Two ETFs Hitting Highs You Cannot Ignore (SEA, SOCL)
The overall market has been rebounding, but the S&P 500 (NYSE: SPY) remains below its all-time high it set early this year. Some of the large-cap energy ETFs have begun to breakout to highs, but the list of sector ETFs hitting highs is nearly non-existent.
That being said, there are two niche ETFs that have been trading in new high territory for over a week as the market was starting to rally from the August sell-off.
The Guggenheim Shipping ETF (NYSE: SEA) surged to a new multi-year high last week and is now up 23 percent for the year. The concentrated ETF is made up of 26 international stocks that are in the global shipping industry and move goods and materials around the globe. The components of SEA are globally diversified with the U.S. only making up 22 percent of the ETF, followed by Denmark at 20 percent and Hong Kong and Japan both at 14 percent.
A recent rally in the Baltic Dry Index, which measures dry bulk shipping rates, over the last month has been a major catalyst for the rally. The 45 percent move higher in the Baltic Dry Index in the last 30 days can be attributed to an increased demand for iron ore from China and more grains being shipped out of the U.S. However, the good times are not limited to the last month for the shipping rates. In the last year the Baltic Dry Index was gone from 662 to 1478, a gain of 123 percent.
As long as the global economy continues to improve from the recession it should lead to higher shipping rates and higher profits for the stocks that make up SEA.
An ETF on the polar opposite spectrum that is also hitting highs is the Global X Social Media ETF (NASDAQ: SOCL). The ETF is a basket of 28 stocks in the high-growth social networking sector. The most well-known stock in the sector, Facebook (NASDAQ: FB), is the number three holding and makes up 12 percent of the ETF. Another leading U.S. social networking stock, LinkedIn (NYSE: LNKD), accounts for 10 percent of the ETF and is the number four holding. The top two stocks in the portfolio are based in Asia and make up 24 percent of the entire ETF.
Even though Facebook gets all the press in the sector, the two Asian companies at the top of the portfolio have had great years and are both near multi-year highs. The beauty of the ETF is that it not only give investors exposure to a high-growth, niche sector, but it also offers global diversification.
The two ETFs will continue to fly under the radar as investors continue to fear the niche sectors. Do not be a sheep and follow the masses. There is money to be made in both sectors and investors need to think outside the box and find new and exciting investment ideas like SEA and SOCL.
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