Of the wide variety of tools available to analysts for picking
investments, Sam Subramanian focuses on momentum, valuation and
These days his gauges are pointing to
that focus on aerospace, biotech, agriculture and several other
Subramanian parlayed an MBA from the University of Michigan
and a Ph.D in chemical engineering from Syracuse University into
an investment research firm and newsletter service that use a
trademarked system called the "ValuM Investment Process."
"Specifically, we seek sectors demonstrating high relative
strength while possessing attractive valuation," Subramanian's
website says. "We also look for sectors with catalysts or
in Sugarland, Texas, in 2003, he worked for McKinsey & Co.,
Exxon, Unocal andFord (
), where he patented
Here's an overview of Subramanian's current top ETF picks and
his explanations of why ETF investors should buy them.
1.iShares Dow Jones U.S. Aerospace & Defense (
Defense firms are seeking to increase sales to emerging
markets, pursue consolidation opportunities, and cut costs to
offset the impact of falling defense spending in the U.S.
Commercial aircraft manufacturers and parts suppliers are
benefiting from rising fleet growth in developing markets and the
need to replace less-fuel-efficient aircraft in developed
SPDR S&P Biotech
Sales of newly launched biotech drugs are ramping up rapidly.
Biotech stocks are benefiting from strong earnings reports and
favorable drug development news. Takeover activity in the biotech
group remains strong, providing value-creating opportunities for
investors. Further, biotech stocks have low correlation to the
broad market, a virtue in this economic environment.
PowerShares Global Agriculture
Rising global population and the need to raise food production
increases demand for fertilizers and agricultural products. In
the near term, tight grain inventory caused by the U. S. drought
is likely to spur outsized fertilizer demand in 2013.
4.Consumer Staples Select Sector SPDR (
In this milieu of global economic uncertainty, stable demand
for food, beverages, and household products makes
dividend-yielding consumer staples investments appealing.
Consumer staples companies are driving up sales through product
innovations, while lowering costs through global supply chain
improvements. Emerging markets offer good growth opportunities
for companies in this sector.
5.SPDR S&P Homebuilders (XHB).
The U.S. housing sector finally appears to be on the mend.
Housing shares have fared well against the backdrop of improving
industry barometers and strong earnings reports. New-home sales
are now at their highest level since July 2008. Reconstruction
needed in response to Hurricane Sandy is also likely to spur
demand. Housing group investments are a play on the prospects for
this recovery to continue.
6.PowerShares Dynamic Leisure & Entertainment (PEJ).
Leisure investments are a play on housing and employment
markets continuing to improve, leading to increases in U.S.
household net worth. Growing mass affluence in Asia is providing
growth opportunities for casinos, restaurant chains and hotel
operators. Rising dividends add to their appeal as well.
7.PowerShares Dynamic Media (PBS).
Media companies are benefiting from stronger spending on
advertisements as marketers woo consumers' dollars in the face of
an uneven U.S. economic recovery. Auto companies, for example,
are spending on ads to push incentives and drive new-model sales.
Online advertising is growing at a rapid rate.
8.PowerShares Dynamic Pharmaceuticals (PJP).
The resilience of pharma company earnings to the economy is
positive in this economic environment. Several pharma shares have
above-average dividend yields. While generic drug companies are
benefiting from patent expirations of branded drugs, major
pharmaceutical companies are targeting BRIC (Brazil, Russia,
India and China) and other emerging nations for their growth.
Utilities Select Sector SPDR
Shares of utility companies provide relatively high dividends
and have safe-haven appeal in this economic environment. The
average utility stock yields nearly 4.2%, over 2.5 times the 1.7%
yield on the 10-year Treasury bond. Power generators are
switching to natural gas as its price declines. Rising
transportation demand for natural gas provides opportunities for
pipeline operators. Merger-and-acquisition activity in the
utilities sector is robust.