NEW YORK (TheStreet) -- Don Dion posts his current insights on the stock, bond, commodity and currency markets in his RealMoney blog, anticipating which ETFs will be in play next.
Here are three of his blog posts from the past week:
Cast Your Nets Beyond BRIC
Published 7/28/2011 1:48 p.m. EDT
iShares MSCI Thailand Investable Market Index Fund
is on track to becoming one of the big winners on today's session. This ETF has been a fixture at the top of our international short-term momentum rankings for several weeks, and it is well off its June 27 low of $61.01.
In many ways, the story in Thailand, Southeast Asia's second-largest economy, is similar to what's going on in Malaysia and Indonesia, which I
touched on last week. These countries all have growing middle classes that are demanding the kinds of goods and services enjoyed in the developed world: cars, home appliances, travel, health care, insurance and so forth.
Indeed, goods are currently being chased by so many Thai baht (the country's currency) that the Bank of Thailand raised interest rates earlier this month in order to check food and energy inflation.
The THD fund is dominated by financials and energy firms, and its top holdings include
, a Fortune Global 500 company that refines and distributes petroleum and natural gas,
Siam Commercial Bank
Advanced Info Service
, a mobile phone operator.
Thailand and its Southeast Asian peers make for a compelling emerging-markets growth story, particularly against the backdrop of moderating growth in the BRIC bloc -- that is, Brazil, Russia, China and India -- and elsewhere. Brazil's Bovespa index today became the first benchmark BRIC to hit bear market territory, or a decline of 20% or more, since the November 2010 highs. Given this clear maturation of the BRIC economies, investors looking abroad for growth should consider Southeast Asia.
At the time of publication, Dion Money Management was long THD.
Looking for Gains in the Energy Sector
Published 7/28/2011 4:19 a.m. EDT
It's not surprising that precious-metals funds such as the
iShares Silver Trust
Van Eck Global Market Vectors Gold Miners
dominate the top of our short-term momentum rankings. The market is clearly looking for safety in these funds against the backdrop of immediate concerns over the U.S. credit rating and longer-term worries about inflation and the budget deficit.
The other sector that appears to have the wind at its back right now is energy. The
iShares Dow Jones U.S. Oil Equipment & Services Index Fund
PowerShares Dynamic Energy Sector Portfolio
, and the
PowerShares Dynamic Energy Exploration & Production Portfolio
have all posted healthy gains in recent weeks. The question now is whether energy will continue to outperform other areas of the market.
demonstrated today when it missed its second-quarter earnings forecast, high petroleum prices don't necessarily translate into higher prices for finished products such as gasoline and jet fuel. And I'm looking for the real dynamism in oilfield services, equipment and prospecting, rather than in the petroleum production and distribution side of the energy sector.
As oil becomes more difficult to extract and producers look to deep underwater and remote onshore fields, IEZ's top holding
should benefit. The company reported a 64% increase in quarterly profit last week, and it remains one of the best ways to capitalize on the demand for deepwater drilling equipment and expertise. IEZ's next heaviest weightings are
National Oilwell Varco
The major oilfields we've relied on for decades are maturing and, in many cases, their production is dwindling. Mexico's giant Cantarell field, for instance, has been in a steep production decline since 2004. Meanwhile, petroleum demand will only increase over the long term as emerging-market economies continue to develop.
If the secular bull market in energy still has room to run, IEZ and its peer funds will be the place to be.
At the time of publication, Dion Money Management had no positions in the equities mentioned.
Buybacks vs. Dividends
Published 7/28/2011 9:08 a.m. EDT
There are essentially two ways successful companies return money to shareholders. A stock buyback program boosts share prices and signals the market that management believes in its company. In the wake of
blockbuster earnings last quarter, for instance, commentators were openly speculating on when the technology giant would use some of its $76 billion cash reserve to undertake a buyback.
Dividends, i.e., periodic cash payments, are the other way to return money to shareholders. Blue-chip large-caps with stable earnings, such as
Procter & Gamble
, are popular with income-seeking investors and are known for their reliable dividend payments.
There are several exchange-traded funds on the market that focus on dividend-paying stocks. The
PowerShares Dividend Achievers Portfolio
is typical of this class of ETFs. To make the cut, a company must have increased its annual dividend for 10 or more consecutive years. The
Vanguard Dividend Appreciation Fund
iShares Dow Jones Select Dividend Index Fund
, or the
SPDR S&P Dividend ETF
all have similar indexing requirements.
ETF investors looking for companies with robust stock buyback programs have fewer options. The
PowerShares Buyback Achievers Portfolio
tracks an index of U.S.-traded companies that have repurchased at least 5% of their shares in the past year.
The rap against buybacks is that they sometimes benefit company managers who hold large numbers of stock options over shareholders. This is not always the case, of course, but it does happen. Remember
Ultimately, I prefer dividend payers. In the current climate of uncertainty, an ETF focused on companies with solid earnings and a history of consistent payouts to shareholders can lend stability to a portfolio.
At the time of publication, Dion Money Management was long DVY.