I want to take this opportunity to welcome you to my new ETF advisory service, the ETF Profit Report. I’ve been looking forward to introducing this new service for quite some time, and after months spent researching hundreds of ETFs, I’m excited about the portfolio we’ve built.
In my 27+ years as an investment advisor, I’ve used a unique approach that combines quantitative and fundamental analysis. That approach served subscribers to my China Stock Stock Digest and Dividend Genius newsletters quite well in 2009. China Stock Digest’s model portfolio was up xx% while Dividend Genius subscribers enjoyed returns of 70%+, better than triple the performance of the S&P 500.
I intend to bring that same successful approach to the world of ETFs to help subscribers once again enjoy the kind of returns that simply cannot be had elsewhere. In my view, the timing could not be better. You’ve probably heard more than a couple of so-called experts say that ETFs are one of the most important inventions in the world of finance in decades. I couldn’t agree more.
The appeal of ETFs is astounding as there really is something for every type of investor in the ETF universe. From emerging markets to dividend ETFs to bond funds to ETFs that track crude oil and gold, there is an ETF for everyone from active traders to conservative investors. But with so many alternatives, how can you be assured that you’re holding the right ETFs for your investment objectives?
With 800+ ETFs currently available to U.S. investors and more coming to market nearly every day, the task is daunting. Throw in about 200 exchange traded notes (ETNs) and many investors are left to wonder what are the differences among various ETFs and are they making the right calls on their own. This is where the ETF Profit Report becomes an invaluable tool in your investment arsenal.
As I said earlier, my research staff and I have spent months mining data and combing over the particulars of hundreds of ETFs to construct a portfolio we think will deliver noteworthy returns in 2010. Of course, with 20 ETFs in our portfolio, not every selection is going to be perfect, but we’re not going to let the laggards hang around for long. ETFs are the perfect tools for sector and geographical rotation, so if our research turns up a better opportunity than a current holding is providing to subscribers, we’ll simply move where the market is telling us better returns lie.
Let’s take a look at what ETF Profit Report subscribers have to look forward to.
Before launching ETF Profit Report, I studied a fair amount of the ETF newsletters currently on the market. Most were long on market commentary and short on explanations as to why they were recommending a particular position. We’re taking a different approach. Yes, in each WEEKLY issue of ETF Profit Report there will be a commentary section, but this section will not be a means of diverting your attention from what’s going on in our portfolio.
Many ETF newsletters provide little in the way of updates regarding their portfolio positions. I find this odd given how dynamic the ETF world is. My promise to you is that you will never be left wondering why I’m recommending an ETF and you will never have to research the weekly events impacting any of our holdings. I’m going to do the leg-work for you.
Finding What Works For You
Diversification is critical when building an optimal portfolio and that was an area of intense focus as I built the ETF Profit Report portfolio. With the start of a new year, I looked at several macro factors that will be on the minds of investors in 2010. Among them, I believe the U.S. dollar is in for more weakness and several of our ETF choices reflect that sentiment.
Likewise, emerging markets, namely China and Brazil, will continue to be significant drivers of global growth. Emerging markets ETFs were among the best performers in 2009 and saw huge inflows of new investments. I expect these trends to continue in 2010 and have made several picks for the portfolio based on that thesis.
Let’s not forget about the power of dividends. The current environment of low profit growth for domestic equities and the paltry interest rates offered by bonds and cash investments makes dividend investing all the more important. Fortunately, there are dozens of ETFs that feature nice payouts and strong yields, and I think I’ve found a few for ETF Profit Report subscribers.
As I stated earlier, energy is one sector to watch in 2010, and that’s one reason that the iShares Dow Jones US Oil & Gas Exploration Index (NYSE: IEO) and the Market Vectors Coal ETF (NYSE: KOL) found their way into the portfolio. We’re allocating 5% to each ETF and while both turned in great performances in 2009, 2010 could bring even more bullish returns.
IEO could prove to be the best way to play further consolidation in the natural gas sector as big integrated oil companies hunt for opportunities to expand their natural gas holdings. KOL is unique in that it holds a mix of U.S. and international firms and while coal gets a bad rap in the U.S., it is important fuel source in emerging markets like China.
These are just two examples of sector ETFs we’re following along with holdings in agriculture, materials and technology.
China and Brazil
There is no shortage of emerging market opportunities for ETF investors, so we may add other ETFs from this class as the year goes along, but for now we’re going to focus on the brightest starts in the emerging markets universe: China and Brazil.
Our China plays will give you small-cap exposure with the the Claymore/AlphaShares China Small Cap Index (NYSE: HAO) and exposure to China’s booming real estate market with the Claymore/Alpha Shares China Real Estate Index (NYSE: TAO). Yes, China’s large-cap ETFs attract most of the headlines, but I think these two lesser-known names are poised to outperform in 2010.
For Brazil, we’ve allocated 5% each to the large-cap and small-cap ETFs tracking those sectors of the Brazilian market. Brazil’s benchmark Bovespa index was among the top performers in the world in 2009 and 2010 could be even better. China has now replaced the U.S. as Brazil’s top trading partner and the resource-rich South American country strands ready to help meet global commodities demand.
It probably won’t surprise many subscribers that the SPDR Gold Shares (NYSE: GLD) found its way into the initial portfolio. While the yellow metal has pulled back a bit recently, the multi-year uptrend in undeniable and gold remains an excellent way to hedge a portfolio against the dollar’s decline.
Our other commodity pick is an ETN that tracks cotton prices. That’s right, cotton. Cotton certainly doesn’t garner the headlines that gold and oil do, but our analysis shows that the time may be right to consider cotton as more than just a wardrobe addition. I’ll fill you on the details in our first issue.
Those are just a few examples of what you can expect from ETF Profit Report. Concise commentary, in-depth research and cutting edge analysis are poignant combination and one we expect will make 2010 a great year for our subscribers. We look forward to having you aboard and helping you make 2010 your best year for investing yet.
Very Truly Years,
ETF Profit Report