There are times when the broader U.S. market moves sideways. And in the last five trading sessions, in spite of rally hype, U.S. stocks have essentially parked the S&P 500 bus in neutral.
In times like these, I often revisit all of my client holdings. Are there any underperformers that have not provided much in the way of diversification or income generation? On the flip side, do I own any assets that have dramatically exceeded respective price targets, where recognizing gains would raise cash for future buying opportunities?
Raising cash is a critical component of successful investing. I may look to prune portfolios so that there is 10%, 15% or 20% available for an inevitable pullback in prices. (And believe me, there are enough August-September headwinds to hamper a 5-week rally’s upward progression.)
Circumstances may dictate whether I buy the proverbial dip or wait for a technical bounce off a key trendline (e.g., 50-day moving average, 200-day moving average, etc.). Regardless, I am always evaluating prospects for my “wish list.”
One exchange-traded tracker that merits serious consideration on a sell-off is Market Vectors Retail (RTH). In particular, it has demonstrated remarkable resilience in spite of ongoing economic uncertainty.
Give credit to RTH’s 10% weight in Wal-Mart (WMT).
Granted, some might regard a 10% weighting in any company as excessive. However, Wal-Mart (WMT) has been nearly bullet-proof in both recessionary and expansionary environments. That fact has helped propel RTH to new price heights in August. Moreover, RTH has served up far greater relative strength than the broader S&P 500 over the last 12 months.
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What makes RTH particularly special is its hybrid make-up, combining consumer staples standouts with consumer discretionary leaders. Wal-Mart (WMT), Costco (COST) and Sysco (SYS) may actually thrive in tough times, while shopping-happy Americans with money to spare may “indulge” at Whole Foods (WF), Bed, Bath & Beyond (BBBY) or even Amazon (AMZN).
Market Vectors Retail ETF pursues the price and yield performance of the Market Vectors US Listed Retail 25 Index - a rules-based index intended to give investors exposure to the largest brand name retailers. Fundamentally speaking, the dividend yield as well as the price-to-book ratio are similar to that of the S&P 500. Technically speaking, an investor might use support levels at the 50-day or 200-day moving average for a potential entry point.
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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.