SET Portfolio Update October 2016

| October 18, 2016

The Uncertain Autumn 

Last month we sold two positions…

  • SPDR S&P Homebuilders (XHB)
  • First Trust NASDAQ ABA Community Bank Index Fund (QABA)

We were concerned with rising interest rates, and the general direction of the markets.

Looking back over the past month, we’ve only seen one sector do well.  Energy is up 2.89% over the past 30 days.  By comparison, Health Care is down 3.77%, Utilities are down 2.54%, and Real Estate is down 1.44%.

Where will sector growth be strongest in the months ahead? Do we anticipate rebounds in the sectors that have recently been losing ground?

What makes a definitive answer difficult isn’t limited to the impossible task of consistently accurate market timing.  It’s also driven by the fact that large, institutional traders have been moving money out of one sector and into another for no reason other than to capture stronger returns.  The back and forth ebb and flow makes it difficult to gauge direction.

The selloff of utility stocks is an example of this.  We would not be surprised to see money flow back into this sector. We are also looking for good performance from the tech sector.  We are evaluating opportunities to invest in, an ETF that will complement our Vanguard Information Technology ETF $VGT.

Next month, when you receive our next update, the U.S. elections will be behind us.  We don’t expect the results to provide a useful degree of clarity for investors.  There are too many other unknowns, ranging from the health of corporate profits to global commodity supply and demand.

We will continue to stick to our knitting and identify opportunities for sector ETF investors that we believe will deliver solid returns.  We will also continue to demonstrate a preference for ETFs that pay a dividend.


. . . . First Trust ISE Global Engineering & Construction $FLM – BUY 

There has been little movement over the past few weeks.  The yield has held steady and stands at 1.97%.

We recommended the ETF earlier this month at $48.17.  Today, it closed at $47.81. 

. . . . Vanguard High Dividend Yield ETF $VYM – BUY

This remains a long-term hold, and a source of income.  Current yield is 2.96%.

We recommended the ETF earlier this month at $73.47.  Today, it closed at $71.15. 

. . . . iShares Edge MSCI Minimum Volatility Emerging Mkts $EEMV – BUY

The ETF continues to do its job, which is standing up against the volatility on emerging markets.  Current yield is 2.4%.

We recommended the ETF earlier this month at $54.02.  Today, it closed at $53.50.

. . . . Vanguard Information Technology ETF $VGT – HOLD 

The tech sector stumbled a few weeks ago and has now recovered its stride.  Over the past 30 days, tech stocks have edged up a modest .13%.  Year-to-date, they are up 10.37%.

We recommended the ETF earlier this summer at $106.29.  Today, it closed at $119.53.

. . . . First Trust ISE-Revere Natural Gas Index Fund $FCG – BUY

We recommended the ETF in June at $25.90.  Today, it closed at $25.75.

We are still anticipating price increases through the fall and winter. We’re not kept up at night by recent slips in natural gas prices.

. . . . PowerShares S&P SmallCap Energy ETF $PSCE – HOLD

We recommended the ETF at $15.66 in May.  Today, it closed at $18.06.

Last week we saw another uptick in energy prices.  Good news, but we don’t believe that uncertainties over the direction of crude prices have vanished.

There could be more volatility.  If the ETF dips below our buy price of $17.50, take advantage of the opportunity.

. . . . Aberdeen Chile Fund $CH – HOLD

We recommended the ETF at $5.73 earlier this year.  Today, it closed at $6.24.

As we have noted in the past, the performance of the Aberdeen Chile Fund is largely driven by industrial output in China.  When China returns to previous levels of copper imports from Chile, look for the fund to do well. 

. . . . Utilities Select Sector SPDR $XLU – HOLD

We recommended the ETF at $41.36.  Today, it closed at $48.41.

The Utilities Select Sector SPDR has fallen from recent highs, but we are not interested in selling.  History tells us that when utility stocks fall out of favor, they eventually regain their lost appeal.  This ETF is a long-term hold.

Action to Take

  • None at this time.

Category: SET Portfolio Updates

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