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Will funds in defensive sectors continue to perform well?

By TheStreet Staff May 31, 2011 11:33AM

By Don Dion, TheStreet

 

Here are five ETFs to watch this week.

 

1.    iShares MSCI EMU Index Fund (EZU)

 

Europe took center stage last week as investors were once again reminded of the debt crises facing vulnerable euro members. During this week, it will be interesting to see if these issues remain on the forefront of investors' minds.

 

I continue to urge investors to avoid products with heavy exposure to nations like Spain, Italy, Greece and Ireland. Rather, risk-tolerant investors seeking exposure to this corner of the developed world may find nations outside of the euro bloc attractive. Over the most recent 30-day period, funds like the iShares MSCI Sweden Index Fund (EWD) and iShares MSCI Switzerland Index Fund (EWL) have managed to outpace EZU.

 

Netflix and Dean Foods are among the US benchmark's top gainers this year.

By TheStreet Staff May 31, 2011 11:25AM

Image: Stocks (© Digital Vision/Getty Images)By Jake Lynch, TheStreet

 

The S&P 500 Index ($INX) has fallen 3.1% from its 52-week high, recorded a month ago, as investors moved out of riskier assets, including commodities.

 

That leaves the benchmark with a 2011 gain of 5.5%, which is on pace to trail the performance of the previous two calendar years.

 

Amid the correction, leadership has shifted to defensive sectors like health care, consumer staples and utility stocks, which were previously bull-market laggards. In the past four weeks, S&P telecommunications stocks have delivered a median return of 6.4% and health-care shares gained 4.2%.

 

The list of concerns facing investors is piling up. Europe's debt woes, driven by Greece, threaten to stall economic growth in a region that's as large as the U.S. Japan just sank into a recession because of an environmental catastrophe, and China, the engine of global growth, is slowing amid higher interest rates.

 

Medical marijuana is already massively profitable for a handful of states, so it's no surprise pharmaceutical giants want in on the action.

By InvestorPlace May 31, 2011 10:18AM

Though it may not be politically correct to talk about the benefits of legalizing marijuana, the bottom line is that many folks are believers in the power of pot as a medication. And those believers include Big Pharma executives looking to boost their bottom lines.


Consider that medical marijuana sales in the U.S. already will reach $1.7 billion this year, with nearly $250 million coming from Colorado, according to a report released in March.  Further, the report predicts that medical marijuana sales will reach $8.9 billion if 20 more states allow its sale for medical use. 


If the U.S. government ever legalizes marijuana, sales would probably make the $11 billion Pfizer (PFE) raked in on Lipitor worldwide last year look like chump change.

 

It's time for investors to transition their portfolios for the proverbial summer rally.

By Jamie Dlugosch May 31, 2011 9:52AM

With May selling behind us it is time to drift over to the long side of the market. Selling in May and going away played out well for those short the market or with portfolios properly hedged.

 

Now that summer is coming, investors can position for the proverbial summer rally. The economy may be showing signs of weakness, but corporate earnings are still strong. It is those profits or the promise thereof that will lift stocks.

 

June is somewhat of a quiet month as the second quarter winds down. I expect investors to nibble at stocks here in anticipation of good profit numbers to be released in July. I would buy the rumor.

 

The ETF to buy this week is the iShares S&P North America Technology and Multimedia Fund (IGN).

 

The nation will get the money it needs only if it cedes control of its finances to the fund. That should help the euro rally and lead to a pretty good day for stocks.

By Jim Cramer May 31, 2011 8:50AM

the streetjim cramerIt's taken long enough, but the IMF has finally gotten in gear to say "enough is enough."

 

For the last year, Greece has strung out everyone on austerity measures that were supposed to make a difference but haven't. Now, at last, it looks like the IMF has a free hand. That means, basically, that if you want the big IMF money you have to turn over your finances to the IMF, just as the IMF has done whenever it truly takes hold and has to part with big money because the IMF doesn't lose money and it always gets its man.

 

The euro can rally on that for a while because what it says is the rest of Europe is not going to protect Greece and it is not kicking the issue down the road gently but forcefully which could mean, for some, the end of the "break the euro" faction for the foreseeable future.

 

Despite bearish headlines, the markets were surprisingly strong...but what does that mean heading into June?

