As an investor I am always looking for ideas and an exchange trade fund (ETF) that allows me to capture investment profits. Below are four ideas I have been tracking and investing in. They illustrate my process of capturing ideas, and in all four instances have upside opportunities. I will be sharing more of these in the future focusing on the earlier stages of the process. Also, one idea not on the list that is currently attractive is bonds. The current dynamics of rising interest rates and credit spreads are creating some opportunities looking forward. More on that later.
The leisure sector has been improving over the last six months as the economy recovers. The sector includes restaurants, casinos, hotels and media businesses. Each of these sub-sectors have been improving making PowerShares Leisure & Entertainment EFT (NYSEARCA:PEJ) a positive choice to capture the move in the broader sector. Tracking off earnings for the fourth quarter we have seen the restaurant stocks do well behind the likes of Darden Restaurants, YUM Brands, and Chipotle Mexican Grill. Hotels stocks such as Marriott (NYSE:MAR), Wyndham (NYSE:WYN) and Starwood Hotels & Resorts (HOT) have added to the growth of the sector. Wynn Resorts (NASDAQ:WYNN) and Las Vegas Sands (NYSE:LVS) have helped the casino stocks and Viacom (VIA.B) in the media stocks. The sector still has upside opportunity, as the recovery expands consumers expand spending. PEJ broke above resistance at $19.10 and is continuing the uptrend.
Semiconductor stocks have been one of the leading sector since the low in August. Some analysts and investors have stated the sector is overbought? One thing I know is the market can remain in an "overbought" situation longer than many estimate. Thus, the trend is higher and looks to move even higher. Several fundamental reasons to consider are first, semiconductor inventories are 20% below prior peaks, second, capacity is still 10% below prior peaks, and third, integrated circuits are 10% below prior peaks. This data is subject to the sector reaching or exceeding prior peaks to make the data meaningful, but there is still upside opportunity in this current run in the semiconductor sector. iShares Semiconductor ETF (NASDAQ:SOXX) shows the uptrend in play and the 30 day moving average is support. Any pullback short term may offer a good entry point.
Medical Devices as a sector has moved higher despite the new healthcare reform regulations. Part of the bill was an additional tax on these devices to help pay for the cost burden for the taxpayers. iShares US Medical Devices ETF (NYSEARCA:IHI) has continued to move higher eclipsing the April high recently. Stocks like Zoll Medical (NASDAQ:ZOLL) and Alere (NYSE:ALR) have set the pace over the last four months. The ETF is one worth scanning the holdings (27) for further opportunities. American Medical Systems (NASDAQ:AMMD), Integra LifeSciences (NASDAQ:IART), Intuitive Surgical (NASDAQ:ISRG), St. Jude Medical (NYSE:STJ) and Sonosite (NASDAQ:SONO) were worth watching for further upside on our last scan of the companies within the ETF.
Build America Bonds were a part of the economic stimulus package in 2008 to help states raise capital for infrastructure projects and put America back to work. We could all argue relative to the success of this program, but the bonds were successful. The bill expired on December 31st for new issues, but don't despair, there was a bill sent to the floor of Congress this week to include them in the new budget proposed by President Obama. If it is approved it could add some upside momentum to the existing bonds. PowerShares Build America Bond ETF (NYSEARCA:BAB) is one way to purchase these bonds in an exchange traded fund. The fund is holding near support at $24.50 and pays a 6.1% dividend yield. Watch the bill and the bonds for an opportunity looking forward.
Daily life creates investable ideas every day. Throw in some research and you have the making of a sound investment strategy. As with any process of investing you need a disciplined implementation process that defines the entry, stop/exit and target for every investment. As the rule of carpentry states, measure twice, cut once.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.