Spooky Investment Readings

The Big US Banks’ Biggest Problem – Jim Jubak

10 Ways to Survive a Zombie Economy – Jim Jubak

How a Gang of Predatory Lenders and Wall Street Bankers Fleeced America–and Spawned a Global Crisis – John Mauldin’s Outside the Box

QE2: What’s an Investor to Do? – David Kotok

Night of the Living Fed – Jeremy Grantham (free registration required at GMO.com)

  • Summary of Night of the Living Fed available here from Prieur du Plessis

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October’s 20 Strongest ETFs

Below are the 20 hottest ETFs at the close of October, based on the 6 month performance.  These are not ‘buy’ recommendations or aggregate portfolios for investment.  An investor could use this list is as a) to get a sense for the intermediate trends and b) as potential short-term trading opportunities (long or short), although I tend not to use leveraged funds.  

While in previous months the highest momentum ETFs I detailed my site were heavy on leveraged ETFs, this month we see a high concentration of agriculture commodity ETFs. 
If you are comfortable using your own technical analysis that is another option for using the list.  Trend lines and support/resistance levels are some of the simplest and most powerful tools for analyzing price charts. An investor could also use proprietary trading signals combined with risk management techniques such as those I profiled in-depth here.
Data includes leveraged ETFs and the data source is FINVIZ.com.  For real time tracking of this list see the right hand side of my blog.

No positions

Ticker Company Trend Half Year Year 200-Day SMA
SGG iPath DJ-UBS Sugar TR Sub-Idx ETN Here 101.78% 32.95% 48.16%
DAG PowerShares DB Agriculture Dble Long ETN Here 74.45% 29.03% 52.13%
JJS iPath DJ-UBS Softs TR Sub-Idx ETN Here 62.69% 49.77% 41.93%
AGQ ProShares Ultra Silver Here 59.86% 86.29% 64.67%
BAL iPath DJ-UBS Cotton TR Sub-Idx ETN Here 56.49% 76.15% 51.06%
UAG UBS E-TRACS CMCI Agriculture TR ETN Here 44.40% 39.79% 33.54%
JO iPath DJ-UBS Coffee TR Sub-Idx ETN Here 44.05% 38.15% 29.04%
FUE ELEMENTS MLCX Biofuels Index TR ETN Here 43.44% 29.70% 30.64%
JJT iPath DJ-UBS Tin TR Sub-Idx ETN Here 42.56% 69.87% 32.93%
JJA iPath DJ-UBS Agriculture TR Sub-Idx ETN Here 41.34% 32.49% 31.37%
EPU iShares MSCI All Peru Capped Index Here 39.98% 47.91% 33.81%
GXG Global X/InterBolsa FTSE Colombia 20 ETF Here 39.96% 68.20% 29.51%
BHH B2B Internet HOLDRs Here 39.66% 76.24% 31.12%
JJG iPath DJ-UBS Grains TR Sub-Idx ETN Here 37.23% 25.85% 29.39%
FUD UBS E-TRACS CMCI Food TR ETN Here 37.20% 32.53% 28.66%
THD iShares MSCI Thailand Invest Mkt Index Here 37.12% 58.26% 28.61%
YCL ProShares Ultra Yen Here 35.95% 25.71% 19.22%
GRU ELEMENTS MLCX Grains Index TR ETN Here 35.13% 25.14% 26.44%
RTL iShares FTSE NAREIT Retail Cp Idx Here 35.00% 42.90% 19.19%
TYD Direxion Daily 10 Yr Trsy Bull 3X Shares Here 34.91% 31.77% 18.30%

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Core ETF Report
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3 Sector ETFs for November

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Please see the right hand side of Scott’s Investments for the November update to the US Sector ETFs. I track the performance of each month’s portfolio as well as previous months’ performance. A summary of the data is listed below, including the percent each ETF is above/below the 200 day moving average.

Last month the top 3 performers based on the sum of the quarterly, half year, and annual returns were XLI (industrials), XLU (utilities), and XLY (consumer discretionary).  This month all of the sector ETFs are above their 200 day moving average except XLF (financials). The top 3 based on momentum this month are XLB (materials), XLK (technology), and XLY.