By MoneyShow.com May 27, 2011 5:53PM
By Tom Aspray, MoneyShow.com

Last week’s financial headlines may have caused many stock investors to run for the exits, as there was very little to make one think that stocks could move higher. 

Despite the concerns over debt contagion, a double dip in the economy, and slower growth in China, the US stock market was surprisingly strong. The early-morning declines on Wednesday and Thursday were met with good demand.

Therefore, even though the major averages made new correction lows, the market had plenty of reasons to drop more sharply. For most of the week, Tuesday’s headline from the Financial Times, “Investors swept up in wave of bearishness,” said it all.

So even though the stock market was not as strong as I had forecast last week, I am sure most were surprised that it closed higher. Sentiment measures continue to get more negative, with only 25% bullish in a recent AAII survey. This is the lowest reading since last summer.
 
Tags: gold

It is important to understand that even a much-followed stock like Cisco will suffer from inefficiency.

By V.N. Katsenelson May 27, 2011 2:37PM
Markets are efficient, or so we’ve been told. I am not here to put a rebuttal to this academic nonsense, but let me give you one of the core reasons why markets are and will remain inefficient: because human beings are efficient.

 

To function in everyday life, our brains are used to simplifying complex problems, through pattern recognition.  We become accustomed to drawing straight lines when we see two points, and if we get a third or fourth point that fits the line, our confidence about the longevity (continuity) of the line increases exponentially.  We become excited, even certain, about prospects of the company we’ve invested in when its stock has gone up for a long period of time, while we often dismiss stocks that have declined or flat-lined, especially if that happened for a considerable period of time.

 

The bank pared holdings of more than half of its touted stocks, filings show.

By TheStreet Staff May 27, 2011 2:32PM

the streetBy Jake Lynch, TheStreet

 

A so-called Chinese Wall is supposed to exist between investment banks' research and asset-management divisions, but recent calls, especially coming from subprime-securities proponent Goldman Sachs (GS), warrant further scrutiny.

 

Goldman helped to catalyze the recent commodity sell-off as its researchers expected little upside when the economy hit a soft patch. Crude oil tumbled beneath $100 on that report. Then, three days ago, with few fundamental changes in the demand outlook, Goldman reversed its stance, advising clients to buy.

 

This flip-flopping from Wall Street's most closely followed researcher is being perceived by some as client-fleecing since the bank is able to trade in proprietary accounts before it releases research and the markets react, as they often do to Goldman's calls.

 

The BlackBerry maker faces a class-action lawsuit and shrinking market share as analysts cut their price targets on the stock.

By Kim Peterson May 27, 2011 2:30PM
The bad news just keeps piling on Research In Motion (RIMM). The company got hit with a new class action fraud this week. Analysts are holding their noses at the stock. The share price has plunged 37% since February.

This wasn't supposed to happen. RIM just launched the PlayBook tablet, its answer to the Apple (AAPL) iPad. And U.S. businesses are recovering and spending more, which should have been just the thing the BlackBerry maker needed.

Check out this analyst discussion about the stock, which one calls "a disaster." Post continues after video

After weeks of downward progress for stocks and other assets, renewed weakness in the greenback has resurrected bullish spirits.

By Anthony Mirhaydari May 27, 2011 2:22PM

To summarize the correction in risk assets over the past month, you could boil it down to a stronger dollar. It all started with the assassination of Osama Bin Laden on the night of May 1. Suddenly America seemed stronger and more secure, sending the greenback higher.

 

And as a result, hedge fund types who had borrowed dollars to bet on silver, crude oil and stocks scrambled to close their trades. The results were the mini-crashes in silver and crude, significant drops in foreign stocks and a slow bleed lower for U.S. equities. Adding to the pressure has been a steady march of poor economic data.

 

But things are changing now as the dollar wilts again, setting the stage for a multiweek rally before the reality of slowing economic fundamentals and the end of the Fed's $600 billion QE2 stimulus sets in. Here's why, along with a few recommendations to play the rebound.

 

AIG's IPO is 'an utter debacle,' Sony hackers go on a global rampage and Arianna Huffington oversells AOL in this week's round-up of business buffoonery.

By TheStreet Staff May 27, 2011 12:31PM

Here is this week's roundup of the dumbest actions on Wall Street.

 

5. AIG: The anti-LinkedIn IPO

 

Apparently, the words AIG and IPO don't get investors beating down the doors to get a piece of the action. Gee whiz, I wonder why?

