Monday, September 22, 2014

A Week for the Markets to Remember!

Janet Yellen delivers the anticipated press conference of 2014 - Scotland decides that it and the England really are better together - Alibaba sets a new IPO record by raising over $25 billion.

While many large IPO’s have unexciting first days, Alibaba was up over 38% opening day and now has a larger market cap than rival Amazon or consumer staple Proctor & Gamble.  With a steep forward P/E ratio and an eighth of the sales of Amazon, it sent a shiver of the great tech bubble down our spine and made us curious as to what sort of values you could find in the ETF world.

Those cruising the list of the ETFG Fundamental Top 25 ETF’s had better come prepared to invest overseas as 8 of the top ten and (and seventeen of the overall list) have an international focus, primarily in emerging markets.  East Asia takes the top spots with PowerShares Golden Dragon (PGJ), iShares MSCI South Korea Index (EWY) and First Trust Hong Kong AlphaDex (FHK) with all three trading close to relatively historic lows on at least one valuation metric or offering a yield close to their all-time high.  And before you get too excited about buying hot names on the cheap, remember that Alibaba listed in the U.S. to access not just a bigger market for its IPO but so it could be included in the largest tech ETF’s to keep that share price higher going forward.

What about those looking for something closer to home?  If you’re willing to go overseas but want to stay in the Western Hemisphere, better look way south of the border at Brazil.  Remember all the fuss about how the Scottish Independence referendum was weighing down the pound and iShares MSCI UK ETF (EWU)?  Well if you missed that move, then Brazil could be another chance to play the election theme as the country prepares to go to the polls on October 5th and its neck and neck between the two challengers both campaigning on a promise to restore Brazil’s slowed economic growth.  Holding near recent support and with a fundamental score higher than nearly any other ETF we rank is the First Trust Brazil AlphaDex ETF.  But with the election just weeks away and with a second round almost guaranteed, be prepared for high volatility.

Finally, what if you just want buy America on the cheap and you want more than just a deep value?  For something a little more diverse, check out the ELEMENTS Linked to the Morningstar Wide Moat Focus Total Return Index (WMW), an ETN designed to track an index compiled by Morningstar analysts of companies that have proven to have a sustainable advantage over their competitors.  Not only has the shift from small to large cap names in 2014 helped lift this ETN over the market (10.45% YTD compared to 8.77% for the S&P 500 as of 9/19, but that momentum helped  pushed its technical scores to near the top of our lists.

Thank you for reading ETFG Perspectives!

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