Best ETFs for the rest of 2013

An expert in exchange-traded funds focuses his recommendations on 3 key sectors.

By MoneyShow.com May 31, 2013 3:04PM

Bank sign copyright John Foxx, Stockbyte, Getty ImagesJim Farrish, founder of MoneyStrategiesInc.com, sits down with Nancy Zambell of MoneyShow.com and reviews his favorite ETFs for the second half of the year, along with his evaluation of some other key sectors.


My guest today is Jim Farrish, and we're talking about ETFs and stock recommendations. Hi Jim, welcome.


Thanks for having me.


So what's your favorite ETF right this very moment?


Right at this very moment, I'd have to say my favorite is Select Sector SPDR Financial (XLF).


Yep, the financials.


Or iShares Dow Jones US Financial (IYF), which is also financials. I still think they have a long way to go.


The fundamentals are still cheap. If you look at XLF, it's trading at 13.1 times earnings, and the S&P is trading at 14.7. That means that we're discounted to the S&P. S&P is trading for the current quarter at 13.1. I still think they're cheap.


Are those mostly large-cap bank stocks?


XLF is all large cap. If you buy IYF you get the small-, mid-, and large cap.


So, more of the regional banks.


The regional banks? If you want regional, buy S&P Regional Banking ETF (KRE), which is the regional bank ETF. If you want just banks, or large-cap banks, buy SPDR Banking ETF (KBE).


What do you think of the regional banks?


I love regional banks. SunTrust (STI) is getting ready to break out to a new high.

What we like is they're cleaning up their balance sheets. They're starting to lend much more than the bigger banks...the local banks are lending to businesses. They're doing a lot of things that they haven't done in a while. I think they're in a great position.


If you're a long-term investor—long term to me is looking out nine-plus months—I think they're a place to be, and we still own them.


Do you like them because of the dividend or because of the growth rates?


I like the growth rates more than anything. The dividends are...


Small.


Since 2008, 2009, the dividends are so miniscule. Maybe they'll come back...but I just like the growth of the stocks. I mean, if you look at a Huntington Bank (HBAN), great stock. Regions Financial (RF), great stock, SunTrust, great stock.


Also, Bank of America (BAC), which is a big cap, good stock. Citigroup (C) is a little pricey, but Istill like the stock. You've got to.


That's where we kind of always are filtering in and looking at the ETF. Are they leading for the upside? We use a thing called customer date sort, where if the index is up 10%, we want to look at what stocks are accelerating beyond that. That's where we want to own the stocks.


OK, do you buy any health-care ETFs today?


We do. We own Select Sector SPDR Health Care (XLV), we own iShares Dow Jones Healthcare Providers (IHF). We own iShares Dow Jones US Medical (IHI), which is the medical devices; SPDR S&P Biotech (XBI), which is large-cap biotech; and iShares Nasdaq Biotechnology (IBB), which is small-cap biotech.


So how do you think the whole Obamacare situation is affecting us?


I think that people who didn't buy health care after Obamacare was passed missed the boat. A lot of money been made.


I think biotech is in the right place, right time, right now. Because of ObamaCare, that leads into the pharmaceuticals. SPDR S&P Pharmaceuticals (XPH) are large-cap stocks. You can use the iShares Dow Jones US Pharmaceuticals (IHE).


They're in a great position. They aren't going away. We aren't getting rid of health care. It's going to be consolidated. I'm a buyer. I own them and we buy, we trade, but we're also investors.


Are you doing any retail at all these days?


I like retail. I bought a little SPDR S&P Retail (XRT) on a breakout the other day to a new high. We got stomped out, so we hadn't been in it, but we're back in it.


I really like the specialty retailers right now, and I like some of the discounters. I love Target (TGT). I like TJ Maxx (TJX). Some of those companies are doing extremely well.


I'm not a big fan of the dollar stores and Dollar General (DG) and all that; I think that runs over. But I think there's some great retail. Specialty retail is the place to be right now.


More from The MoneyShow

4Comments
Jun 2, 2013 2:15AM
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I think this story was written about 10 minutes before the stock market crashed. Either way, the author looks dumb. Too much red ink for me to get interested in doing any of this. Your next move should be to BUY WALT DISNEY at $60/share because in a few years it will be over $200/share. Also, energy stocks. Obama just approved opening second facility to export LNG (liquified natural gas) so throw a dart because most nat gas drillers will be profitable. I like AeroVironment for domestic drones because everyone knows how much the Republicans, a la Nixon, love to spy on and control American behavior. We will continue our procession into becoming a police state and this is the cheapest drone stock. Eventually, Congress will realize we have created a melting pot of people who are born to lose and just want to stay high so I recommend the cigarrette makers. Tobacco companies have tons of money so if marijuana is actually legalized by the Feds these will be the instant players, not some pot shop in Colorado. The little guys will be wiped out instantly by the big players if the Feds legalize it. Invest in tobacco stocks now and collect high dividends like Lorillard (LO).
Jun 2, 2013 2:08PM
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Last year, few bought stocks at dow 13,000. Before that it was 11,000, 10,000, and below. Stocks weren't worth even those levels. Nothing has changed. Now "investors" are supposed to get excited about dow 15,000. Yeah, let's all buy at the all time record dow price, in the middle of a depression. How'd that work out at the last record price in 2008, or in 1999, or when housing peaked in 2007, or when gold peaked in 1980, or last year.  
Jun 2, 2013 2:24AM
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Forgot to mention that I think Elon Musk is a visionary and a genius whose inventions could potentially save the human race. That being said, he practices a concept known as "chaos theory." Just like most veterans are brainwashed to think you can't sue the government, we are brainwashed to think that only the government can go to space. Musk proved them wrong. Yet, isn't it scary that if the U.S. is the most innovative country on earth and so free-enterprise friendly then why did it take so long for a Musk character to arrive and where are all the others?? Going forward, only the true visionaries, maybe you, will create the new ideas that make us all money. Does anybody know what happened to that guy who could cause saltwater to combust and burn? Why don't we have saltwater-powered boats? Solar boats? DNA-based medical repairs? Anti-aging or reverse-aging treatments? If we all begin to lose our eyesight at a certain age, why can't we reverse that with stem cells or something else? Are eyeglasses akin to the horse and buggy? Eyeglasses should be a sign that medical technologies are being withheld from us by the government. Where are all the other Elon Musks?? Why do humans have to die? Why can't we stop the aging process? Elon, work on that. 
Jun 2, 2013 9:38AM
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and yes, Friday's minus in the stock market came from the back door banking queen herself, ck, watch your stock portfolios or they will wind up as free political presents for your neighbors and that goes for your pensions also.

Ck learned from the best, the late Sen. Teddy Moore Kennedy.

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