Five Defensive ETFs Your Broker Forgot to Mention (XLP, PCY, PBS)
Lethargic market action dating back to last week coupled with some less-than-impressive GDP news courtesy of China and renewed concerns about our old friend Greece might be the signs that now is a good time to add some defensive positions to portfolios.
Remember, stocks have a tendency to start out well in March fade toward the end of the month, so adding a boring position or two early in the month isn't the worst idea. Here are some ETFs to consider.
First Trust Consumer Staples AlphaDEX ETF (NYSE: FXG) While the First Trust Consumer Staples AlphaDEX ETF is no Consumer Staples Select Sector SPDR (NYSE: XLP) in terms of assets or volume, it's a fine ETF in its own right. FXG is up over 4% year-to-date and perhaps in a sign that investors are getting defensive, volume in the ETF is already about 20% above the daily average with two hours left in Monday's session.
The 37-stock ETF is much heavier on food names than companies like Procter & Gamble (NYSE: PG), but FXG's top food constituents are not as well known as Kraft (NYSE: KFT) or General Mills (NYSE: GIS). In fact, Kraft isn't even an FXG constituent.
iShares Dow Jones US Telecom Index Fund (NYSE: IYZ) Of the typical defensive sectors (staples, health care, telecom and utilities), telecom has been the disappointment over the past year. In 2011, IYZ got thrashed by the SPDRs ETFs tracking the other three sectors we just mentioned. That said, this may not be the time to hang up on IYZ. The ETF is solidly in the green this year, the yield is decent and there's a reasonable chance that if the broader market continues grinding higher, IYZ could make a golden cross. Limited upside, but you're not likely to lose any sleep with this one either.
PowerShares Emerging Markets Sovereign Debt ETF (NYSE: PCY) Most bond ETFs are usually a good idea for playing some defense with, but at least PCY has that emerging markets kicker, so it's not as boring as an ETF loaded with Treasuries. Not to mention, PCY currently yields 5.4%, so it's a superior yield play than a Treasuries fund. PCY usually holds dollar-denominated bonds issued in 22 emerging markets and current top-10 issuing nations include Venezuela, Mexico, Indonesia, Poland and the Philippines.
PowerShares Dynamic Media Portfolio (NYSE: PBS) The PowerShares Dynamic Media Portfolio has a beta of 1.3, a tad higher than we'd normally like to see with a "defensive" position and it's holdings are mainly discretionary, but with a strong chart and coming up on the sweet spot of presidential election year spending, PBS is one to consider now or as a buy on the dip candidate.
FocusShares Morningstar Consumer Defensive Index ETF (NYSE: FCD) FCD doesn't get a lot of press because the staples ETF arena is dominated by XLP and the Vanguard Consumer Staples ETF (NYSE: VDC), but FCD has performed inline with XLP this year and has the same expense ratio as VDC. For Scottrade clients looking for a staples ETF, FCD is the best bet because you'll get it commission-free.
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