Finding so-called safe havens is getting harder, particularly
at the sector level. Thursday's bloodbath serves as a reminder
that even the most popular safe-haven sectors are often just less
bad than the broader market.
Take the examples of the Consumer Staples Select Sector SPDR
(NYSE:
XLP
) and the Utilities Select Sector SPDR (NYSE:
XLU
). Two of the most popular safe haven destinations among sector
funds
are now showing signs of vulnerability
.
In the past five trading days, XLU and XLP are off 1.8 percent
and 1.2 percent, respectively, but the SPDR S&P 500 (NYSE:
SPY
) is down just 0.3 percent. Then there is the case of the Health
Care Select Sector SPDR (NYSE:
XLV
), another supposed "boring is beautiful" play. The danger with
XLV is that
the ETF's correlations to higher risk sector
funds are on the rise
.
Said another way, the options for sector ETFs with near-term
upside potential are dwindling. However, there are a few that
deserve consideration.
First Trust NYSE Arca Biotech Index Fund (NYSE:
FBT
)
With a spate of FDA-related headlines expected in the coming
weeks and the ever-present possibility of mergers and
acquisitions activity, biotech ETFs are worth a look here. The
sectors volatile reputation might chase some investors away in
this risk off environment, but FBT's correlations, or lack
thereof are compelling.
In the past 90 days, FBT has jumped 9.6 percent compared to a
2.3 percent increase for XLV and a 4.3 decline for SPY. Perhaps
more importantly, biotech stocks and ETFs enjoy a useful
advantage over other sector funds: Almost no correlation to
Europe. In fact, FBT has been shown an almost perfect inverse
correlation to the Vanguard MSCI Europe ETF (NYSE:
VGK
) over the past three months. VGK is down 9.4 percent over that
time.
PowerShares S&P SmallCap Consumer Staples Portfolio (
PSCC
)
The consumer staples ETF conversation has a tendency to revolve
around XLP and the Vanguard Consumer Staples ETF (NYSE:
VDC
), so it is easy to overlook the PowerShares S&P SmallCap
Consumer Staples Portfolio. Despite its small-cap focus, PSCC is
the best performer among this trio over the past 30 and 90
days.
PSCC's lineup is not unfamiliar nor highly speculative. Top-10
holdings include Hain Celestial (NASDAQ:
HAIN
), Casey's General Stores (NASDAQ:
CASY
) and Boston Beer (NYSE:
SAM
).
Global X Lithium ETF (NYSE:
LIT
)
With almost no fanfare, the Global X Lithium ETF has jumped 8.5
percent in the past month. LIT, which will celebrate its second
birthday in a month, has not always been an under-the-radar play.
The ETF came roaring out of the gates in 2010 as investors bought
into the theory that lithium was the next great commodities
story.
Enthusiasm for the lithium story and LIT later waned, but a
renaissance appears to be underway. Prices have tripled since
2000 in a market now worth $1 billion,
Bloomberg reported
. Translation: LIT is still a valid backdoor play on increased
iPad and Prius sales.
For more on sector ETFs, click
here
.
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