ProShares Ultra Real Estate (URE) 2x is up 45% over the last year, triple what the S&P500 recorded. It has a 76% two month ARR (12.7% actual) and an accelerating 106% one month ARR (8.83% actual). The fund summary states that it seeks to replicate the daily investment results, before fees and expenses, that correspond to two times (2x) the daily performance of the Dow Jones U.S. Real Estate SM Index. The index measures the performance of the real estate sector of the U.S. equity market. Component companies include, real estate holding and development and real estate services companies and real estate investment trusts.

For those who prefer non-leveraged ETFs, you should consider these. All have ARRs of around 40% over the past month and 20% over 12 months.

First Trust S&P REIT Idx (FRI),

iShares FTSE NAREIT Real Estate 50 (FTY)

iShares FTSE NAREIT Resid Plus Cp Idx (REZ)

The real estate recovery began around 14 months to go and with interest rates at record lows, we believe it has a long way to go.

(click to enlarge)

The red line you see on this chart requires a bit of explaining..

We have recently developed an Average True Range indicator that accurately tests the "health" of a trend. By health we mean it will indicate, well before an uptrend is over, that selling has begun and the peak of the trend has been reached. It allows an early exit and the locking in of profits before they are eroded.

The indicator uses a 14 day Average True Range (ATR), a measure of volatility and compares this to the closing price. This is the formula, note we have used moving averages to smooth the data and give a better idea of how volatility is rising or falling.

200 day moving average of the 14 day ATR = %

21 day moving average closing price

When the volatility percentage rises, selling is happening. When it falls, stocks are being held and bought. The redline in the chart represents volatility and has been falling almost continuously for fourteen months, indicating that real estate related shares are being bought and held. In the latest upward price run, the volatility has been falling steadily since December 7th.

In summary for a strong uptrend you are looking for a falling ATR percentage and OSPX trend indicators of X/Up or Up/Up. Enter when all three agree and exit when they don't. Reverse for shorting.

Unfortunately we are unable to include the ATR data on the site as yet, but we will be happy to email an Excel template to any who request it. This will allow you to quickly calculate the percentage yourself.

Disclosure: I am long [[URE]].

(click to enlarge)

If further evidence of the cash flowing into this contra (short) is needed, consider this ARR panel. The Annualized Rate of Return (ARR) or growth in share price has shown uninterrupted acceleration for 12 months. It grew 12% in the last year, but in the last month has moved at a rate of 98% per annum.

1M 98%; 2M 76%; 3M 61%; 6M 19%; 1YR 12%

Of all developed economies Japan's is the one most on the edge. Government debt is 230% of GDP, the world's highest. Shinzo Abe will have to play a very delicate game: print money and get the currency down, with the aim of letting inflation rise a bit, but without letting it go higher and spooking the bond market. The goal is to pull Japan out of its 23-year deflation, by debauching the yen and this is where the shorting opportunity lies.

Disclosure: I am long [[YCS]].

Turns out there are two main factors. Buying stocks with a low beta and a cheap source of funds by drawing on the floats maintained by the insurance companies he owns.

It is a popular misconception that low beta equals low return. A good example is this excerpt from the investopedia.com

Many utilities stocks have a beta of less than 1. Conversely, most high-tech Nasdaq-based stocks have a beta of greater than 1, offering the possibility of a higher rate of return, but also posing more risk. Read more: www.investopedia.com/terms/b/beta.asp#ix...

The economist article goes on to say that pension and mutual funds are barred from borrowing, so opt for higher beta stocks hoping for higher returns, making their portfolios more volatile. With funds chasing higher beta and ignoring lower beta stocks, the latter become under-valued and vice versa. So the astute Warren is using cheap money to buy undervalued stocks.

We thought we would do a test on the 986 stocks that we cover at OnlineSPX.com, beta range 0.17 to 2.93, and we have found it to be true. Lower beta stocks do out-perform their more volatile counterparts and we have found the optimum level, to draw the line. More on that later.

What was also interesting is what we found when we grouped stocks by our recommendation and their average beta.

Value Buys averaged a 1.06 beta, non-value Buys 0.96 and Holds 0.94, had an overall average of 0.99, so lower by .01 than the S&P500. These are stocks we like and like Warren we are leaning towards lower betas.

Sells 1.25 and *no opinion offered 1.39, had an average of 1.32. These two, for varying reasons, are not wanted, at least not by our modeling and the much higher beta would suggest Warren doesn't want them either.

* These stocks have a OnlineSPX.com safety rating (SR) greater than 4, our cut-off point.

Now to our test. We took the 986 stocks, their respective betas and their *2yr ARR then sorted by beta low down to high. To smooth data, we ran a moving 200 over the ARRs. As the chart below shows, the average ARR constantly rises and began to accelerate once 1.00, the index average, was past and continued to rise more steeply after that. So there you have it, stocks with a beta lower than 1.00, all other aspects being satisfactory, are likely to be good additions to your portfolio.

