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 commented on Oracle's bullish comments about the software sector, an agriculture ETF with exposure to emerging markets and acquisitions, and a euro-dollar strategy.
Look to the Oracle
Posted 03/26/2010 10:49 a.m. EDTOracle ( ORCL) moved markedly lower this morning following the release of earnings after yesterday's bell, but there's more to this earnings report than first meets the eye. ETF investors can gain exposure to the strong software industry over the longer term using either the iShares S&P North American Technology-Software Index Fund ( IGV) or the PowerShares Dynamic Software Portfolio ( PSJ). ORCL is a top component in both ETFs. While Oracle's profit fell 10.5% last quarter, most of the losses can be credited to the firm's absorption of struggling Sun Microsystems. Months of wrangling over regulatory issues didn't help the software maker last quarter. In its earnings report, however, the company noted that it expects Sun to make a "significant contribution" to revenue in the current quarter. Both IGV and PSJ count ORCL among their top holdings, with 9.04% and 4.96% allocations, respectively. Year to date, the funds are both higher -- IGV is up 4.42% while PSJ is 6.23% higher. The more significant numbers, however, are the returns for IGV and PSJ for the one-month period ended March 25. During that period, IGV and PSJ gained 6.97% and 5.69%, respectively -- the funds are picking up steam. The primary difference between the two funds is that IGV employs a modified cap-weighted strategy while PSJ charges a bit more but screens for factors like fundamental growth, stock valuation, investment timeliness and risk factors. The practical impact of this difference is that IGV has a higher percentage of assets dedicated to top holdings like Oracle, Adobe ( ADBE) and Microsoft ( MSFT), while PSJ has a broader portfolio that is more equally balanced. Both funds, however, will help investors capture the recent run in software. Reading the details of Oracle's report, the outlook looks positive. In its report, the company noted that revenue from new software licenses was higher for the second quarter in a row. Software licenses are a good indicator of how the sector will perform in the months ahead. An increase in software licenses indicates that companies are increasing spending on new tech projects. More contracts can mean more growth years ahead of when they are signed. Don't let ORCL's early-morning trading get you down on software. Inside the company's earnings report are plenty of reasons to be bullish on the sector in the months ahead.