and/or index funds mentioned above. The company does not receive compensation from any of the fund providers covered in this feature. Moreover, the commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities.