ETF Expert Eyes Water, Industrials

07/25/2013 8:00 am EST

Focus: ETFs

Chris Versace

Editor, PowerTrend Bulletin, Growth & Dividend Report, and PowerTrader

As a result of solid earnings data from industrials, we are adding Industrial Select Sector SPDR ETF to our holdings; meanwhile, hot weather is keeping us bullish on PowerShares Water Resources, says exchange traded fund specialist Chris Versace, of the ETF PowerTrader.

We've already booked gains with our position in Industrial Select, but I want you to put those profits back to work to drive even more returns in the coming weeks.

Industrial giants General Electric (GE) and Honeywell (HON), as well as rail companies Norfolk Southern (NSC), Kansas City Southern (KSU) and others, have reported upbeat results. Those are some of the companies that are held by the Industrial Select Sector SPDR ETF (XLI).

Others include Boeing (BA), which is benefitting from a multi-year backlog level, and Eaton Corp. (ETN), that is benefitting near-term from the rebound in the heavy truck market, due to demand from companies like Paccar (PCAR), which is also an XLI holding. Let's participate in this improving demand picture by adding (XLI) to our holdings.

Meanwhile, the East Coast has been hit by high temperatures and high humidity, and it's not the only area of the country where people are watching the heat index.

We've seen a bump up in corn prices after a US Department of Agriculture (USDA) report showed that dry conditions in parts of the western Midwest had left the national crop less healthy.

This report raised concerns, especially after last summer's drought, which struck as much as two-thirds of the land in the 48 contiguous states and still afflicts 44% of that area and 87% of Texas, according to the US Drought Monitor.

Persistently hot weather is expected to intensify summer droughts in most US regions and water shortages in the Southwest, the Southeast and Hawaii.

Given this scenario, the outlook for our position in PowerShares Water Resources (PHO) looks even better, given the incremental demand for water that tends to result from hot and dry conditions, not to mention those associated with drought conditions. This situation paints a favorable outlook for the water utilities held by (PHO).

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