Todd Shriber: A lot of folks have been asking me lately what my thoughts are on the market. Not surprisingly, it seems like I get more of those questions the more chaotic the market gets. Even the the future Mrs. Shriber’s parents recently asked my thoughts on the current state of affairs in the financial markets. Hey, at least that situation lets me know that they actually like me. Kidding aside, believe me when I say I understand why the recent goings on have folks feeling a bit discombobulated and confused.
I know how you feel. August and September were bloodbaths and October got off to an inauspicious start. Now in the past five days, we seen some very strong up days and two down days that some would argue indicate the bears are losing their vigor. Up and down we go and it leaves a lot of investors feeling like they need to invest in pharma stocks to find a cure for their market-induced heartburn.
Don’t fret because there is a silver lining: There are a lot of good ETFs on sale right now. You just need to know where to look. The future Mrs. Shriber would say these days for ETF investors are a lot like Nordstrom or Neiman Marcus the day after Christmas. All the fancy designer stuff is still there, it’s just being offered at substantial discounts. To us as investors that’s called value.
Of course, the slippery slope between value and value must be observed. When it comes to searching for bargains in the ETF bin, I like to shop for those funds that have been beaten up to the point where I can say the repudiation has been too harsh. And yes, I like to embrace ETFs that have been ensconced in controversy because the more controversial something is on the way down, often times we’ll see that security generate more alpha on the way up.
Here’s where I’m looking now for value plays in the ETF universe that have the potential to deliver massive percentage gains over the next 18 months.
Global X Uranium ETF (NYSE:URA)
Yes, I said it and yes, I’ll admit this ETF has been slammed this year. So why do I like it? For starters, URA’s recent woes have nothing to due with Japan or other negative nuclear industry headlines. Second, the long-term outlook for the uranium sector is compelling. Trading for less than $9, URA is now a call option with no expiration data on the coming uranium sector rebound.
Market Vectors Coal ETF (NYSE:KOL)
I’ll eschew making a black cloud joke here, but that’s exactly what KOL and the coal sector has been under lately. Negative profit and production revisions from KOL constituents and a dour environment for high-beta ETFs has punished the ETF. However, KOL’s rebounds after its previous beatings have been substantial. Volatile and home to an iffy chart, scaling into KOL is the best way to play it.
Market Vectors RVE Hard Assets Producers ETF (NYSE:HAP)
When an ETF devotes nearly 81% of its weight to the materials and energy sectors, it’s easy to understand why it has fallen out of favor recently. HAP’s holdings are less controversial than KOL’s and URA’s, but no less prone to rebound hard and fast when the risk on trade returns. HAP is probably the best bet on this list for the more conservative investor.
Todd Shriber is an ETF fanatic, a former hedge fund trader, and a journalist. Todd started his professional career with Bloomberg News, where he covered banks, energy and technology. After leaving Bloomberg, Todd became a trader at a California-based hedge fund where he specialized in trading financials, energy, basic materials, and ETFs.
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