ETFdb Analyst Picks

Published on by on October 11, 2012 | Updated January 4, 2013

ETFdb Analyst Picks are actionable investment ideas that our team of experts believes are poised for outperformance over the next 30 to 90 days. Based on our current reading of macroeconomic conditions, we offer relevant investment ideas that stand to benefit from the prevailing market sentiment. Each ETFdb Analyst Pick includes a fundamental rationale as well a suggested stop-loss and price target to better assist investors. Note that these recommendations are updated on a monthly basis, and as such, will appeal to longer-term traders looking to capture a trend spanning over the course of several weeks.

Active Recommendations

Below we outline our current ETFdb Analyst Picks, and as always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques:

ETFdb Analyst Pick #1: Long XLU

State Street Utilities Select Sector SPDR
Price Target $40.00
Suggested Stop-Loss $35.00
Date Recommended 10/9/2012
Price On 10/9/2012 $36.76
Expense Ratio 0.18%
2009 Performance +11.71%
2010 Performance +5.30%
2011 Performance +19.62%

Analyst Take

Amid all of these clouds of uncertainty, U.S. stocks have remained quite resilient; domestic large cap securities proving their ability to attract inflows in times of economic uncertainty, showcasing that many are still eager to remain invested despite looming threats. With most broad-based domestic equity indexes sitting on decent gains accumulated throughout 2012, the potential for a steep pullback on Wall Street continues to grow as mixed economic data releases and political gridlock encourage profit taking.

As such, the Utilities Sector ETF presents a viable opportunity for those who wish to remain invested in the stock market, but are wary that a “risk off” wave could hit Wall Street in the fourth quarter. Intensifying worries over Europe and growing concerns over the “fiscal cliff” at home are two catalysts that can inspire a correction. Taking a long position in XLU in the current environment is attractive for two reasons; first and foremost, the utilities sector has demonstrated the ability to take on “safe haven” appeal during times of uncertainty. Securities in this corner of the market are characterized by low volatility and historically stable dividend distributions, making them ideal candidates for those looking to scale back on risk. Furthermore, this ETF has endured a healthy correction down to its 200-day moving average; from a technical perspective, this presents an attractive entry point for buyers looking to capture upside while still being able to keep a close watch on downside risk. 

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