September Could be Kind to These ETFs
On a historical basis, September is usually unkind to stocks and investors have been reminded of that in ample doses since the start of the month. The good news is September's sour reputation does not mean there are not opportunities to be had.
In fact, there are a few ETFs that can comfort investors this month. Perhaps the best thing is that the funds on this list are not leveraged, so conservative investors can embrace a couple of these picks, too. Here are the ETFs to be involved with from the long side this month:
iShares Gold Trust (NYSE: IAU) Or the SPDR Gold Shares (NYSE: GLD) or any ETF backed by physical gold for that matter. IAU makes the cut here because it has a lower expense ratio than GLD. Additionally, IAU has slightly outperformed GLD year-to-date. Regardless of which gold ETF investors choose, historical data indicate gold is a wise move from the long side this month.
In the past 25 Septembers, gold prices have increased 19 times. Factoring in the six years when gold prices slid in September, gold's average September gain is almost 2.7 percent, according to Dorsey Wright.
iShares Dow Jones U.S. Real Estate Index Fund (NYSE: IYR) The real estate sector has been a decent performer over the past 20 Septembers, rising 12 times and falling on eight occasions. The average gain in the 12 up Septembers outpaces the average loss by 50 basis points, according to Dorsey Wright.
IYR is already up 17.3 percent year-to-date and that might imply the fund is due for a September pullback. Past performance probably is not the biggest near-term risk facing this ETF. Valuation might be. IYR sports a P/E ratio of almost 45 and a price/book ratio of nearly 3.5, according to iShares data.
On the other hand, a 30-day SEC yield of 3.56 percent is decent in this environment and that could be enough to send yield-hungry investors into this fund as September moves along.
U.S. Oil Fund (NYSE: USO) Embracing a risky asset such as oil futures would appear to be the opposite of what would be deemed a practical September. The data support such a move. Over the past 16 Septembers, oil futures have risen nine times and fallen seven times. Not a big margin favor of the bulls, but the Dorsey Wright data indicate crude's average gain over those nine Septembers is 120 basis points better than the average loss.
PowerShares DWA Technical Leaders Portfolio (NYSE: PDP) The PowerShares DWA Technical Leaders Portfolio tracks an index based on relative strength methodology, which is to say the ETF is home to 101 stocks showing bullish relative strength characteristics.
On the surface, PDP would be appear to be a fund more geared toward a risk on environment because consumer discretionary and financial services names combine for almost 50 percent of the ETF's weight. The index has jumped in 10 of the past 15 Septembers, though it should be noted the average loss in the five down Septembers is much higher than the average gain. PDP has almost $617 million in assets under management and Apple (NASDAQ: AAPL) is the ETF's largest holding with an allocation of 3.53 percent.
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