* This Annualized Rates of Return (ARR) period closely corresponds to the period we do our beta calculation over.

The screener button that I find most interesting is the Cash Flow Counter or CFC for short. When cash flows into ETFs it will naturally raise their price, but how do you know if that cash flow is accelerating exponentially? The CFC filter works it out for you by annualizing the last 1M, 2M, 3M and 6M periods and then goes on to display annual growth numbers for 1yr, 2yr, 3yr, 5yr and 10yr. For example ETFs with a CFC number of 3 next to their name have shown 3 consecutive increases, i.e. their 1M, 2M, 3M annualized growth percentages are each higher than the previous number.

Currently 177 ETFs are displaying accelerating cash flows over the last 3 months, so not a very elite group. If we change the CFC filter to display only those that have a number of greater than 4, that is they have been experiencing accelerated growth for at least 1 year, the list is reduced to an interesting group of 12.

Here they are with their respective CFC numbers and consecutive annualized / annual growth percentages (ARRs) shown:

For me the most interesting and consistent ETF in this group is VOX, which is designed to track the performance of a benchmark index that measures the investment return of telecommunication services stocks. It has hardly taken a backward step since its lowest close of $31.50 back on November 20th 2008, when it was no doubt viewed as a defensive play given what was happening in the market back then. It has lifted 30% in the last year and has a 35% ARR over 6 months, both are the best results in this group of 12. Also the 15% p.a. result over three years, puts it in the top 19% of performers over this period in the super group of 585.

NB: All ARR percentages use adjusted closing prices, so dividends and share splits, where they apply, are taken into consideration.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

In our experience, although not always, dividends are paid by companies that have no better avenue to re-invest the cash in their own company. They are out of ideas, so give money back to shareholders who in turn "invest" either in low single digit savings accounts or try to find another stock that will give them capital growth, as the one they are in certainly won't do it.

Companies with no debt are attractive, as apart from the obvious low risk benefit of no debt, they generate so much free cash flow that they simply don't need to borrow.

Taken together what you have is a company generating strong free cash flow and knowing exactly what they will do with it.

To find these rare stocks we ran our screening filters through the 932 stocks we currently analyze, setting Dividend Yield and Debt to Equity columns in our Watchlist manager to zero. We found less than 8%, or 72 to be exact, fitted the bill.

We were not overly impressed with the group's average Annualized Rate of Returns (ARRs). Their 3yr, 5yr and 10yr percentages came out at 21%, 11% and 21% respectively. Certainly better than the 860 non qualifiers managed; which was 11%, 1% and 10% respectively.

There had to be a super group within the sample of 72, so we added two of our screener filters; Performance Ranking (PR) and Safety Rating (SR) of less than 3, i.e. superior to the average setting of 4. We now had our super group consisting of just three stocks.

Note both the high Free Cash Flow (FCF) and Return on Total Capital (ROTC) numbers. They have the cash and they know how to use it.

NB. We should point that we have had Monster Beverage Corp (MNST) as a Sell since July 19th 2012 when it closing price dipped below its 63dma. Since that call the company disclosed after hours on Thursday August 9th, that an unnamed state AG is investigating its namesake drink line. This caused a 10% fall the following day and it has been fairly stable around that price since. For us, to re-establish a growth trend, the price would have to rise to over $61.60

Disclosure: I am long [[AAPL]].

One of those stocks is CF Industries Holdings, Inc. (CF) and we like everything about them, starting with a compelling valuation.

Our fair value estimate of $367.00 represents a large margin of safety over its last close of $224.51. The market seems to have recognized this pricing mismatch, with the stock is displaying accelerating growth over the past 6 months to the last close;

1 month $203.56 + 9.8% (ARR 117.4%)

2 months $194.25 +15.5% (ARR 93.2%)

3 months $193.08 +16.3% (ARR 65.3%)

6 months $187.00 +20.1% (ARR 40.2%)

At the current rate of growth the +82.9% result of the last 12 months could well be eclipsed.

Two, three and five annual rates of price growth (includes dividends), show as 55% p.a., 39% p.a. and 26% p.a. At the latter rate, capital will double in less than three years, so an impressive achievement over a difficult five year period in the market.

In addition to valuation our data base, which tracks the rolling last 4 quarters, shows well above average fundamental readings to the last reported June quarter.

• A very high free cash flow of 88%.
• Low debt to equity reading of 32% and
• Return on Total Capital of 33%.

CF has an OSPX in-house Safety Ranking of 3. We base these rankings on a stock's consistency of results, price volatility and debt risk. A scale of 1 to 7 is used with 1 being the best and 4 the average.

Disclosure: I am long [[CF]]. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.