Three ETFs To Watch This Week: IYE, SMH, VOO

by on October 25, 2010 | ETFs Mentioned:

As the greenback begins to take back some of the ground it has recently lost, investors are befuddled as to where they should allocate their assets. Some are still bullish on gold or fixed income, while others believe that these two asset classes have hit their peaks, and are due for a nasty correction in the near-term. Still others remain bullish on plain-vanilla equities, citing relatively cheap valuations as one of the chief reasons to buy in to the recovery that many believe is currently in full force. No matter which side of the coin you fall on, earnings season is always a big tell for how the individual sectors and companies have performed over the last three months. This week falls in the midst of earning season, leaving plenty to look forward to, as some of the world’s largest companies release their most recent quarter’s results [see also Three ETFs To Watch During The Great Currency War Of 2010].

Below, we profile three ETFs that could be active this week [for more ETF ideas, sign up for our free ETF newsletter]:

iShares Dow Jones U.S. Energy Sector Fund (IYE)

Why IYE Will Be In Focus: The energy sector has been in the spotlight this year, with the Deepwater Horizon spill providing negative attention for many of the country’s top integrated oil firms. On Thursday, Exxon Mobil, one of the world’s largest and most powerful companies, will release its earnings for the third quarter of 2010, giving more insight on how the oil and gas sector has fared in the wake of the worst environmental disaster in U.S. history, the subsequent oil drilling ban, and limited demand for a variety of oil based products. Analysts have forecasted an EPS of $1.39 and revenues of nearly $100 billion, a 20% growth in sales from the Q3 of 2009.

IYE has a considerable holding in Exxon Mobil (24.1%) along with other big name oil firms like Schlumberger (6.4%), who reported strong earnings last week, leading investors to be hopeful that Exxon can replicate these results. Thus far in 2010, this ETF has returned roughly 2.3% with a dividend yield of 1.4%. Accounting for roughly a quarter of this fund’s assets, Exxon Mobil’s report will be a big mover for not only this ETF, but the entire stock market, making it perhaps the most anticipated earnings release of the week [see also Energy ETFs: Global Or U.S.?].

HOLDRS Merrill Lynch Semiconductor (SMH)

Why SMH Will Be In Focus: Semiconductor firms have seen a healthy growth spurt recently, due to a large boost in the tech sector as consumers snap up devices like smartphones and tablet computers. This sector was also given a boost two weeks ago, when Intel crushed earnings marks; revenues jumped by 59% from the previous quarter, proving that the back to school rush was strong despite economic uncertainty.

SMH holds a total of 18 securities, with Texas Instruments (21.7%) and Intel (20.9%) accounting for the two largest holdings. This ETF will be active in trading on Monday, as Texas Instruments is set to report their earnings from their most recent fiscal quarter. Analyst estimates peg the company with an EPS of $0.69 and revenues of $3.69 billion. Texas Instruments has either met or surpassed earnings expectations for the last four quarters, setting a precedent that many now expect of the firm. Whether this report comes in high or low, SMH will be a big mover in response to whatever numbers Texas Instruments releases [see also Semiconductor ETF Gets A Makeover].

Vanguard S&P 500 ETF (VOO)

Why VOO Will Be In Focus: Though markets saw an impressive growth in September, this month has been a bit more up and down, worrying many that equities are still not a safe play. One of the most important economic indicators to comment on how our nation has performed is the Gross Domestic Product, which is the overall output of goods and services of the U.S. economy. On Friday of this week, the government will release the GDP growth figures for the third quarter of 2010, which are expected to jump to 2.2% from the previous 1.7%.

VOO is made up of the largest companies in the U.S., including Exxon Mobil (3.1%), Apple (2.5%), and Microsoft (1.9%). While the GDP figures will impact almost every corner of the market, VOO should be particularly active as it is heavily-weighted in these top companies which look to in focus as the country’s growth level is reported. If the GDP jumps as analysts have predicted, VOO may surge, but a lower than expected GDP could crush this fund and investor confidence alike.

Disclosure: Photo courtesy of Bill Bertram. No positions at time of writing.