5 ETFs to watch this week

Keep an eye on funds tracking consumer-focused companies and Egypt.

By TheStreet Staff Feb 7, 2011 1:06PM

Image: Stock market report (© Corbis)By Don Dion, TheStreet

 

Here are five ETFs to watch this week.

 

1. iShares Dow Jones U.S. Broker-Dealers Index Fund (IAI)

 

NYSE Euronext (NYX) and IntercontinentalExchange (ICE) are slated to report their earnings this week, providing further insight into the state of the broker-dealers industry. Together accounting for more than 10% of its index, these two companies' performance will influence the action of IAI in the coming days.

 

So far, investors have seen mixed earnings results from IAI's other major positions, including Goldman Sachs (GS),Morgan Stanley (MS), Ameriprise (AMP) and CME Group (CME).

 

In the coming days, investors holding this fund will want to maintain a close watch. IAI is bumping against a level that has been a sufficient point of resistance since late 2009.

 

2. iShares Dow Jones U.S. Consumer Goods Index Fund (IYK)

 

A slew of consumer-focused companies will step up to the plate this week to report their earnings. Because it tracks a well-diversified index of names in consumer staples and consumer discretionaries, IYK is a strong option for conservative investors looking for a one-stop-shop way to gain exposure to the ongoing recovery.

 

Post continues after video

 

Companies on this week's calendar includePhilip Morris (PM), Lorillard (LO), Coca-Cola (KO), Pepsi (PEP),Molson Coors Brewing Company (TAP), Kraft (KFT), Hasbro (HAS) and SaraLee (SLE). Together, this collection of companies accounts for more than 30% of the fund's index.

 

3. Market Vectors Egypt ETF (EGPT)

 

Egypt has been one of most closely watched regions in recent days as citizens protest the nation's government. Although President Hosni Mubarak has promised to not seek re-election, the crowds have remained persistent, stoking concerns around the globe.

 

The political unrest has sparked the attention of investors, who have turned to EGPT in droves in an effort to gain exposure to the Egyptian market. Despite this sudden popularity, I urge investors to avoid jumping into this product. Early last week, the fund's sponsor, Van Eck, announced that share creation would be halted for EGPT, essentially turning the fund into a closed-end product and causing EGPT to develop a substantial premium.

 

4. Market Vectors Junior Gold Miners ETF (GDXJ)

 

Gold and gold-related ETFs have taken a backseat recently as investors have opted out of defensive plays in favor of riskier asset classes. Late last week, however, the smallest, most volatile members of the gold-production industry got an M&A-fueled jolt.

Last Thursday,Newmont Mining (NEM) announced its plan to acquire Fronteer Gold (FRG) for $2.3 billion.

 

The news sent shares of FRG soaring, aiding GDXJ and the relatively new Global X Gold Explorers ETF (GLDX) higher. FRG accounts for 3% of GDXJ's index, while in GLDX the company represents the largest equity position, making up more than 6% of the fund's index.

 

Despite its less-than-stellar start in 2011, gold remains an attractive long-term asset class for investors looking for ways to protect against market and political turmoil.

 

5. iPath Dow Jones UBS Cotton Total Return Subindex ETN (BAL)

 

Regulators took aim at the cotton market late last week in hopes of cooling the commodity's rapid ascension. In order to clamp down on the effects of speculation, IntercontinentalExchange announced that it would step up its examination of large cotton positions, including requiring approval to hold more than 300 cotton futures contracts.

 

It remains unclear how dramatically BAL will be affected. Investors, however, may want to hold off on gaining exposure to this product and watch the effects from the sidelines.

 

As I've explained, single-commodity ETNs tend to be volatile. Investors looking for another way to track the ongoing price rally should turn to a well-diversified futures-based product such asPowerShares DB Agriculture Fund (DBA) or theMarket Vectors Agribusiness ETF (MOO).

 

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