A Not-So-Final Farewell
After more than two years of publishing, this will be our final issue of Global ETF Profits as a standalone service. In order to bring you more concise, actionable advice, we are merging Global ETF Profits with my market-beating Personal Finance Fund Portfolio.
Going forward, you will receive biweekly print issues of Personal Finance. You will also continue to receive my weekly e-letter ETF Profits Weekly, though the name will change to ETF Investment Insider beginning next week.
Thank you for being a subscriber to Global ETF Profits. I look forward to providing you with even better advice in each issue of Personal Finance, as we navigate these challenging times together.
In this final issue of Global ETF Profits, I’ll be covering the exchange-traded funds (ETF) I recommend selling, as well as those that I intend to continue covering in Personal Finance.
Continued Growth Coverage
There are a handful of names from our Growth Portfolio that I intend to carry over to my Personal Finance Fund Portfolio.
I have covered iShares S&P Global Healthcare (NYSE: IXJ) in the Fund Portfolio over the past two years for the same reasons that I’ve covered it here.
Between 2010 and 2020, US gross domestic product (GDP) is projected to rise about 38 percent. Over the same period, healthcare spending is expected to grow 57 percent. Indian GDP is forecast to double during that time, while its healthcare spending is expected to grow 140 percent. China is an even more extreme case, with GDP expected to grow 115 percent, while healthcare spending jumps 167 percent.
Similar disparities between GDP growth and healthcare spending can be found around the world.
Rising incomes and improving standards of living are the primary drivers of surging healthcare spending. With more money to spend, the developing world’s emerging middle class is adding more meat, sugar and processed foods to their diets. At the same time, jobs are becoming less strenuous and more sedentary, and car transportation is increasingly prevalent, which means people are getting less exercise. As a result, obesity and diabetes are not limited to the developed world anymore, they’re now global epidemics.
Additionally, populations around the world are enjoying greater longevity. While the average person born in the year 1900 had a life expectancy of 48, today the average person can expect to live to 67. Improvements in longevity have been especially pronounced in emerging market nations such as China. In 1900, the average Chinese could expect to live to around 30; today they’re likely to reach 75.
Now that people are living longer, age-related diseases are becoming increasingly common around the world, including ailments such as heart disease, arthritis, cancer and Alzheimer’s disease.
All these aforementioned factors add up to booming demand for healthcare.
Continue buying iShares S&P Global Healthcare under 65 and watch for updates on the fund in Personal Finance.
While I don’t currently cover iShares Dow Jones US Oil Equipment Index (NYSE: IEZ) in Personal Finance, I plan on initiating coverage of the fund there in the near future.
Even as the world remains mired in economic crisis, energy demand continues to grow. According to the Energy Information Agency, last year global oil demand rose by 800,000 barrels per day to 87.9 million barrels per day. This year, demand is expected to grow to 88.9 million barrels per day.
According to the consultancy McKinsey & Company, even if there is a severe downturn in global GDP growth as a result of a worldwide economic downturn, oil demand should still reach 91.5 million barrels per day by 2015 and 103.5 million barrels per day by 2020. The world has an insatiable secular demand for energy.
While oil demand has been rising, energy resources are becoming increasingly difficult to develop. Energy outfits now operate in environments such as the deepest parts of the ocean that require highly specialized–and expensive–equipment.
iShares Dow Jones US Oil Equipment Index provides exposure to all the top names in the oil equipment and services sector, including Schlumberger (NYSE: SLB) and Halliburton (NYSE: HAL). It also has sizable allocations to outfits such as National Oilwell Varco (NYSE: NOV), which provides much of the equipment used in deepwater drilling activities.
Continue buying iShares Dow Jones US Oil Equipment Index under 68.
While the remaining positions in the Global ETF Profits Growth Portfolio will continue to receive sporadic coverage in Personal Finance, PowerShares Lux Nanotech Portfolio (NYSE: PXN) is the only position that should be sold outright.
PowerShares Lux Nanotech Portfolio holds a basket of companies that have at least some involvement in funding, manufacturing or developing nanotechnologies.
While there are a number of established companies in the portfolio, including 3M (NYSE: MMM) and Intel (NSDQ: INTC), more than 57 percent of the fund’s portfolio is devoted to speculative microcap names that are extremely economically sensitive. And while many of these companies are developing promising technologies, most of them are largely dependent on venture capital funding, which could quickly evaporate if the global economy takes a decisive turn for the worse.
While PowerShares Lux Nanotech Portfolio is still appropriate for aggressive, risk tolerant investors, I recommend that others sell now.
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