ETFs For Momentum Stocks (FBT, PNQI, HDGE)
So many momentum stocks, so little time. There is something to be said for momentum investing also known as buying high and selling higher for the bulls and shorting low and covering low for the bears.
Buying high and selling higher has worked for the last $100 or $200, perhaps more, with the likes of Apple (Nasdaq: AAPL) and Priceline (Nasdaq: PCLN), but with the elevated price tags sported by those and other high momentum names, ETFs are fertile ground for momentum seekers.
To truly ride the momentum train, the trick is finding ETFs littered with these type of stocks, not just one or two. Here are a few to get you started.
PowerShares NASDAQ Internet Portfolio (Nasdaq: PNQI) The PowerShares NASDAQ Internet has been previously highlighted as the ETF with perhaps the largest allocation to Priceline at 9.4%, but the fund features an array of other high momentum names. In addition to Priceline, PNQI's top-four holdings are Baidu (Nasdaq: BIDU), Amazon (Nasdaq: AMZN) and Google (Nasdaq: GOOG), all of which have been or have the potential to be momentum names on the upside. That quartet represents about 30% of PNQI's weight, confirming the fund's status as a "momentum ETF."
First Trust NYSE Arca Biotech Index Fund (NYSE: FBT) It's no surprise that a biotech fund makes this list, but the surprise may be which biotech ETF makes the cut. The old standby of the biotech ETF group is the iShares Nasdaq Biotechnology ETF (Nasdaq: IBB), the largest biotech ETF. Don't get us wrong, IBB is a fine ETF.
Those in search of real momentum will enjoy the First Trust NYSE Arca Biotech Index Fund more. FBT has outperformed IBB by about 8% this year, but that's not the true momentum indicator. Look at FBT's top-four holdings: Amylin Pharmaceuticals (Nasdaq: AMLN), Regeneron Pharmaceuticals (Nasdaq: REGN), Illumina (Nasdaq: ILMN) and Alexion Pharmaceuticals (Nasdaq: ALXN).
Year-to-date, Alexion is the worst performer of that quarter and that's with a gain of over 28%. Amylin and Regeneron have more than doubled to start the year, highlighting FBT's utility as a valid play for biotech momentum hunters.
AdvisorShares Active Bear ETF (NYSE: HDGE) The Active Bear ETF is pricy with an expense ratio of 3.29%, but with over $197 million in assets under management, the fund is one of the larger actively managed ETFs on the market. As we noted earlier, momentum can be had on the downside as well and HDGE has done a fine job of finding momentum shorts.
The fund's top-10 lineup includes Goodyear (NYSE: GT), OpenTable (Nasdaq: OPEN) and Green Mountain Coffee Roasters (Nasdaq: GMCR). A look at those charts explains why HDGE has started to show signs of awakening from its slumber.
Guggeneheim Solar ETF (NYSE: TAN) Another downside momentum play, the Guggenheim Solar ETF is simply broken and that's putting things kindly. After looking at the chart, it may seem like eager shorts and put buyers are late to the party, but with nothing but the notion that solar stocks are cheap to save TAN, down is still the path of least resistance.
First Trust Dow Jones Internet Index Fund (NYSE: FDN) The past week has not been kind to the First Trust Dow Jones Internet Index Fund and the ETF could offer more in the way of Priceline exposure. Home to 41 stocks, FDN has some constituents that are questionable on the momentum front, but they're further down the roster. When Google, Amazon and Priceline represent over a third of an ETF's weight, that fund is a legitimate momentum play.
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