01/20/2014 8:00 am EST
Both of my ETF picks for 2014 may sound speculative. But each, in its unique way, is not. In fact, each provides a stealthy way to offset their risks, suggests Jim Lowell, editor of The Forbes ETF Advisor.
First Trust US IPO (FPX) began trading in April 2006, and has a market value of over $300 million—it's a hidden gem that won't run the risk of selling at a premium or discount to its NAV.
The IPOX-100 US Index is made up of the 100 largest, best performing, most liquid US initial public offerings; measuring the IPO's performance during their first 1,000 trading days. (IPOs get placed into the index on their sixth trading day and remain in the index for 1000 days.)
The top three sectors are consumer discretionary (25.9%), information technology (19.3%), and health care (16.8%). The top ten holdings are Facebook, AbbVie, GM, Phillips 66, Kinder Morgan, Kraft Foods, Marathon Petroleum, HCA Holdings, Dollar General, and Delphi Automotive.
First Trust US IPO is US-centric and a great complement to my more speculative pick, WisdomTree Japan Hedged Equity (DXJ), which is made up of dividend paying Japanese companies and an inbuilt hedge against Yen movements versus our almighty US dollar.
If the yen weakens, this fund should get a bit more return boost, on top of its holdings' returns, compared to its un-hedged competitors…and vice versa. But in 2014, so long as tapering takes hold, and the prospect for faster US growth turns into the reality of it, the yen should weaken versus the dollar.
As for its holdings, with Abenomics working its stimulus mojo and the macro global view brightening, the names herein should fare well—and if clouds gather, they should be able to weather any storm well.
It began trading in June 2006 and has a market value of over $11.9 billion—you won't have to worry about liquidity. The top three sectors are industrials (25.5%), consumer discretionary (22.8%), and information technology (15.6%).
The top ten holdings are Mitsubishi UFJ Financial, Toyota Motor, Canon, Honda Motor, Takeda Pharmaceutical, Japan Tobacco, Nissan Motor, Mitsubishi, Mitsui & Co, and Astellas Pharma.