Potential strategies an investor could employ would be the following:

    • Buy the top 3-6-12 or 6 month performers and hold for one month. Or, buy the top performer based on the 6 month performance.
    • Buy the top performers only if they are also above the 200 day moving average.
    • Buy any ETF which is above the 200 day moving average, sell if it drops below the 200 day average. Update once per month
    • Trade the top 3 momentum performers using a more detailed trading plan such as one I detailed here.

For some additional background on the strategy please click here and/or check out Mebane Faber’s The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets.

I have also added ETF Replay’s ranking for each ETF plus SHY (short duration bond ETF). For some background on ETF Replay please visit the site or read my previous articles here and here.

The data source for the information below is Finviz.

No positions

Ticker Company Free Trend Analysis Perform-ance (Quarter) Half Year Year Sum 200-Day SMA
XLB Materials Select Sector SPDR Here 8.04% 4.98% 17.85% 30.87% 10.09%
XLE Energy Select Sector SPDR Here 6.80% -1.33% 4.66% 10.13% 6.94%
XLF Financial Select Sector SPDR Here -3.26% -11.23% -0.42% -14.91% -1.62%
XLI Industrial Select Sector SPDR Here 4.72% -2.16% 24.97% 27.53% 7.66%
XLK Technology Select Sector SPDR Here 9.19% 3.44% 16.28% 28.91% 9.69%
XLP Consumer Staples Select Sector SPDR Here 6.16% 5.00% 12.25% 23.41% 6.77%
XLU Utilities Select Sector SPDR Here 3.36% 5.03% 13.29% 21.68% 6.54%
XLV Health Care Select Sector SPDR Here 7.63% 1.46% 11.16% 20.25% 3.46%
XLY Consumer Discret Select Sector SPDR Here 10.15% -0.09% 29.58% 39.64% 10.42%

ETF Replay Ranking

6 month return / 3 month return / 3 month volatility 3 month return / 20 day ret/ 20 day volatility
SHY 7 8
XLB 4 5
XLE 8 6
XLF 10 10
XLI 9 9
XLK 3 1
XLP 1 3
XLU 2 7
XLV 5 4
XLY 6 2
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A Basic Market Timing Portfolio for November

previously detailed some basic portfolios as well as trading ideas. In an effort to be more user friendly, I track the portfolios monthly on my blog using Google Docs. One portfolio consists of 5 basic ETFs: BND (Vanguard Total Bond Market ETF), DBC (Powershares Commodity Index), VEU (Vanguard FTSE All-World ex-US ETF), VNQ (Vanguard REIT Index ETF), VTI (Vanguard Total Stock Market ETF). 
Despite only being 5 ETFs, one could take multiple approaches to the portfolio, from buying and holding to actively managing it; or an investor could use a combination of different approaches or trading strategies. Listed below are the month end results for October of the 5 ETFs listed above. One could purchase the top 1,2, or 3 performing ETFs based on momentum as judged by the 3-6-12 returns or just the 6 month returns. In this case, that would indicate a purchase of VNQ, VEU and VTI (3-6-12 strategy).  This combination of ETFs differs from last months list.
Another twist an investor could add would be to purchase the underlying securities based on momentum only if they are also trading above their 200 day moving average (or another moving average of your choice). At the end of October, all 5 ETFs were above their 200 day simple moving average. 

Many of the strategies listed here were inspired in part by Mebane Faber, author of The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets. For an even better explanation of some of the strategies, I recommend the book. Also, he has a new project which allows users to replicate the best performing hedge funds, AlphaClone.

The data source for the information below is Finviz, which has some of the best free financial data on the web (as well as a new elite service) and Google Finance.

In addition, I have also added an exciting new ranking feature.  Using ETF Replay, I am ranking the ETFs in various portfolios based on their 3-factor statistical model that combines relative strength and volatility.  The current ranking of the 5 ETFs are below.  I ranked the ETFs over different time periods – the first column is the rank of each ETF based on a combination of 6 month and 3 month return and 3 month volatility.  For previous discussions on this system please read the articles here and here.  An investor could use the ETF Replay ranking system similar to the momentum and moving average system detailed above. 

