Dion's Weekly ETF Blog Wrap

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:


Two ETF Opportunities Ahead

Published 4/21/2011 12:50 p.m. EDT

Navigating the choppy, light-volume conditions of the U.S. marketplace ahead of a long weekend can be hazardous, particularly when trading ETFs. In the ETF marketplace, the presence of plenty of buyers and sellers helps to ensure that market price lines up with underlying volume. The fewer investors there are actively trading or creating two-sided markets, the more likely it is that you'll see pricing discrepancies -- premiums and discounts.

While it looks like stocks are heading higher for now, it's a good idea to forget the aggressive trading and look forward to opportunities in the week ahead. Earnings, earnings and more earnings are set to dominate the headlines, and here are a couple of funds to keep an eye on:

The iShares Dow Jones U.S. Aerospace & Defense ETF ( ITA): Although U.S. presence in Iraq and Afghanistan is slated to be scaled down, defense concerns and conflicts abroad continue to fuel profits for the largest U.S. defense companies. United Technologies ( UTX), one of the biggest names in defense, reported better-than-expected results this week, helping to send ITA slightly higher yesterday.

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In the week ahead, half of ITA's top 10 holdings will report quarterly earnings. Longer-term concerns about U.S. budget cuts and military cutbacks may make a long-term investment risky for some, but investors who are bullish on earnings in the short term might want to consider picking up shares of ITA on Monday. Top ITA components that report next week include Boeing ( BA), Lockheed Martin ( LMT), Northrop Grumman ( NOC), Raytheon ( RTN) and General Dynamics ( GD).

The First Trust Dow Jones Internet ETF ( FDN): FDN, yesterday's " ETF Play of the Day," will also be a fund to watch in the week ahead. Top FDN holdings including Amazon ( AMZN), eBay ( EBAY), Akamai Technologies ( AKAM) and Netflix ( NFLX) will be reporting quarterly results next week, and technology's recent momentum could keep trending upward if numbers come in better than expected.

I continue to be very bullish on the top Internet firms as devices from companies such as Apple ( AAPL) and Research In Motion ( RIMM) help consumers to access the Internet from virtually anywhere. Many of FDN's top holdings serve as hubs for web surfers, and as consumer confidence grows, advertising revenue should continue to rise.

At the time of publication, Dion Money Management was long FDN.

PIMCO's Bill Gross to Debut New ETF

Published 4/20/2011 3:05 p.m. EDT

Issuers with an angle tend to make the biggest splash in the exchange-traded-fund marketplace, so it's somewhat unsurprising that PIMCO's bond ETFs have quickly found an audience. The bond giant's upcoming ETF debut, however, may be the most successful of all.

In a Securities and Exchange Commission filing today, PIMCO announced its intention to release an actively managed ETF designed to mimic the PIMCO Total Return fund, managed by investment guru Bill Gross. The objective of the fund, stated simply in the preliminary filing, is to "(seek) maximum total return, consistent with preservation of capital and prudent investment management."

The new fund will be Bill Gross' investment philosophy made transparent: PIMCO and the guru himself are listed in the fund materials as the ETF managers. Once launched, the fund's daily holdings will be posted on PIMCO's ETF website before commencing trading on the NYSE Arca.

Erratic bursts of praise for active ETFs have appeared in the media over the last couple of years, claiming that these hands-on managed investments would supplant more traditional models. Thus far, active ETFs have failed to attract much attention from investors, who appear to have different tastes than the media, and several funds have shut down over time.

Gross' new fund could change all that and usher in a new era of active ETFs managed by the most famous of global investors. As details emerge, I will comment more extensively.

At the time of publication, Dion Money Management had no positions in any of the securities mentioned.

Red-Hot Chile Demands Attention

Published 4/20/2011 1:02 p.m. EDT

Rapid growth is helping to spur a large number of initial public offerings in Chile, which has an emerging-market economy that's steaming ahead at the fastest pace in more than a decade. Boasting the best performance amongst the Latin American indices during the past year, Chile's IPSA equities index is one emerging-market benchmark to keep an eye on.

Latin America as a whole has been a hot spot for IPOs during the last 12 months, and this has been especially true for Chile. In fact, analysts predict that Chilean firms could raise as much as $9.6 billion through next year from IPOs and subsequent offerings. (See linked source above.) At the same time, an improving Chilean economy is also helping large-cap companies to outperform, and investors interested in tapping into that particular segment of Chilean growth should scoop up shares of the highly liquid iShares MSCI Chile Investable Market ETF ( ECH).

ECH has advanced more than 12% during the last month, driven by the strength of such top holdings as Empresas Copec, Cencosud and Enersis ( ENI). While this cap-weighted fund is a bit top-heavy, ECH is a good way for investors to target the more developed companies in Chile's red-hot emerging marketplace.

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