One ETF Strategist’s Recent Scorecard

January 04, 2016

The Problem With The ‘Q’s’

May 9, 2014 (Annualized Performance)

Results: The PowerShares QQQ ETF (QQQ | A-64) outperformed the substitute portfolio comprising the iShares MSCI USA Momentum Factor (MTUM | A-71), iShares Russell Top 200 Growth (IWY | A-94) and iShares North American Technology (IGM | A-87) by 3.84%. (Negative?)

Commentary: The main focus of this article was to criticize the QQQ for its index methodology. I proposed a substitute of the three ETFs above, investing half in the technology ETF and half favoring mega-cap growth and momentum. I continue to dislike ETFs that base indexes on where a company trades. Given the run in the QQQ, my substitute portfolio held up quite well.

Riding Italy’s Mend With EWI

April 4, 2014 (Annualized Performance)

Results: iShares Italy (EWI | C-91) lagged iShares MSCI ACWI ex U.S. (ACWX | A-96) by 4.83% (Negative)

Commentary: Italy still seems attractive. Consider an allocation to iShares MSCI Spain Capped ETF (EWP | B-95). Spain’s fundamentals and competiveness are improving more quickly.

Why I Love Momentum Fund MTUM

Jan. 22, 2014 (Annualized Performance)

Results: iShares MSCI USA Momentum Factor (MTUM | A-71) surpassed the Russell 3000 by 5.40%. (Positive)

Commentary: Recent years have favored growth stocks and steady performers, and momentum captured those trends. Momentum stocks are generally riskier than the market, so while I continue to favor momentum stocks, I advocate blending them with quality ETFs to manage the risk.

All In On Treasury Floaters

Dec. 20, 2013 (Annualized Performance)

Results: N/A

Commentary: Access to floating-rate Treasury bonds became a reality when an ETF launched three months later.

Time Is Right For Tech ETFs

Nov. 21, 2013 (Annualized Performance)

Results: The average performance of the four technology ETFs: Technology Select SPDR (XLK | A-92), iShares North American Tech (IGM | A-87) and Fidelity MSCI Information Technology (FTEC | A-94) (all large-cap or all-cap); PowerShares S&P SmallCap Information Technology (PSCT | A-39), small cap) returned 3.68% more than the Russell 3000. (Positive)

Commentary: Glad the first one worked out. Technology has done well, and I expect that to continue. We live in the network era, and technology companies are at the center of connecting us to the rest of the world. Valuations are still reasonable and business models are strong. Interestingly, small-cap technology lagged large-cap by nearly 13% annually over the two-year period. If small-caps had been left out, the difference would have been more than 7%.

At the time of writing, CLS Investments held positions in these above-mentioned securities: IWV, INDA, MCHI, EWJ, EFV, EFA, IWR, VGT, IHI, DBEF, AAXJ, IEMG, IVV, LQD, QQQ, MTUM, IWY, EWI, ACWX, EWP. The firm is an Omaha, Nebraska-based third-party investment manager and ETF strategist. CLS began to emphasize ETFs in individual investor portfolios in 2002, and is now one of the largest active money managers using exchange-traded funds, with more than $2 billion invested. Contact CLS’ Chief Strategist Scott Kubie at 402-896-7406 or at [email protected]. Please click here for a complete list of relevant disclosures and definitions.

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