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Ride the Bull Market With These Two Momentum ETFs

November 20, 2014 3:10 pm
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With the market in the midst of one of its most impressive rallies over the last decade, identifying stocks that are outperforming the market is crucial to capitalize on the current market environment. One of the best ways to take advantage of a bull market with such strength is to identify momentum stocks. To fall into this category, a stock would have to show above average relative strength, which can be measured by the strength of a stock when compared to its peers.

There are a number of momentum ETFs from a plethora of sectors that meet this criteria. Highlighted below are two momentum ETFs that will likely capitalize on the current market condition as long as the rally continues.

PowerShares DWA

The PowerShares DWA Technical Ldrs Pf (ETF) (NYSE: PDP) consists of 100 publicly traded companies that have a relatively high price momentum and are predicated to sustain the momentum for the near future.

The ETF is distributed across 10 sectors with the most heavily weighted being consumer discretionary at 26 percent, industrials at 19 percent and health care at 17 percent.

The top individual holdings include:

  • Apple Inc. (NASDAQ: AAPL) with a 3.2 percent holding
  • Jazz Pharmaceuticals plc – Ordinary Shares (NASDAQ: JAZZ) making up 3.1 percent
  • O’Reilly Automotive Inc (NASDAQ: ORLY) coming in at 3 percent

PDP is up 12 percent year over year and 11 percent over the last six months. The momentum ETF has an expense ratio of 0.65 percent.

Related Link: Here Are A Few Preferred Stock ETFs For Income And Diversity

iShares Trust

The iShares Trust (NYSE: MTUM) follows 125 publicly traded companies that exhibit high momentum characteristics. Its holdings are spread across 11 sectors with the most heavily weighted being health care at 22 percent and industrials at 16 percent.

The top individual holdings include:

  • Facebook Inc (NASDAQ: FB) making at 5.7 percent
  • Wells Fargo & Co (NYSE: WFC) with a 4.9 percent holding
  • Johnson & Johnson (NYSE: JNJ) coming in at 4.8 percent

It has performed very well up 13 percent year to date beating the market by 2 percent during that time as compared to the SPDR S&P 500 ETF Trust (NYSE: SPY); it is also up 12 percent over the last six months. The ETF has an expense ratio of 0.15 percent.

It is important to note that this is one of the more difficult investment strategies to master due to the constant evaluation and rotation of money. An investor interested in momentum stocks would be wise to leave the heavy lifting to the professionals and choose an ETF over individual stocks.

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