No Positions 

Ticker Company Trend Performance (Quarter) Half Year Year Sum 200-Day SMA
BND Vanguard Total Bond Market ETF Here 1.90% 5.48% 7.95% 15.33% 3.67%
DBC PowerShares DB Commodity Index Tracking Here 7.93% 2.52% 4.05% 14.50% 8.66%
VEU Vanguard FTSE All-World ex-US ETF Here 7.15% 7.06% 10.40% 24.61% 10.12%
VNQ Vanguard REIT Index ETF Here 4.52% 2.81% 40.70% 48.03% 11.93%
VTI Vanguard Total Stock Market ETF Here 6.23% -0.62% 15.55% 21.16% 6.77%

ETF Replay Ranking

(6 mo return/3 mo return/3 mo volatility) 3 month return/20 day return/20 day volatility
2 5
5 3
4 2
1 4
3 1

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October Portfolio Reviews (+ Halloween Costume)

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In an effort to help better track the various ETF portfolios I track each month, I will now be providing monthly summaries of every portfolio in one snapshot.  Please let me know if you have any questions or feedback.  As always, the portfolios can be tracked for free on the right hand side of the site.  I will update November portfolios this weekend while wearing a verrrryyy spooky Ben Bernanke costume….

October Portfolio Review
Average Return for all 5 ETFs: 2.78%
Average Return Top 3 Momentum ETFs also above 200 day SMA: 3.45%
Average Return for top 3 momentum: 3.45%
US Sector
Average Return for all 10 ETFs: 1.12%
Average Return for top 3 momentum: 4.17%
Global Sector
Average Return for all 10 ETFs: 3.20%
Average Return for top 3 momentum: 4.15%
Individual Country
Average Return for top 5 momentum: 4.94%
Average Return for all tracked country ETFs: 3.12%
To view MarketClub’s 3 trend based portfolios, please consider their free report here or a risk free trial here
ETF Replay Portfolios
6/3/3 Portfolio
Average Return of Top 3 ETFs: 4.45%
Average Return of Top 10: 1.65%
Average Return of All: 2.33%
3/20/20 Portfolio
Average Return of Top 3 ETFs: 2.87%
Average Return of Top 10: 3.86%
Average Return of All: 2.33%
Benchmark Returns
EFA (Intl Developed) Returns: 2.76%
EEM (Emerging Mkts) Returns: 1.92%
SPY (S&P 500) Returns: 3.04%
AOR (ishares 60-40 Stock Bond Allocation) 2.06%
Returns calculated based on opening price of first trading day of month to closing price on last trading day of the month. Dividends are excluded in returns.
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Live SP500 Trading Video & Analysis

Chris Vermeulen offers us a live trading video and analysis on the S&P 500 in this video and market analysis.  At the time of the video on Wednesday, he was holding a long position in SPY and TBT (20+ year treasury short). He had a protective stop on SPY if it closes below 116.85, so my assumption is the long position is still being held.

I have no positions in SPY or TBT

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Read more on SPDR S&P 500 ETF, ProShares UltraShort 20+ Year Treasury, S&P 500 (SPX) at Wikinvest

12 High Yield, Low Payout Dividend Stocks

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Low fixed income yields continue to frustrate income investors.  For those wanting higher yields and willing to take additional risk, utilities are one sector worth consideration as part of an overall portfolio strategy. Utilities tend to be lower growth, lower volatility stocks compared to other sectors. The simplest option for exposure to utilities is XLU, the Utilities SPDR ETF which currently yields 3.98%.

Using Finviz I screened the utility sector for stocks yielding over 4% with payout ratios below 60%. I previously performed a similar screen last December here which if held until today would have returned 4.74% excluding any dividends versus 2.47% for XLU.

I also listed each stock’s beta and the percentage it is above/low its respective 200 day simple moving average. I tend to look for stocks with positive price trend, the 200 day SMA is one simple way to gauge the long term price trend (for those interested in more in-depth trend strategies I track several on Scott’s Investments). Beta gauges the volatility of a security in comparison to the market as a whole. A beta of less than 1 indicates a security has been less volatile than the  market as a whole. As you can see, each stock has a beta under 1.

EGAS ($69 million) has a relatively small market capitalization, so liquidity should be considered before entering a position.

No positions

Ticker Company Trend P/E Dividend Yield Payout Ratio Beta 200-Day SMA Price
AGL AGL Resources Inc. Here 13.03 4.53% 54.98% 0.48 4.95% 38.83
AT Atlantic Power Corporation Here 5.01 8.18% 18.75% 0.77 9.08% 13.33
AVA Avista Corp. Here 14 4.67% 59.82% 0.74 4.85% 21.42
D Dominion Resources, Inc. Here 9.76 4.18% 39.95% 0.56 7.21% 43.82
DPL DPL Inc. Here 12.34 4.54% 55.54% 0.61 2.71% 26.65
EGAS Gas Natural Inc. Here 7.16 4.72% 34.37% 6.80% 11.45
EXC Exelon Corp. Here 10.71 5.13% 54.88% 0.63 -2.43% 40.93
FE FirstEnergy Corp. Here 12.42 6.07% 56.39% 0.53 -3.66% 36.26
HNP Huaneng Power International Inc. Here 9.13 5.41% 50.72% 0.7 -1.20% 22.73
NWE Northwestern Corp. Here 12.62 4.62% 57.09% 0.72 9.59% 29.41
PEG Public Service Enterprise Group Inc. Here 10.66 4.20% 44.01% 0.53 3.18% 32.63
UNS Unisource Energy Corp. Here 11.9 4.52% 44.25% 0.74 9.44% 34.5
More on this topic (What's this?) Read more on Diversified Utilities at Wikinvest

Think and Grow Poor?

MarketClub has been making a big push to promote 3 trend following portfolios.  Below is an introduction on the strategy from Adam Hewison, founder of MarketClub:

Think, and grow poor…

I know it sounds crazy, but that’s exactly what many investors do. They literally over think the market and therefore miss out on the big moves.

Let’s take a look at the current crazy financial conditions that an everyday investor has to deal with in the US:

    * The stocks going higher (BULLISH) * Record unemployment (BEARISH) * No new funds flowing into mutual funds (WHO KNOWS?) * A crashing dollar (BULLISH STOCKS?) * China raises rates (BEARISH STOCKS?)

It’s enough to give you a headache when you have to sort out the bullish/bearish rumors constantly floating around, from the facts.

This, in my humble opinion, is the #1 reason why most investors miss out on big moves, or worse yet, are frozen into a state of inaction only to witness their capital decimated when the market turns down.

If “Think, And Grow Poor” Doesn’t Work, What Does?

The answer is, “Don’t Think, And Grow Rich.”

I have just finished three educational reports that will prove that a strategy such as the ones we outline could make a lot of sense to your financial future.

These three reports show in detail three different portfolios that fall under the umbrella of the “don’t think, and grow rich” approach. These reports have been meticulously researched, prepared, and come with our compliments. I believe that this “don’t think, and grow rich” approach can provide you with the kind of answers that many investors are looking for in today’s markets.

3 Ways To Take Advantage Of The “Don’t Think, And Grow Rich” Philosophy

Click on any image above to request that report.

MarketClub’s WORLD CUP PORTFOLIO: This portfolio has been designed to take advantage of several important world markets and provide diversification in several categories. The goal of this portfolio is to provide superior returns for investors with as little risk as possible. THIS PORTFOLIO TRADES IN: Corn, Wheat, Soybeans, Crude Oil, Gold, and the Dollar Index.

MarketClub’s GLOBAL STRATEGY PORTFOLIO: This portfolio has been designed to take advantage of moves and provide diversification in global markets. The goal of this portfolio is to provide protection and good returns for investors who wish to use global markets to reduce risk. THIS PORTFOLIO TRADES: 5 ETFs that track the following markets and countries: Brazil (EWZ), Russia (RSX), India (EPI), China (FXI), and Australia (EWA).

MarketClub’s PERFECT “R” PORTFOLIO: This portfolio has been designed to build (or even rebuild) retirement accounts by investing in four major and diversified markets. The goal of this portfolio is to provide protection and good returns for 401(k) and IRA accounts with as little risk as possible. THIS PORTFOLIO TRADES: 4 ETFs that track the following markets: gold (GLD), oil (USO), S&P 500 (SPY), and the US Dollar (FXE).

These portfolios have been researched and prepared to provide you with strategies that are easily executable and will help your portfolio grow and prosper in the years ahead.

Now for the good news, these portfolios come not from a brokerage company, but from MarketClub, a leading online educational resource for traders and investors worldwide.

You can access the reports that accompany these portfolios with our compliments in the next 48 hours. After that time only members of MarketClub will have access.

Every success,

Adam Hewison

President of INO.com

Co-founder of MarketClub

P.S. MarketClub is powered by INO.com and has been doing business on the internet for the past 15 years. We are not affiliated with any brokerage companies or any Wall Street firms.

