NEW YORK (
) -- Don Dion posts his current insights on the stock, bond, commodity and currency markets in his
blog, anticipating which ETFs will be in play next.
Here are three of his blog posts from the past week:
Stock Up on PBJ
Published 10/04/2010 7:04 a.m. EDT
U.S. food companies, and those that deal heavily with the food industry, this week will deliver earnings and give investors yet another angle on the economic recovery and the U.S. consumer.
on Tuesday will give investors the first taste of food industry profits when it reports the results from its numerous divisions.
also issues results Tuesday. On Wednesday, investors will get results from
follows on Thursday.
While some of these earnings reports will make more of a splash than others, the group offers valuable insight into the spending habits of U.S. consumers. The stock market may have had a blockbuster September, but has that been enough to get U.S. consumers to stock up or head back out to eat? I believe we'll be pleasantly surprised.
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If the recent strength of the
PowerShares Dynamic Food & Beverage ETF
is any indication, the names that headline U.S. food companies are well on the road to recovery. This well-balanced fund is up nearly 17% year to date and nearly 22% for the one-year period ended Oct. 1. Positive earnings could help to further quicken PBJ's upward momentum and make this ETF a good play on earnings in the week ahead.
Top PBJ components include Yum! and other top companies like
. Yum! is the only major PBJ component reporting results this week.
PBJ is a good way to capitalize on a slice of the earnings reports that U.S. investors will be watching this week and for the next few weeks. Feeling bullish about food companies and the American consumer? Put a little PBJ in your pantry.
At the time of publication, Dion Money Management owned PBJ.
Best of Breed: Biotech and Pharma ETFs
Published 10/07/2010 12:00 p.m. EDT
Looking for a way to get exposure to pharma and/or biotech? The ETF industry has answers if you know where to look. While the number of ETFs that track the health care industry may be daunting, there are several funds that track the pharma and biotech subsectors that really stand out.
Pharma: As many ETFs use a cap-weighted methodology, top pharma funds are often heavily weighted towards the biggest firms in the industry. While this may seem problematic to some investors looking to mitigate security-specific risk or tap into remote niches of the pharma industry, sometimes, the biggest pharma firms are simply the ones that you're looking for.
A good ETF for capturing the pharma titans is the
iShares Dow Jones US Pharmaceuticals ETF
. While daily trading volume is borderline anemic, the exposure that IHE offers for longer-term investors is worth the care necessary in trading this well constructed big-pharma fund. IHE's portfolio highlights large pharma firms without overweighting them: Top components
Johnson & Johnson
make up just 9.84%, 8.84% and 8.14% of the underlying portfolio, respectively.
Looking for a more equal-weight approach that reduces security-specific risk? Check out the
SPDR S&P Pharmaceuticals ETF
. XPH's top two components,
, make up just 4.98% and 4.8% of the underlying portfolio, respectively.
Biotech: I've always believed that the biotech sector is one area where ETFs shine. As the biotech industry is such a make-it-or-break-it business, there is plenty of volatility and it's extremely difficult to predict which individual company will win the drug-development lottery.
iShares Nasdaq Biotechnology ETF
is the most popular fund out there if you're strictly looking for size. This highly liquid ETF offers exposure to 128 holdings in total, but its construction favors large firms like
If you're looking for a more balanced biotech approach, check out the
First Trust NYSE Arca Biotechnology Index ETF
. While FBT's underlying portfolio certainly includes big names like
, a better-balanced underlying portfolio reduces security-specific risk.
Aging boomers and new reform have made the health care sector an attractive place to make some longer-term investments. If you're looking to build exposure to the pharma and biotech subsectors into your portfolio, ETFs are a good place to start.
At the time of publication, Dion Money Management was long IHE.
With Networking, Balance Is Best
Published 10/07/2010 7:07 a.m. EDT
reportedly ready to make an
early next year, expect to see a rush by the networking sector to accommodate the increased interest and increased flow of data.
The networking subsector of the tech industry is a compelling investment in any environment. As global firms grow, update and expand coverage the volatility of individual stocks can be heart-wrenching to say the least.
on Wednesday dropped more than 12%, while
declined more than 8%. If you're looking for exposure to networking -- beyond just
-- it can be difficult to pick and choose.
FFIV and RVBD also have another thing in common - they are both components of the
PowerShares Dynamic Networking Portfolio
. Employing a "smart" indexing methodology (which takes into account factors such as fundamental growth, stock valuation, investment timeliness and risk, not just market cap), PXQ offers exposure to 30 networking firms in one stop.
Consider how valuable this balance can be on a negative day for networking. FFIV may be one of PXQ's top five components, but its 12% drop Wednesday didn't unhinge the entire fund's performance. When it comes to this volatile and high potential sector, balance is best.
Rapidly developing technology, increased competition, global economic recovery and emerging market expansion all bode well for the networking sector. PXQ may have gotten knocked down Wednesday falling 4.2%, but this fund isn't out. Look at current weakness as a perfect opportunity to buy PXQ for exposure to networking for the last part of 2010.
At the time of publication, Dion Money Management had no holdings in the securities mentioned.
Don Dion is president and founder of
, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.
Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.