SET Portfolio Update October 2013

| October 1, 2013

October 1, 2013

Dear Sector ETF Trader Reader,

We’re kicking off the month of October with more stupidity out of Washington.

Our elected leaders failed to reach a deal to fund the Federal Government.  Now the government is shut down.  And we’re being held hostage by the stupidity of these fringe interests.

And there are more problems down the road… We’re quickly approaching the debt ceiling. A failure to reach an agreement to raise the ceiling could result in a default on debt payments.

Needless to say, the uncertainty created by these events has investors on edge.

The good news is, the shutdown is only temporary.  And the previous shutdown in 95-96 and the near-miss last year led to large bounces in the stock market.

What’s more, the 4th quarter is historically a strong period for stocks.  According to Bespoke, the 4th quarter was the best quarter to own stock going back the last 20, 50, and 100 years.

To add a little fuel to stoke bull market fire, investors are pulling money out of bond funds for the first time since 2004.  And on the other hand, stock mutual funds and ETFs have collected $275 billion year-to-date.

The influx of money is clearly bullish for stocks.

Right now the total return on the S&P 500 year-to-date is 21%.  The recent pullback from the all-time high of 1,729 is a meager 2.7%.  That’s nothing to be concerned about.

In my opinion, it’s best to ignore any temporary downswings caused by the government shutdown.  There are simply too many reasons to be bullish on stocks to let the stupidity of our elected officials cloud the bigger picture.

Now onto the updates…

. . . . PowerShares Dynamic Media Portfolio (PBS) – Buy up to $23.75

Our ‘old media’ ETF is centered around companies like CBS (CBS), Time Warner(TWX), and DISH Network (DISH).  But it has enough ‘new media’ like LinkedIn(LNKD), Google (GOOG) and Netflix (NFLX) to give it growth potential that few other ETFs can match. Grab your shares of PBS up to $23.75.

. . . . iShares Transportation ETF (IYT) – Buy up to $120.00

IYT broke above our $120 buy up to price shortly after our recommendation.  It has since moved back below $120… but it won’t be here for long.  Grab your shares of IYT before they move beyond $120 for good.

. . . . First Trust Global Wind Energy (FAN) – Buy up to $11.00

FAN is surging to the upside as I expected.  Bullish investor sentiment toward green energy stocks is fueling a strong move.  I gave FAN a wide entry point to ensure everyone got in.  It won’t be long before FAN moves beyond $11 for good.  Grab your shares of FAN up to $11.00.

. . . . First Trust NASDAQ ABA Community Bank Index Fund (QABA) – Buy up to $32.75

QABA hasn’t done anything since we bought it in July.  It’s just hovered around $32 per share.  But a breakout could be just around the corner.  This ETF has been consolidating in a tight range for three months.  And it’s on the verge of breaking out to the upside. Grab your shares up to $32.75.

. . . . Guggenheim S&P 500 Equal Weight Technology ETF (RYT) – Hold

RYT’s equal weight methodology continues to outperform market-cap weighted tech sector ETFs.  At the recent high, RYT was up 11.7%.  And it will look to extend those gains as global economic growth picks up in the weeks ahead.  Continue holding RYT.

. . . . Health Care Select Sector SPDR (XLV) – Hold

XLV is moving higher despite the turmoil surrounding the funding of the Affordable Care Act – otherwise known as Obamacare.  The exchanges for individuals to buy insurance went live today.  And contrary to what some would have you believe, the world didn’t explode… shocker, I know.  The influx of new people onto insurance bodes well for healthcare stocks across the board.  Continue holding XLV for bigger gains.

. . . . Morgan Stanley Cushing MLP High Income Index ETN (MLPY) – Buy up to $18.50

Not much has changed with MLPY… The correction in dividend paying stocks has already happened.  And the recent drop in interest rates over the last few weeks should make the yield on MLPY that much more attractive.  Feel free to buy MLPY while it’s under $18.50 to get a piece of the juicy dividend.

. . . . iShares Semiconductor ETF (SOXX) – Hold

SOXX hit a recent high of $68.03 – a total return of 18% since we bought it in February. And there still plenty of upside from here.  The growth potential for semiconductors is off the charts.  New products are being rolled out to a growing global customer base.  The recent launch of Apple’s (AAPL) new Phone 5s and 5c that sold a record 9 million units in the first weekend is a clear indication demand for the latest and greatest tech gadget is getting stronger.  Continue holding…

. . . . iShares DJ US Home Construction Index Fund (ITB) – Buy up to $23.00

ITB got a bit of spark from the drop in mortgage interest rates and some decent data about single family home starts.  But homebuilders that focus on entry level homes could take a hit due to the government shutdown.  Don’t forget, the majority of first time home buyers use FHA loans to buy.  If the shutdown drags out too long, the Federal Housing Administration could be forced to delay the new endorsements and further constrict a buyer’s ability to get a mortgage.  I think any impact should be temporary… feel free to buy ITB up to $23.00.

. . . . Guggenheim Timber ETF (CUT) – Hold

CUT is just shy of our $25.50 price target.  It’s only a matter of time before it gets there… and it could happen sooner rather than later.  If stocks get a post government shutdown bounce like they have in the past, we could be ringing the cash register in short order.

Action To Take

  • None at this time.


Category: SET Portfolio Updates

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