Jim Farrish, founder of MoneyStrategiesInc.com, reviews his favorite ETFs for the next nine months, along with his evaluation of some other key sectors.
My guest today is Jim Farrish, and we're talking about ETFs and stock recommendations. Hi Jim, welcome.
Thanks for having me.
So what's your favorite ETF right this very moment?
Right at this very moment, I'd have to say my favorite is Select Sector SPDR Financial (XLF).
Yep, the financials.
Or iShares Dow Jones US Financial (IYF), which is also financials. I still think they have a long way to go.
The fundamentals are still cheap. If you look at XLF, it's trading at 13.1 times earnings, and the S&P is trading at 14.7. That means that we're discounted to the S&P. S&P is trading for the current quarter at 13.1. I still think they're cheap.
Are those mostly large-cap bank stocks?
XLF is all large cap. If you buy IYF you get the small-, mid-, and large cap.
So, more of the regional banks.
The regional banks? If you want regional, buy S&P Regional Banking ETF (KRE), which is the regional bank ETF. If you want just banks, or large-cap banks, buy SPDR Banking ETF (KBE).
What do you think of the regional banks?
I love regional banks. SunTrust (STI) is getting ready to break out to a new high.
What we like is they're cleaning up their balance sheets. They're starting to lend much more than the bigger banks...the local banks are lending to businesses. They're doing a lot of things that they haven't done in a while. I think they're in a great position.
If you're a long-term investor—long term to me is looking out nine-plus months—I think they're a place to be, and we still own them.
Do you like them because of the dividend or because of the growth rates?
I like the growth rates more than anything. The dividends are...
Small.
Since 2008, 2009, the dividends are so miniscule. Maybe they'll come back...but I just like the growth of the stocks. I mean, if you look at a Huntington Bank (HBAN), great stock. Regions Financial (RF), great stock, SunTrust, great stock.
Also, Bank of America (BAC), which is a big cap, good stock. Citigroup (C) is a little pricey, but Istill like the stock. You've got to.
That's where we kind of always are filtering in and looking at the ETF. Are they leading for the upside? We use a thing called customer date sort, where if the index is up 10%, we want to look at what stocks are accelerating beyond that. That's where we want to own the stocks.
OK, do you buy any health-care ETFs today?
We do. We own Select Sector SPDR Health Care (XLV), we own iShares Dow Jones Healthcare Providers (IHF). We own iShares Dow Jones US Medical (IHI), which is the medical devices; SPDR S&P Biotech (XBI), which is large-cap biotech; and iShares Nasdaq Biotechnology (IBB), which is small-cap biotech.
So how do you think the whole Obamacare situation is affecting us?
I think that people who didn't buy health care after Obamacare was passed missed the boat. A lot of money been made.
I think biotech is in the right place, right time, right now. Because of ObamaCare, that leads into the pharmaceuticals. SPDR S&P Pharmaceuticals (XPH) are large-cap stocks. You can use the iShares Dow Jones US Pharmaceuticals (IHE).
They're in a great position. They aren't going away. We aren't getting rid of health care. It's going to be consolidated. I'm a buyer. I own them and we buy, we trade, but we're also investors.
Are you doing any retail at all these days?
I like retail. I bought a little SPDR S&P Retail (XRT) on a breakout the other day to a new high. We got stomped out, so we hadn't been in it, but we're back in it.
I really like the specialty retailers right now, and I like some of the discounters. I love Target (TGT). I like TJ Maxx (TJX). Some of those companies are doing extremely well.
I'm not a big fan of the dollar stores and Dollar General (DG) and all that; I think that runs over. But I think there's some great retail. Specialty retail is the place to be right now.
Related Reading:
