Publish date:

Don Dion's Weekly ETF Blog Wrap

Here is some of what Don Dion was blogging about this past week on <I>RealMoney</I>.
Author:

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.

In the following three blogs from the past week Don advised investors to avoid certain homebuilder ETFs, said biotech remains a bright spot in the uncertain health care sector and noted the strength of well-performing developed-market funds.

Avoid Homebuilder ETFs for Now

Posted 02/24/2010 9:41 a.m. EST

Despite improved numbers from

Toll Brothers

(TOL) - Get Report

, investors should continue to avoid homebuilder ETFs such as

SPDR S&P Homebuilders ETF

(XHB) - Get Report

and

iShares Dow Jones U.S. Home Construction Index Fund

(ITB) - Get Report

.

>>Want More ETFs? Visit Our ETF Screener Page

Although Toll trimmed losses during its first fiscal quarter, revenue still fell, despite the company's "luxury" status. Other top holdings in the homebuilder ETF group, such as

Lennar

(LEN) - Get Report

,

D.R. Horton

(DHI) - Get Report

and

Pulte Homes

(PHM) - Get Report

, face the same fundamental challenges as Toll.

Since ITB is a more top-heavy fund than XHB -- TOL makes up 7.47% of ITB's portfolio and 3.79% of XHB's portfolio -- it will be the more volatile of the two today, whether investors feel encouraged or sell on the news.

> > Bull or Bear? Vote in Our Poll

The chart at the end of this article shows how ITB's top-heavy lineup has separated this fund as some investors bet on a recovery among headlining homebuilders.

Last week, I

reminded investors

to consider the fundamentals when it comes to homebuilders. No matter what the charts or earnings reports say, times are undeniably tough. Consumers are just beginning to dig back in by treating themselves to a

Panera

(PNRA)

sandwich. With unemployment so high, it will be a long time before people rush out to buy homes again.

For now, investors should shy away from the homebuilders. If you're looking to bet on a slow consumer recovery, check out a

well-balanced retail fund

.

An Obama-Proof Health ETF

Posted 02/24/2010 10:32 a.m. EST

As President Obama prepares for his health care summit tomorrow, a cloud of uncertainty continues to envelop the various subsectors of the industry.

On Monday I suggested that the release of Obama's new health care proposal could derail the

iShares Dow Jones U.S. Healthcare Provider ETF

(IHF) - Get Report

in the short term, and that

investors should buy on the dips.

It still seems highly likely that health care reform will be met with continued resistance, and once Republicans get a chance to add their two cents at the health care summit tomorrow, it's likely that IHF could continue its rally.

Another long-term health care play that should be immune to continued health care debate is biotechnology. Developing that one-in-a-million drug is like hitting the lottery, and these highly specialized drug developers are less prone to the generic pressure felt by other pharmaceuticals.

The biotech industry is tailor-made for the ETF model. Since it is highly likely that a number of biotech firms will either boom or bust, the ETF model allows you to gain access to a portfolio of companies and minimize security-specific risk. This would be an extremely difficult subsector to go stock-picking in.

While several ETFs allow you to access biotech -- including the

SPDR Biotech ETF

(XBI) - Get Report

and

iShares Nasdaq Biotechnology Index ETF

(IBB) - Get Report

-- I would suggest a smaller fund for investors looking for a strong play on this health care slice.

The

First Trust NYSE Arca Biotech Index ETF

(FBT) - Get Report

has continued to lead peers like XBI and IBB in 2010. Its strong, well-balanced portfolio of biotech companies has helped FBT outperform top-heavy IBB and the more heavily traded XBI.

Top holdings in FBT's portfolio include

TST Recommends

Sequenom

(SQNM)

,

Cephalon

(CEPH)

,

OSI Pharmaceuticals

(OSIP)

and

Gilead Sciences

(GILD) - Get Report

.

Some traders may find FBT's moderate liquidity problematic on large orders, but with an average daily trading volume of 50,000, FBT has adequate liquidity for the average trader.

The health care industry will continue to fluctuate as reform is drafted, met with opposition and drafted once again. The innovative area of biotech, however, continues to look like a solid long-term buy in an uncertain sector.

Don't Forget Developed Market ETFs

Posted 02/23/2010 11:03 a.m. EST

While individual country ETFs can help investors gain targeted access to emerging markets, investors need to keep in mind well-performing developed-market funds.

In a post yesterday, I

emphasized

the strength of single-country funds such as the

iShares Thailand ETF

(THD) - Get Report

and the

iShares Taiwan Index

(EWT) - Get Report

as an indicator of shifting trends in emerging-market performance.

While strong emerging-market picks can help to bolster a well-rounded portfolio, investors should also remember to include strong developed-market picks to capture a mix of economies.

Last week I

noted

that the

iShares MSCI Japan Index Fund

(EWJ) - Get Report

continued to advance despite the controversy surrounding top holding

Toyota

(TM) - Get Report

.

Like Tiger Woods' press conference, pre-released testimony from Toyota's James Lentz will likely do little to comfort drivers who have bet on Toyota's brand. Sticky accelerators are a dangerous threat, and Toyota's response was admittedly slow.

Nevertheless, EWJ's resilience in light of Toyota's challenges should perk up the ears of U.S. investors. EWJ is in the black year to date, up 1.44%, even though TM makes up 5.21% of the fund's holdings. Other top holdings include Mitsubishi, UFJ Financial,

Honda Motor

(HMC) - Get Report

,

Canon

(CAJ) - Get Report

and

Sony

(SNE) - Get Report

.

Stateside, the solid dividend stocks in the

iShares Dow Jones Select Dividend Index

(DVY) - Get Report

have helped investors net a 5.37% return during the three-month period ending Feb. 22. During the same three-month period, the

PowerShares International Dividend Achievers ETF

(PID) - Get Report

rose less than 1%.

The message for ETF investors is simple: Get past the noise.

Gold, Greece and garbage bonds are all distracting in a volatile marketplace. Now is not the time to forget the fundamentals.

When building a well-diversified U.S. and international portfolio, don't forget to include the developed markets.

-- Written by Don Dion in Williamstown, Mass.

At the time of publication, Dion Money Management owned iShares Dow Jones Select Dividend Index.

Don Dion is president and founder of

Dion Money Management

, 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.