5 ETFs to watch this week

Exchange-traded funds in the agricultural and networking sectors are poised to make gains this week.

By TheStreet Staff Aug 9, 2010 10:39AM

thestreet.comBy Don Dion, TheStreet

 

Look for the networking and agriculture sectors to move higher this week – and to take a few exchange-traded funds along with them. Gold and retail, on the other hand, may see losses. Here are five ETFs investors should keep an eye on this week.

 

1. iShares S&P GSTI Networking Index Fund (IGN)

 

This fund has nearly 9% of assets in Cisco (CSCO), which reports this week. Analyst expectations are consistent, with high and low estimates at 43 cents and 40 cents a share, respectively. Additionally, Cisco beat earnings by at least 2 cents in each of the previous four quarters.

 

In the past month, IGN has seen strength from networking holdings such as Juniper (JNPR), as well as companies involved in the smartphone industry.

 

 

Qualcomm (QCOM) has pulled the fund higher, while Motorola (MOT), maker of one of the most popular Android phones, has seen its shares climb more than 20% in the past month. MOT is now the number one holding in the fund, with nearly 10% of assets.

 

2. SPDR Retail (XRT)

 

Consumer discretionary stocks took a beating after it became clear that business was recovering faster than the consumer. Investors anticipated a consumer rebound earlier this year, but when the numbers didn't match their expectations, shares sold off sharply in May and June.

Still, XRT has had a good year overall, up about 8% compared to less than 2% for the S&P 500 ($INX). Some sectors helping the fund include discount, luxury, specialty and grocers. Two holdings that have underperformed in 2010 report this week: Kohl's (KSS) and JC Penny (JCP).

 

Investors turned very sour on JCP last week, sending shares down about 15%; it appears the market is not optimistic about the firm's prospects. I expect this week will be similarly unkind to retail.

 

3. Powershares DB Agriculture Fund (DBA)

 

Russia halted wheat exports until December, after a heat wave and wildfires damaged the country's agricultural sector. This in turn caused wheat prices to pile more gains on top of the 42% move in July, which was the best monthly performance since 1959. The powerful move lifted other grain prices, with corn seeing a better than 20% move.

 

Although the move is impressive, it may have yet to peak, as the weather forecast still calls for more hot and dry conditions, which will delay the planting of the next wheat crop and reduce yields at harvest.

 

4. SPDR Gold (GLD)

 

With the help of a weak U.S. dollar, gold climbed back above the $1,200 level last week. The bounce helped lift gold miners and Market Vectors Gold Miners (GDX). August tends to be unfavorable for gold prices -- or at the very least a period of consolidation -- so I expect prices to move sideways or lower this week.

 

5. Claymore/MAC Global Global Energy Index ETF (TAN)

 

SunPower (SPWRA) reports earnings on Tuesday. The company has been a consistent underperformer and dropped to a new all-time low in May.

 

It has rebounded since then, but continues to underperform the sector as measured by TAN. Analysts are predicting only 10 cents per share in earnings, well below the 25 cents expected three months ago. Analysts have also cut their earnings estimates for this year and next year. SPWRA could hurt itself with a worse-than-expected result this week, but that probably won't damage the other holdings in TAN because of the low expectations.

 

The solar sector has enjoyed a rebound of late and was one of the better performing sector ETFs last week. Higher oil prices and a continued rebound in the euro both contributed to the gain.

 

The ETF held up well during Friday's decline in the market, a good sign for a sector that is associated with bullish and optimistic sentiment. I expect the outperformance will continue ahead of a heavier earnings week next week.

 

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