Last week, I wrote a piece on ETFs with remarkably positive trends in relative strength. Specifically, I highlighted three successful investments that rarely garner media coverage, yet deserved a bit more of the limelight. (See “Three ETFs With Momentum That You Probably Don’t Know Exist.”)
I received a great deal of direct feedback on this particular article. Do I own Market Vectors Gaming (BJK) in my own portfolio? (Answer: Not at the moment.) Is the trading volume on lesser-known ETFs an issue? (Answer: It depends.) Don’t I know that Colombia is an emerging market, not a frontier market? (Answer: Get a grip, wannabe ... the reclassification happened just last fall.)
As I look at the tape, I consider discussing the ongoing trend toward high income production. Indeed, REIT ETFs and High-Yield Bond ETFs have hit fresh 52-week highs (4/24/2012). On the other hand, if writing about the wild and the exotic revs up the reader base, why should I disappoint?
Here, then, are three more ETFs with momentum that you probably haven’t heard “word one” about:
1. Guggenheim Defensive Equity (DEF). Outside of the REIT ETFs and the High Yield Bond ETFs, you won’t find many exchange-traded investments hitting new 52-week peaks. Guggenheim’s DEF is one of the few that can make this claim as well as trumpet its five-star Morningstar rating. DEF is defensive enough to experience only two-thirds of the beta volatility of the S&P 500, yet present comparable five-year performance percentages. Currently, DEF is above short-term (50-day) and long-term (200-day) moving averages.
2. PowerShares Dynamic Leisure and Entertainment (PEJ). A majority of stock ETFs had fallen below a 50-day moving average in April, giving rise to the notion that a more substantial market correction was inevitable. PEJ, however, barely budged. This exchange-traded vehicle passively tracks an index comprised of discretionary eateries like Starbucks (SBUX), Chipotle (CMG) and McDonald's (MCD) as well as discretionary entertainment corporations like Walt Disney (DIS) and Viacom (VIAB). Since PEJ began trading in mid-June of 2005, it has handily outpaced the S&P 500.
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3. First Trust ISE Water (FIW). This global ETF seeks to replicate the performance of the ISE Water Index - a modified market cap-weighted index comprised of stocks of potable water and waste-water corporations. Surprisingly enough, since its inauspicious inception in mid-2007, it has outperformed the Russell 3000. FIW has a P/S (price-to-sales) below 1 at just 0.81. And while recent momentum may be fading due to its international exposure, FIW still maintains a relative strength ranking in the 70th percentile of the entire ETF universe.
Disclosure: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships.