10 ETFs Moving into Buy Range

Focus: ETFS

Peter Way Image Peter Way Founder and CIO, Peter Way Associates

These funds should continue to improve as the markets continue to recover from the disaster that was September, writes Peter Way of Block Traders’ ETF Monitor.

Leveraged ETFs
There has been no subtle shift towards opportunity in leveraged long ETFs, when compared with our last letter. Back then, we saw only four out of 30-plus candidates as buyable.

Our practice requires risk-balanced return prospects that are multiplied by the leverages present, in order to be considered for a buy recommendation. Now, three of those are slightly short of that hurdle. Only DRN, an ETF investing in REITs, meets the test.

Shudder again, as you may have a fortnight ago about actually putting money into that persistently troubled sector. But the time to buy is when they’re on sale.

So, maybe the market turn is not convincingly upon us yet. Still, at least much of the “bottomless pit” uncertainty should be dissipated.

Broad ETFs
When looking at the broader-oriented ETFs, those tracking market indexes or the sector measures, there is no enthusiasm yet for a big rally. Nothing in either set meets our buy recommendation criteria.

To find opportunity we must probe those ETFs that are more narrowly focused, at the commodity, industry, or geographic level.

The best-priced of this set is IBB, a holder of stocks in the Nasdaq Biotech index. Its current forecast gives it about four times as much upside as downside exposure. In over four years, it has had this favorable an appraisal less than 2% of the time.

When that has been the case, end-of-day market quotes for IBB in the following three months have been higher than at the time of forecast 87% of the time, or seven out of every eight market days.