 

This week's secondary offering of American International Group (AIG) shares was anything but a success for the U.S. Treasury and those unfortunate enough to have bought in. 

 

While closely monitoring market action for clues about what lies ahead, more aggressive traders can look to profit from ETFs tracking the tech sector and gold.

By MoneyShow.com May 27, 2011 11:22AM
By Tom Aspray, MoneyShow.com

The stock market was hit with many negatives this week, including weaker-than-expected durable goods and GDP numbers. 

Overseas developments were not much better, with continuing debt concerns in the Eurozone threatening to spread as the International Monetary Fund (IMF) has threatened to withhold its next payment on Greece’s bailout.

There are also further concerns over the state of the Chinese economy, as the Shanghai Composite has closed lower for the past seven days and was down over 5% this week.

As if this was not enough, crude oil is back over $100 per barrel and gas prices are uncomfortably close to $4 per gallon as we head into the Memorial Day weekend. After last year, the “Sell in May and go away” crowd is vowing not to be caught with too many stocks in their portfolios—like they had last year.

The technical outlook for the stock market is different from last year, considering that in April 2010, the weekly NYSE Advance/Decline (A/D) line had formed a bearish divergence, but this year, no divergences are currently evident. (See Market Timing 101 for more.) The daily A/D line made new highs in early May and has pulled back to stronger support this week.

I believe the market behavior on Wednesday and Thursday was especially important, as the stock index futures were under pressure in early trading, but on both days, stocks rebounded to close higher.
 

Not if you mix shareholder returns into the equation.

By Motley Fool Pick of the Day May 27, 2011 11:19AM

By Tim Beyers

 

CEO compensation is a hot topic, especially now that the Dodd-Frank Act requires say-on-pay votes. With CEO pay and performance seemingly disconnected at the following company, the Fool invites you to judge for yourself whether this business's boss actually deserves such a hefty paycheck.

 

Few things are worse for investors than owning a piece of an "oh yeah" tech company. These are the Rodney Dangerfields of their industries. They've been around forever. They've even done impressive work in years past. But lately, whenever their names come up in conversation, it's almost always with the caveat, "oh yeah, I forgot about them." Adobe (ADBE) has become that kind of company, but you wouldn't know it from CEO Shantanu Narayen's pay package.

 

By owning both cyclical financial stocks and steady consumer staples, the Oracle can perform well in any market.

By TheStreet Staff May 27, 2011 10:59AM

By Don Dion, TheStreet

 

As Warren Buffett has quipped, his favorite holding period for any investment is "forever." By sticking to a long-term time horizon when structuring his legendary investing portfolio, the famed billionaire has been able to weather numerous short-term shake-ups during his long career.

 

In examining his current holdings lineup, it is possible to uncover clues that will help retail investors mimic him and profit over the long run.

 

Buffett's portfolio taps into a wide range of market sectors, providing exposure to industries such as energy and health care. The largest chunks of the Berkshire Hathaway (BRK.A) portfolio, however, are dedicated to companies in the financial and consumer sectors.

 

These potential bargains could heat up.

By TheStreet Staff May 27, 2011 10:48AM

By Jamie Dlugosch, StockPickr

 

I live in the frozen tundra of Minneapolis, where we are slowly -- and I mean slowly -- emerging from a dastardly long winter and a spring that hasn't sprung. It is hard to believe that summer, as marked by Memorial Day weekend, is right around the corner.

 

While many market participants slow down their investment activity in summer, I think there is plenty of money to be made by staying active. In the current environment, stocks are exhibiting weakness. Sellers are dominating the action, and pessimism is rising.

 

This is actually quite bullish for stocks. Yes, many risks remain, but current fiscal and monetary policy is conducive to economic growth. It may not be the strongest recovery on record, but we are growing, and we're likely to continue to do so.

 

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[BRIEFING.COM] The stock market finished the Wednesday session on a modestly lower note, but it is worth mentioning today's retreat took place after six consecutive gains. The Dow Jones Industrial Average (-0.1%) and S&P 500 (-0.2%) settled not far below their flat lines, while the Nasdaq Composite (-0.8%) lagged throughout the session.

Equity indices started the day in the red, with the Nasdaq showing early weakness as large cap tech names and biotechnology weighed. The technology ... More


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