5 ETFs to watch this week

The lastest picks include funds in health care, precious metals and oil.

By TheStreet Staff Oct 25, 2010 9:40AM

By Don Dion, TheStreet

 

Here are some exchange-traded funds that might rise this week.

 

1. iShares Dow Jones U.S. Pharmaceuticals Index Fund (IHE)

 

Health care has been a choppy part of the market as companies mull ways to deal with the passage of Washington's sweeping reform bill. But one subsector that has performed well has been drug stocks.

 

Over the past 90 days, IHE has outperformed ETFs designed to track other parts of the health care industry, such as the iShares Dow Jones U.S. Healthcare Providers Index Fund (IHF) and the iShares Dow Jones U.S. Medical Equipment Index Fund (IHI).

 

Looking to this week, IHE will be an exciting fund to watch as a number of major holdings, including Bristol-Myers Squibb (BMY), Merck (MRK), Hospira (HSP) and Mylan (MYL), report their performance for the previous quarter.

2. ETFS Physical Precious Metals Basket Shares (GLTR)

 

Precious metals remain a wildly popular part of the market as investors seek ways to protect against broad market volatility. Late last week ETF Securities, a newcomer to the U.S. ETF industry, launched one of the more unique plays on this attractive asset class.

 

In the past, investors seeking physical exposure to precious metals had to invest in them separately using funds such as iShares Gold Shares (IAU) and ETFS Physical Palladium Shares (PALL). GLTR combines exposure to four metals: gold, silver, platinum and palladium.

 

While I foresee GLTR becoming a force to be reckoned with, the fund is still new to the industry and may take some time to gather steam.

 

3. iShares Dow Jones U.S. Aerospace & Defense Index Fund (ITA)

 

Earnings season will once again thrust the aerospace and defense industry into the spotlight. Earnings reports from top ITA holdings Boeing (BA), Lockheed Martin (LMT) and United Technologies (UTX) are out of the way, and this week a number of other major players within the fund's portfolio are slated to report their performances.

 

Investors with exposure to ITA should keep a close watch on reports from General Dynamics (GD), Raytheon (RTN), Northrop Grumman (NOC), Rockwell Collins (COL) and L-3 Communications (LLL).

 

4. iShares FTSE/Xinhua China 25 Index Fund (FXI)

 

When it comes to gaining exposure to China, I typically advise investors to turn to the small-cap-oriented Guggenheim China Small Cap ETF (HAO) over the large-cap, state-owned-enterprise-dominated index underlying FXI. However, with half of this fund's index scheduled to report earnings this week, this China-focused ETF will be exciting to watch.

 

Economic headwinds facing the U.S. and Europe are causing investors to turn their attention overseas to opportunities present in the emerging markets. ETFs provide investors a unique opportunity to gain direct exposure to the economies of popular nations such as China, Brazil and India.

 

5. First Trust ISE Revere Natural Gas Index Fund (FCG)

 

Oil industry heavyweights from around the world will dominate this week's earnings schedule but playing them with ETFs is a bit tricky.

 

Companies on board to report their earnings include Exxon Mobil (XOM), ConocoPhillips (COP), Chevron (CVX), Hess  (HES), Total (TOT), and Royal Dutch Shell (RDS.A).

 

Rather than choosing a broad energy fund such as iShares Dow Jones U.S. Energy Sector Index Fund (IYE) to follow these earnings, First Trust's natural gas fund may be a bigger beneficiary. Oil giants are becoming increasingly involved with the natural gas industry and are therefore qualifying for positions within FCG's portfolio. XOM, COP, HES, TOT and RDS account for over 17% of the fund's total portfolio.

 

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