Eq: Large Cap
(New York)
A REIT as an ETF might be an odd concept for some advisors. Since REITS are a special asset class unto themselves, and ETF made up of them could seem foreign. Their big advantage is that they are much cheaper than actively managed real estate strategies. However, risks abound, especially as many REITs tend to focus only on the US market, which could be very risky at the moment. One good REIT ETF is the Schwab US REIT, which has returned over 5% this year despite rising rates, and sports a 4%+ yield. Schwab points out that one of the best parts of REITS is that they “do not move in lockstep with either stocks or bonds.” The Vanguard Real Estate ETF is another good REIT choice. For global exposure try the SPDR Dow Jones Global Real Estate.
FINSUM: We like REITs in principal, but rates are a big worry at the moment. They seem like a good way to earn yield right now, but should probably be hedged.
(New York)
Safe dividend stocks are absolutely prized by America’s retirees. No group relies on dividends more than retirees, and most seek safe and reliable dividends with underlying businesses that can provide some price appreciation too. With that in mind, three stocks to look at are McDonalds, Corning, and Starbucks. All three companies have strong and growing businesses and seem committed to rewarding shareholders. They also have the formidable capital position to be able to invest in continuing robust growth even in changing times.
FINSUM: We don’t know much about Corning, but McDonalds seems like a good bet to us. The company has responded well to the shifts in consumer tastes and it has been innovative in adapting its menu and model to the new environment.
(New York)
Retail clients, and some advisors, are adopting an increasingly defensive outlook on the market as the economy roars and rate hikes look more and more certain (not to mention soaring valuations). So what are the best defensive ETFs to protect a portfolio? The range of defensive strategies is broad—from dividend-focused, to shorting, to multi-factor. Some of the most popular include the AdvisorShares Dorsey Wright Short ETF, the Fidelity Dividend ETF for Rising Rates, or the Principal Mega-Cap Multi-Factor Index ETF.
FINSUM: It seems a smart choice to have defense ETFs be a decent portion of one’s portfolio right now. That said, we would be anxious to make shorting-focused ETFs a substantial holding.
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(New York)
Retail has had a great year, but looks to be facing headwinds moving forward as executives and analysts have all downgraded forecasts for the sector. However, one area of retail that looks to remain very hot are off-price stores, or discount retailers. Such retailers are seen as largely immune to ecommerce because of their treasure-hunt experience for customers and their high turnover model, which makes them less susceptible to online retailers. Accordingly, they held up well even during retail’s rout. One stock that looks likely to do well now is Burlington Stores. The reason why is that it is behind leaders TJ Max and Ross in that it has not yet optimized its operating model for the current environment, but is beginning to. This is not reflected in its stock, which means it has a great deal of upside.
FINSUM: Retail is one of the sectors we feel we have special insight into, and we definitely agree that off-price stores are going to hold up well moving forward.
(Washington)
There has been a lot of speculation that the midterm elections could cause a big problem for markets. If the Democrats sweep into congress, causing a major power shift, many worry markets might crumple. However, the reality is that the most likely outcome—a blue House and Red Senate—would actually be bullish for stocks. One analyst who specializes in political-driven investing says that investors would be relieved to have a split Congress. If somehow both chambers go blue, then there would likely be a selloff in bonds, stocks, and the Dollar, but even that might prove a buying opportunity as Democrats “are not unified around anything”.
FINSUM: Depending on the election’s outcome, different sectors are going to see different results, as some are blue-positive (like auto suppliers, homebuilders, hospitals etc), while others are red-positive (like biotech, banking, credit cards, and defense).
(New York)
Here is a proposition. What if you could have stocks in your portfolio that help you earn income, combat rising rates, and support you during a recession. Look no further than this group of rising dividends stocks that should perform very well in a recession. All three are medical device makers with wide moats and long growth runways that shouldn’t be thrown off path by an economic downturn. The three are Johnson & Johnson, Medtronic, and LeMaitre Vascular. The first two companies are aristocrats and have increased their dividends steadily for over 40 years.
FINSUM: These are interesting choices. Medical device makers do some like good recession-time bets because healthcare demand should hold up nicely in any downturn.