SET Portfolio Update April 2016

We try to avoid falling into the tender trap of a “flavor of the month” when it comes to looking at what’s been unfolding on the markets, and what factors are in play with our portfolio of ETFs.

Last month, we examined the ups and the downs of the $VIX, the volatility index that tracks the bullish and bearish outlook of S&P 500 index options traders.

Volatility spiked in mid-February, and fell in March.  But in early April, the VIX began to edge back up, and then returned to its up and down pattern and eased off.

Taken by itself, the ups and downs of volatility, and the spurt we experienced in early April, doesn’t appear to foreshadow another difficult stretch for investors.  But it’s definitely one of many trends that warrants consideration.

What’s significant is that volatility is now much less extreme than it was in January.

What else are we keeping an eye on so we can help you make sound decisions on which sectors will prove most profitable for your ETF investments?

The usual suspects… interest rates, oil prices, commodity prices, and China.

This year’s steady increase in gold prices has slowed down.  Gold has come off recent highs.

The failure of oil producers to set production limits this past weekend at their meeting in Doha did not send jitters through the markets.  It didn’t even rattle energy stock prices.  Yesterday morning, Exxon Mobil $XOM shrugged off the news and closed higher.

On the Chinese markets, large cap stocks have now made up almost all the ground they lost since the beginning of the year.  Chinese turbulence seems to have subsided for the moment.

This year we have made four recommendations.  Tides can turn, but for now, the portfolio is doing well.

Now, onto the updates…

. . . . First Trust NASDAQ Community Bank Index Fund $QABA – HOLD         

We recommended this ETF a few weeks ago at $35.87.  Now it’s stormed past our buy up to price of $38.00.  The First Trust NASDAQ Community Bank Index Fund closed today at $38.43.

Bank stocks in general have rebounded.  Our timing was good.  We don’t profess to be market timers, but we saw assets we believed were undervalued and there has been a growing realization of this.

The KBW Nasdaq Bank Index flirted with a three-year low in February.  One of the reasons why we’ve seen an uptick:  the most recent earnings report have largely been better than expected.

The price target is $46.00.  Continue holding.

. . . . Aberdeen Chile Fund $CH – HOLD

The ETF closed today at our buy price limit of $6.25.  It has benefitted from higher copper prices, which continue to fluctuate but have come off recent lows.

Positive outlooks on the Chinese economy, given that China buys most of Chile’s copper, should help.

The price target is $11.00.  Hold.

. . . . SPDR S&P Homebuilders $XHB – HOLD

The ETF continues to climb.  The industry has avoided the possible speed bump of an interest rate hike.  New home sales edged up slightly in February from January, and we expect momentum to accelerate when March data are released.

The price target is $50.00.  Continue holding. 

. . . . Market Vectors Retail ETF $RTH – HOLD

The ETF is finally getting a helping hand from Amazon $AMZN.

Amazon is one of the ETF’s largest positions, and in February, the stock fell below $490.  Now it’s back over $620.

Home Depot $HD, another major holding, has also rebounded nicely.  Home Depot stock traded below $112 in February.  Now it’s over $135.

The Market Vectors Retail ETF has now edged over $78.00, above our buy up to price of $77.50.

The price target is $90.00.  Continue holding.

. . . . iShares Medical Devices ETF $IHI – HOLD

$IHI is still on a tear.

Helping out is the problem-child stock in the ETF, Abbott Laboratories $ABT.

Abbot’s stock price has roared back and is contributing to the ETF’s overall improved performance.

Still on our radar: concerns about federal legislation that could place pricing controls on drugs.  We do not consider this to be likely.

But overall, investors have not been well taken care of by health care stocks.  During Q1, healthcare turned in the worst performance of any S&P 500 Index sector.  It was off 5.5%, compared to the market’s 1.3% gain.

This is why we zeroed in on medical devices as the opportunity when we recommended the ETF last year.

The price target is $140.00. Continue holding.

Action to Take

• Move Market Vectors Retail ETF $RTH to HOLD
• Move First Trust NASDAQ Community Bank Index Fund $QABA to HOLD
• Move Aberdeen Chile Fund $CH to HOLD

Category: SET Portfolio Updates