Global Tactical Asset Allocation ETF Now Trading

AdvisorShares and Cambria Investment Management, in which Mebane Faber has an active role, launched the first Global Tactical Asset Allocation ETF today (symbol GTAA).  The press release is here.  For more information on some of the strategies behind the ETF I would recommend visiting Faber’s site World Beta and I also highly recommend his book, The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets.

I will be adding GTAA as a benchmark ETF for some of the strategies I track on the right hand side of my site.

Faber also is affiliated with AlphaClone which allows investors to easily track and create portfolios of some of the top institutional money managers and hedge funds.

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22 Top Stocks Based on PEG and Price Momentum

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I conduct the following screen on a monthly basis. Early out-of-sample results have been mixed, performing well during bullish environments and poorly during bearish/choppy markets.  Last month’s list is here and returned an average of 4.91% for the 10 stocks on the list versus 3.34% for SPY.  The top 5 stocks on the list returned 7.21%.
August’s list here, July’s list is here, June’s list is here, May’s list is here, Aprils’ list is here, March’s list is here, February’s list is here and January’s here. The screen looks for the following:

  • earnings growers still reasonably priced as judged by the PEG ratio
  • low debt
  • a history of high return on equity and investment, and
  • price momentum as gauged by the percentage the stock is trading to its 250 day high.
August’s list returned a whopping 16.17% versus 7.87% for SPY.  It is worth noting that list had very few stocks that qualified for the list, three in total. 

When the screen results in more than 5-10 stocks I have also started tracking returns of the top  5 or 10 stocks at the beginning of each list (when more than 5 stocks qualify).  The top stocks are selected based on fundamental factors.   For the full list of stocks and results, please see the right hand side of Scott’s Investments.

The screen has tested well historically in bullish periods so strategies an investor could use to avoid drawdowns would be to either a) abandon this type of strategy entirely when the S&P 500 or another major index is below a long term moving average, or b) hedge positions with a position in SH or write a short option strategy on an equity index or ETF like SPY.
This month’s list contains 22 stocks versus 12 last month.  Two possible tools an investor could use to conduct this screen on his/her own are stockscreen123 or Finviz. This screen was conducted using stockscreen123.

No positions in stocks mentioned

Ticker Name Trend Rank MktCap Industry
LRCX Lam Research Corporation Here 99.52 5391.68 Semiconductors
MDF Metropolitan Health Networks, Here 98.97 161.77 Healthcare Facilities
DDMX Dynamex, Inc. Here 98.59 205.6 Air Courier
EZPW EZCORP, Inc. Here 98.31 1063.6 Consumer Financial Services
DECK Deckers Outdoor Corporation Here 98.29 2012.1 Footwear
CNU Continucare Corporation Here 96.9 274.91 Healthcare Facilities
JOSB Jos. A. Bank Clothiers, Inc. Here 96.19 1232.07 Retail (Apparel)
TXN Texas Instruments Incorporate Here 96.07 34254.3 Semiconductors
FCFS First Cash Financial Services Here 93.89 886.4 Retail (Specialty)
IDCC InterDigital, Inc. Here 93.83 1316.75 Communications Equipment
USNA USANA Health Sciences, Inc. Here 90.46 622.77 Personal & Household Prods.
MSM MSC Industrial Direct Co., In Here 88.91 3665.49 Misc. Capital Goods
AAPL Apple Inc. Here 88.08 281633.31 Computer Hardware
AZO AutoZone, Inc. Here 82.16 10587.51 Retail (Specialty)
TSM Taiwan Semiconductor Mfg. Co. Here 79.86 54911.73 Semiconductors
SNHY Sun Hydraulics Corporation Here 77.9 525.07 Misc. Fabricated Products
CTCM CTC Media, Inc. Here 72.52 3653.59 Broadcasting & Cable TV
NTES NetEase.com, Inc. (ADR) Here 68.61 5099 Casinos & Gaming
DRQ Dril-Quip, Inc. Here 68.39 2678.87 Oil Well Services & Equipment
CPRT Copart, Inc. Here 63.99 2856.68 Retail (Specialty)
QCOR Questcor Pharmaceuticals, Inc Here 55.42 652.16 Biotechnology & Drugs
FSLR First Solar, Inc. Here 44.35 12452.53 Semiconductors