2 ETFs hitting highs you cannot ignore
Don't shy away from niche sectors that these exchange traded funds give you exposure.
The overall market has been rebounding, but the S&P 500 (SPY) remains below its all-time high it set early this year. Some of the large-cap energy ETFs have begun to break out to highs, but the list of sector ETFs hitting highs is nearly non-existent.
That being said, there are two niche ETFs that have been trading in new high territory for over a week as the market was starting to rally from the August sell-off.
The Guggenheim Shipping ETF (SEA) surged to a new multi-year high last week and is now up 23% for the year. The concentrated ETF is made up of 26 international stocks of companies operating in the global shipping industry and that move goods and materials around the globe. The components of SEA are globally diversified with the U.S. only making up 22% of the ETF, followed by Denmark at 20% and Hong Kong and Japan both at 14%.
A recent rally over the last month in the Baltic Dry Index, which measures dry bulk shipping rates, has been a major catalyst for the gains. The 45% move higher in the Baltic Dry Index in the last 30 days can be attributed to an increased demand for iron ore from China and more grains being shipped out of the U.S. However, the good times are not limited to the last month for the shipping rates. In the last year, the Baltic Dry Index has gone from 662 to 1478, a gain of 123%.
As long as the global economy continues to improve from the recession it should lead to higher shipping rates and higher profits for the stocks that make up SEA.
An ETF on the polar opposite spectrum that is also hitting highs is the Global X Social Media ETF (SOCL). The ETF is a basket of 28 stocks in the high-growth social networking sector. The most well-known stock in the sector, Facebook (FB), is the number three holding and makes up 12% of the ETF. Another leading U.S. social networking stock, LinkedIn (LNKD), accounts for 10% of the ETF and is the number four holding. The top two stocks in the portfolio are based in Asia and make up 24% of the entire ETF.
Even though Facebook gets all the press in the sector, the two Asian companies at the top of the portfolio have had great years and are both near multi-year highs. The beauty of the ETF is that it not only gives investors exposure to a high-growth, niche sector, but it also offers global diversification.
The two ETFs will continue to fly under the radar as investors continue to fear the niche sectors. Do not be a sheep and follow the masses. There is money to be made in both sectors and investors need to think outside the box and find new and exciting investment ideas like SEA and SOCL.
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