{"id":24297,"date":"2011-10-06T07:00:44","date_gmt":"2011-10-06T11:00:44","guid":{"rendered":"http:\/\/countingpips.com\/fx\/2011\/10\/06\/how-did-those-%e2%80%9clow-risk%e2%80%9d-etfs-hold-up\/"},"modified":"2011-10-06T07:00:44","modified_gmt":"2011-10-06T11:00:44","slug":"how-did-those-low-risk-etfs-hold-up","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2011\/10\/06\/how-did-those-low-risk-etfs-hold-up\/","title":{"rendered":"How Did Those \u201cLow Risk\u201d ETFs Hold Up?"},"content":{"rendered":"

By The Sizemore Letter<\/a><\/p>\n

The financial press has an abundance of advice but a bit of a shortage when it comes to follow-up.\u00a0 Few writers bother to review how those \u201cthree hot stock picks\u201d they recommended actually performed in practice.<\/p>\n

Frankly, they should.\u00a0 When you make a good call, you deserve credit.\u00a0 But you \u201cown\u201d the bad calls too.\u00a0 People invest their hard-earned money after reading what you had to say.\u00a0 You owe it to them to go back and check your work.<\/p>\n

Today, I\u2019m going to revisit an article I wrote in late March: \u201cThree Low-Risk ETFs to Ride Out a Volatile Spring<\/a>.\u201d<\/p>\n

At the time of the original article, the Arab Spring was in its infancy, the Japanese Fukushima plant threatened the world the with the worst nuclear disaster since Chernobyl, and the sovereign debt crisis had just caused the sitting Portuguese government to fall.\u00a0 The markets long ago lost interest in the Arab political revolution and the Japanese nuclear disaster, but the Eurozone crisis has actually deepened.\u00a0 \u00a0That \u201cvolatile spring\u201d ending up bleeding over into a volatile summer and a volatile early fall as well.\u00a0 And if we don\u2019t get a resolution of the ongoing Greek crisis soon, we can look forward to a volatile winter.<\/p>\n

Since the original article went to press, the S&P 500 is down 14 percent (see black line in chart).\u00a0 Let\u2019s see how my recommendations did.<\/p>\n

\u00a0\"\"<\/a><\/p>\n

Utilities Select SPDR (NYSE: $<\/span>XLU<\/a>):<\/strong> Of the three ETFs recommended, XLU is the clear winner.\u00a0 At time of writing, it shows a price return of over 4 percent, which does not include the $0.68 per share in dividends. \u00a0\u00a0The dividends add an additional 2.2 percent for a total return of over 6 percent.\u00a0 Not a bad return, all things considered.\u00a0 On a total return basis, it\u2019s about 20 percent better than the S&P 500.\u00a0 But perhaps what is most impressive is that even during the pits of the August sell-off, investors who bought in March would have been down less than 4%.\u00a0 Again, not bad.\u00a0 Over the course of the fourth quarter, readers may want to take profits in the utilities sector and reallocate their funds to more growth-oriented sectors.<\/p>\n

iShares Dow Jones US Healthcare (NYSE: $<\/span>IYH<\/a>)<\/strong>: My rationale for recommending Big Pharma was pretty straightforward.\u00a0 The stocks in the sector had already been punished by fears of patent expirations, and I believed the selling to be overdone.\u00a0 Furthermore, healthcare is a defensive industry.\u00a0 Even if it\u2019s not \u201crecession proof,\u201d it\u2019s certainly recession resistant.\u00a0\u00a0 IYH sold off far more aggressively than XLU, but it still managed to hold up fairly well.\u00a0 At time of writing, IYH is down 6% from my recommended price versus a 14% loss on the S&P 500.\u00a0 This does not include the nearly 1 percent that the ETF has paid in dividends over the period.\u00a0 Overall, I can\u2019t complain about IYH\u2019s performance.\u00a0 To survive the bloodbath of the past six months with only minimal losses is an accomplishment.\u00a0 I continue to see a lot of value in Big Pharma, and I recommend that readers hold on to their shares of IYH.<\/p>\n

iShares S&P Global Telecommunications (NYSE: $<\/span>IXP<\/a>):<\/strong> This recommendation has been a bit of a disappointment to me.\u00a0 Yes, it performed better than the S&P 500.\u00a0 But its price is still down 10%.\u00a0 After the $1.73 per share in dividends, the loss is closer to 7%.\u00a0 That\u2019s not bad, but given the cheap valuations in the sector, the steady dividend payout, and the defensive nature of the business I would have expected better.<\/p>\n

Of the three ETFs, IXP would be my favorite at the moment.\u00a0 The companies that comprise the fund\u2019s holdings are in the unique position of being \u201cdefensive\u201d in the developed markets of the United States and Europe and \u201cgrowth investments\u201d with respect to their prospects in emerging markets.\u00a0 Over the past year, I\u2019ve highlighted the Spanish telecom giant Telef\u00f3nica (NYSE: $<\/span>TEF<\/a>) <\/strong>for its exposure to the fast-growing markets of Latin America, which make up 40% of company revenues.\u00a0 Telef\u00f3nica is a major holding of IXP, and there are plenty more just like it.<\/p>\n

I would like to reiterate my buy recommendation of IXP. Whether the volatility is finally over or not, I consider the telecom sector to be the best value for your dollar today.<\/p>\n

If you liked this article by Sizemore Insights<\/em>, you\u2019d probably enjoy The Sizemore Investment Letter<\/em>, our premium members-only newsletter. Click here<\/a> for more information.<\/p>\n","protected":false},"excerpt":{"rendered":"

By The Sizemore Letter The financial press has an abundance of advice but a bit of a shortage when it comes to follow-up.\u00a0 Few writers bother to review how those \u201cthree hot stock picks\u201d they recommended actually performed in practice. Frankly, they should.\u00a0 When you make a good call, you deserve credit.\u00a0 But you \u201cown\u201d … <\/p>\n

Continue reading “How Did Those \u201cLow Risk\u201d ETFs Hold Up?”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-24297","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/24297","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=24297"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/24297\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=24297"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=24297"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=24297"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}