Portfolio Review: Weisbrod Goes Nuclear

June 04, 2008

Manager also buying ETFs focused on natural gas and global infrastructure based on various fundamental, technical factors.


When picking out exchange-traded funds for his clients, André Weisbrod says he likes to keep an eye on the bigger picture.

That means taking into account economic as well as sector trends around the world, according to the chief executive at STAAR Financial Advisors.

"We focus on identifying significant long-term trends in the market and then finding the best ways to take advantage of those opportunities," Weisbrod said. "But we're not trying to pick tops and bottoms. We're definitely not market timers."

Once such a top-down fundamental approach identifies macro changes, or mega-trends as he calls them, Weisbrod uses technical analysis to try to pinpoint when and where to place assets. Those types of momentum indicators include reviewing price charts and tracking volume movements.

He says his aim is to use all of the research tools available to turn ideas into realistic ways to invest in demographic, social and political trends. Besides managing private accounts, Weisbrod's firm serves as advisor for the STAAR family of mutual funds. Those combine mutual funds with exchange-traded funds to build portfolios.

In both client portfolios and his various funds, Weisbrod remains bullish on commodities and natural resources.

"In the short term, parts of the market such as energy have been bid up so high that we could be due for a healthy correction," he said. "But the long-term trend in energy is certainly for prices to go up."

Recently, Weisbrod has been adding to the Market Vectors Nuclear Energy ETF (AMEX: NLR). He first started buying it about two months ago. "It's an energy sector that hasn't flown with the others since nuclear energy has been out of favor until very recently," he said.

France gets 70% of its power from nuclear energy, Weisbrod points out. "The reason is that nuclear energy is practical and the technology has greatly improved to make it safer," he said. "As energy consumption in emerging markets continues to grow, the whole world is increasingly going to turn to nuclear energy."

Weisbrod considers NLR as an extremely overlooked and undervalued fund. "When it takes off, we think it has a huge upside," he said. "If our assumption is correct that energy will continue to go up over time, NLR's a great value right now."

On the opposite end of the return spectrum is First Trust ISE-Revere Natural Gas (NYSE: FCG). It has gained more than 35% this year, similar to other natural resources funds such as the iPath S&P GSCI Crude Oil Total Return Index ETN (NYSE: OIL).


Weisbrod prefers natural gas to pure-play oil ETFs. "We're not dumping the oil, but we're lightening up our exposure to it and putting more into FCG," Weisbrod said.

Natural gas is going through a seasonal cycle that should support higher prices, he says. "FCG has a pretty strong short-term chart," Weisbrod said. "If oil is hit hard, this could be a good diversifier, although FCG and OIL have been moving pretty much in tandem for the past year."

Global infrastructure is also a macro trend he's playing. Weisbrod has just started investing in the SPDR FTSE/Macquarie Global Infrastructure 100 ETF (AMEX: GII). "Compared to energy, its chart is rather boring," he said. "But we think it's positioned to really kick in over the next few years. GII just seems like a good long-term play."

The portfolio is almost 60% international stocks with a heavy concentration in utilities. To complement GII, Weisbrod has been buying the Invesco PowerShares Cleantech Portfolio (AMEX: PZD). "It holds energy as well as infrastructure plays," he said. "PZD fits nicely as a diversification tool in our alternative categories."

Despite a strengthening dollar, Weisbrod still likes prospects for overseas stocks. In terms of broader-based funds, his main pick now is the iShares MSCI EAFE Value Index (NYSE: EFV). "While we're waiting to see what the market's going to do, it's nice to get a bigger dividend," he said. "And in this environment, EFV has slightly lower PE's than more growth-oriented indexes. So that can help if the market corrects sharply at some point."

Big Down Under

Weisbrod also likes to complement such diversified funds with single-country ETFs. One of his favorites is iShares MSCI Australia Index (NYSE Arca: EWA). The firm started buying it about five years ago.

"I just like the country. It's very stable and a well-run economy," Weisbrod said. "If we're not out of a bear market, it'll probably correct like most of the rest of the world. But among single-country ETFs, this is a core long-term holding in our portfolios."

STAAR has also been putting its clients lately into health care names. "We haven't been out of health care. But we're increasing our weightings now a little bit," Weisbrod said. "At this point, we're just nibbling at a couple of new positions now."

Those include: HealthShares Cancer (NYSE Arca: HHK); iShares Dow Jones US Medical Devices (NYSE Arca: IHI) and iShares NASDAQ Biotechnology (AMEX: IBB).

"Some of this is very political, so elections in November could slow down some of these areas if we systematically go to more of a socialized approach," Weisbrod said. "But eventually, with the aging demographics in this country, we're going to need more dollars invested in things like cancer research and medical devices. So we're looking at some very specific ways within the broader health care sector to play longer-term trends."


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