3 Industry ETFs Nobody's Talking About

Throughout September, a monster rally for stock assets captured most of the headlines. Nevertheless, commodities, corporate bonds, high-yield bonds, foreign currencies -- heck, most real estate investment trusts -- are all logging 52-week highs.

The "all-assets-are-climbing" phenomenon goes hand-in-hand with the Fed's implied use of additional quantitative easing. Simply stated, the Fed's planned monetary stimulus to buy U.S. treasuries and/or mortgage-backed securities yet again, even while interest rates are already at an effective rate of 0%, further devalues the U.S. dollar; not surprisingly, the ultrastimulative monetary policy entices investors to buy anything other than the U.S. dollar -- from the least risky to the most risky.

It follows that it may not make all that much sense to talk about industry ETFs that are flying under the radar. After all, if everything goes up, why bother trying to set your portfolio apart?

Well, the simple answer is an effort at minimizing duplication and excessive risk. In other words, just because Thailand ( THD), Turkey ( TUR), and Indonesia ( IDX) are raking in the bucks, you probably shouldn't hold every single-country emerging-market ETF; these investments are highly correlated, and they are further out on the risk spectrum than many may realize.

So here are three subsector ETFs very few people have mentioned lately:

PowerShares Global Listed Private Equity ( PSP) This ETF was one of the worst casualties of the financial collapse. Its ties to the crisis didn't exactly help. Still, the business of "buying out" public corporations or acquiring distressed assets or lending capital has had a renaissance of sorts.

This is an exchange-traded investment that has risen 170% off of its March 9, 2009, lows. Yet unlike other casualties of finance, such as the KBW Bank Index ( KBE), an investment that has been in a downtrend since April. PowerShares Global Listed Private Equity ( PSP) is experiencing a technical uptrend since most U.S. stock assets bottomed in early July. PSP also boasts a SEC 30-day yield in the area of 3%. (Year-over-year, PSP is up about 5%, whereas KBE is down about 4%.)

iShares Software ( IGV) About the only thing writers, TV gurus and journalists wish to talk about in tech-land these days? Cloud computing. You should pay high double-digit multiples or triple-digit multiples for names such as Salesforce.com ( CRM), Rackspace ( RAX) and VMWare ( VMW). Really?

OK, even I offered a cloud computing, dot-com play with the First Trust Internet Fund ( FDN) back in August. (FDN has rallied 15.6% in just a bit more than a month!) Yet IGV rallied for 11.7% in the same period at a fraction of the risk. Most importantly, it's nearly impossible to dismiss the attractiveness of Microsoft ( MSFT), Oracle ( ORCL) and Intuit ( INTU) with these giants' global footprints.

SPDR Pharmaceuticals ( XPH) It's true that broad-based health care has been abysmal. And even the formerly loved medical devices stocks couldn't shake the health care reform law.

Yet XPH has always been a little unique in its design. By concentrating a max of 5% in one company through equal weighting -- a lawsuit here, a patent expiration there -- they just haven't derailed the need for drugs. What's more, whereas some pharma investments tend to be caught up in distribution and pipelines, XPH has more exposure to actual researchers and developers.

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Disclosure Statement: ETF Expert is a website that makes the world of ETFs easier to understand. Gary Gordon, Pacific Park Financial and/or its clients may hold positions in ETFs, mutual funds and investment assets mentioned. The commentary does not constitute individualized investment advice. The opinions offered are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial or its subsidiaries for advertising at the ETF Expert website. ETF Expert content is created independently of any advertising relationships. You may review additional ETF Expert at the site.

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