5 ETFs to watch this week
Keep close tabs on the ETFs tracking agribusiness and retail this week.
By Don Dion, TheStreet
Here are five ETFs to watch this week.
Throughout the second half of 2010, one of the most closely watched stories has been that of rapid food price increases. This week, investors will gain more insight into how the jump in agricultural commodity prices has affected the farming industry when equipment supplier Deere & Company (DE) reports its quarterly earnings performance Wednesday.
There are several funds ETF investors can consider when looking for exposure to the agriculture industry. MOO provided investors with access to the companies responsible for supplying farmers with the machinery and chemicals needed to produce adequate yields. Deere represents the largest position within MOO's portfolio, commanding more than 8% of the fund's assets.
The international investing arena has been difficult to navigate recently because of the sovereign debt issues plaguing Europe and because of China's steps to reign in inflation.
Despite this economic turmoil, there are pockets of strength. For instance, Mexico and the rest of Latin America have remained particularly resilient. EWW, which reflects the performance of the broad Mexican marketplace, has seen a strong rally in recent months, powering back to pre-crisis levels and moving higher in our long-term-momentum rankings. This fund is heavily dedicated to tech and the consumer, with telecom giant America Movil (AMX) and Walmart de Mexico (WMMVY) commanding the fund's top positions.
The retail industry will take center stage this week as shopping centers and online retailers prepare for crowds of Black Friday shoppers. Although the frenzy is still a few days away, thanks to early deal leaks from industry leaders such as Wal-Mart (WMT) and Best Buy (BBY), anticipation is already high.
Last week investors were treated to a slew of positive earnings reports from companies dedicated to various parts of the retail sector. The strength of their performance over the past three months lends credence to my belief of a consumer rebound. While XRT will benefit during the retail-fueled holiday season, investors may want to consider picking up this fund as a longer-term play on the larger consumer recovery.
In the past I have attempted to explain my mixed feelings toward the current state of real estate: Oversupply issues have and will continue to weigh on the prospects for residential real estate and homebuilders, while the outlook for REITs and commercial real estate looks far more promising. As a result, I have consistently urged real-estate bulls to opt for REIT-focused funds rather than homebuilder ETFs.
Aside from the fundamentals of the real-estate sector, REITs have proved popular because of their promise of strong distribution yields. Investors fearing economic issues plaguing various regions of the globe have increasingly turned to income-focused assets in hopes of securing consistent payouts.
According to a report in last week's Wall Street Journal, a number of the largest companies in the REIT industry have raised their dividends recently, indicating that the industry's fundamentals are improving further.
Real estate likely still has some choppy waters ahead of it as the markets continue along the road to recovery. However, the strong yields that come with funds such as ICF will aid in weathering these storms.
Sovereign debt issues facing the European Union reignited domestic debt concerns last week, sending investors fleeing from municipal bond ETFs. The exodus caused HYD to take a steep drop, going from all time highs to previous 2010 lows in a matter of days.
The budget issues in California are doing little to ease investor concerns, further pressuring this aspect of the fixed income industry. At 14%, California bonds represent the largest slice of HYD's index.
Going forward, municipal bonds will likely be a shaky region of the market. Investors looking for a more stable and promising play on fixed income should look to high yield corporate bond funds such as iShares $ iBoxx High Yield Corporate Bond Fund (HYG) or dividend-paying equities such as those found underlying iShares Dow Jones Dividend Select Index Fund (DVY).
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