Sectors of the Month – Aug 2016
There’s something interesting going on with Russia. The VanEck Vectors Russia ETF’s (RSX) tight correlation with oil seems to have broken down over the last few weeks and looks like a bullish set up. In our commentary last month, we specifically mentioned avoiding emerging markets that were tied to oil because oil had already run up so much from its lows. But this month is different. Notice the tight correlation between Russia and oil from mid-May through the end of June in the chart below. Then the relationship breaks down through the month of July as oil fall about 20% while Russia stays breakeven or better. This makes us think that if oil bounces back at all this month, there could be a significant rally in Russian stocks. Some commentators have made the case that a recent tax overhaul for the oil and gas industry in Russia has improved their margins, which could be one reason for its resiliency. http://www.forbes.com/sites/kenrapoza/2016/07/28/tectonic-shifts-coming-to-russian-oil-industry/?utm_source=yahoo&utm_medium=partner&utm_campaign=yahootix&partner=yahootix#472016622f7e
Additional sectors that we think are attractive are iShares MSCI South Korea ETF (EWY), Utilities Select Sector SPDR ETF (XLU), First Trust Dow Jones Internet Fund (FDN), and iShares US Defense & Aerospace (ITA).
South Korea had a recent breakout above resistance, then pulled back and held support, and now looks poised to rally.
The Utilities sector has had a great run this year and we think the low interest rate environment and continued political and economic uncertainties will cause this sector to continue to be a favorite for investors who seek a safe haven and dividend yields.
The First Trust DJ Internet Fund contains many of the high-flying growth companies that draw so much media attention, with its largest holdings being Facebook, Amazon, Google, and Salesforce. Through this […]
Sectors of the Month – Sept 2016
An Asian Buffet, the Internet, and Coffee: Three of my favorite things. And this month, they’re our favorite sectors too.
For a vast number of people in the world, every day starts out with a cup of coffee and checking Facebook, and maybe even a post on Facebook about their coffee.
Between a Starbucks on every corner of the globe and the convenience of the Keurig, Americans are drinking more coffee than ever. It’s a fact, global demand for coffee is headed toward record levels this year, and supply is having a hard time keeping up. Other commentators have recently noted that “stockpiles at warehouses monitored by ICE have dropped for 11 straight quarters” and that weather conditions have hurt Brazil’s coffee crop this year. This sets the stage for a classic supply-and-demand increase in prices. So one of our top picks this month is the iPath Bloomberg Coffee ETN (JO).
Another sector to love is the First Trust Dow Jones Internet ETF (FDN). This fund’s largest holding is Facebook (FB) with a weight of over 10%. Just a few years ago, the consensus was that Google would continue to be the leader in online Display Ad Revenues. More recent studies show that Facebook has surpassed Google and continues to take market share each year as Facebook Ads have become a central part of many business’ marketing strategies. As we head into the Fall and Winter seasons, it’s our opinion that businesses will begin to ramp up these ad campaigns and Facebook will see a wave ad spending inflows. And as investors begin to anticipate this, we think it creates a positive outlook for this fund.
And lastly, we like the Asian ‘buffet.’ By this we mean that we like […]