More Selling? Embrace These ETFs (FXP, BGZ, HYLD)
Monday's losses for U.S. equities are certainly more tolerable
than what was seen last Friday, but losses are losses and just
two trading days into June it appears the sixth month of the year
is picking up where May left off. There are 19 trading days left
for stocks to get their acts together this month, but it's
becoming harder and harder to be bullish on the broader
In fact, some would argue that now is the ideal to realize
profits or cut losses on traditional long positions.
" Look at the news around the world, India is mired in a deep
slowdown, China is mired in a fiscal mess and slowdown, Greece IS
leaving the Euro, Spanish yields are already at unsustainable
levels, the U.S. is looking at deficit ceiling issues and tax
break expirations and there isn't a single central bank in the
world that is politically or fiscally prepared to continue with
mass bailouts," Street One Financial President Scott Freeze said
in a note today.
From the long side, Freeze likes two inverse leveraged ETFs:
The ProShares UltraShort FTSE China 25 (NYSE:
) and the Direxion Daily Large Cap Bear 3X Shares (NYSE:
). FXP is the double-leveraged equivalent of the iShares FTSE
China 25 Index Fund (NYSE:
). In the past month, FXP has surged over 29%, while FXI, the
largest China-specific ETF, has slid 13%. FXP is now trading at
its highest levels since December 2011.
BGZ is the triple-leveraged inverse play on the Russell 1000
Index. Technology, financial services and energy names combine
for approximately 45% of that index's weight, implying BGZ is
well-suited for the current environment as those sectors have
been among the worst laggards in recent weeks. BGZ has jumped
more than 22% in the past month.
Freeze also isn't too enthused with Treasuries. "We also
predict a flight from fixed income and treasuries as the yields
have fallen to levels that won't even keep up with inflation," he
Despite the recent
controversy surrounding some junk bond ETFs
, Freeze likes the iShares iBoxx $ High Yield Corporate Bond Fund
), the largest high-yield bond ETF. HYG yields 7.3%.
The Peritus High Yield ETF (NYSE:
) was also highlighted in the note. That fund, which currently
yields 10.6%, focuses on high yield debt securities that, via
their coupons, generate a high current income stream, according
to the fund's fact sheet. HYLD pays a monthly dividend.
Given that inverse and leveraged ETFs are not suitable for all
investors, Freeze did highlight some traditional long ETFs that
investors might want to consider at the moment. Those funds
include the ALPS Alerian MLP ETF (NYSE:
) and the newly minted Global X MLP ETF (NYSE:
). AMLP currently yields just under 6%. He also likes the Global
X SuperDividend ETF (NYSE:
). SDIV, which will celebrate its first birthday on Friday,
currently yields 9.83% and pays a monthly dividend.
The iShares Dow Jones Select Dividend Index Fund (NYSE:
) was also mentioned in the note. Home to 101 stocks and almost
$9.9 billion in assets under management, DVY charges 0.4% per
year. DVY is conservatively positioned as utilities account for
almost a third of the fund's weight. Top-10 holdings include
), Kimberly-Clark (NYSE:
) and CenturyLink (NYSE:
). DVY yields 3.5%.
"We believe that HYLD, HYG, AMLP, MLPA, SDIV, DVY need to be
in your portfolios for the next three months at least, and if you
can be more aggressive, add in FXP, and any of the short products
for the major market indices," Freeze added.
For more on inverse ETFs, please click
(c) 2012 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.