"In the Black" Monday Reveals Intriguing Sector Standouts
By Gary Gordon | October 13, 2008 | 3:02 PM | 0 Comments
I am typing this entry only half-way through Columbus Day's trading session... a springboard bounce off last week's historic slide. It may be hard to say how the leader-board will look at the finish. Nevertheless, a quick glance may help identify where the bargain hunting crowd perceives value.
Early Rebounding Leaders
1 YR 10/13/2008 (Through Mid-Day)
PowerShares Private Equity (PSP) -52% 15%
iShares Oil Exploration and Production (IEO) -40% 14%
iShares Telecom (IYZ) -50% 10%
PowerShares Private Equity (NYSE: PSP) may be the biggest enigma on the board. For starters, companies whose principal business is to invest in and lend capital got slammed alongside every other financial institution in the credit crisis. Yet today, when financials are only marginally higher, PSP has been making a provocatively bold statement.
Indeed, the "coupling" of private equity to regular banking/lending/insurance may not have made sense on the way down. A variety of experts consider "private equity" as an entirely separate and distinct asset class. Perhaps that is what some buyers are beginning to nibble at here on 10/13/08.
What's more, many private equity companies have been taking advantage of the credit mess, feasting on the bits and pieces of other firm's faults and miscalculations. Additionally, PSP may benefit from its core constituents' investments in private corporations with exceptionally bright futures.
The iShares Oil and Gas Exploration (NYSE: IEO) is rebounding alongside oil. And oil's 50% slide from July is similar to that of this ETF's fall.
Still, the amount of the sell-off seems somewhat ludicrous. We have a country that is demanding that drilling be a part of the energy independence plan. We have companies that are hella-profitable whether oil is at $150 or $80. Maybe explorers would not be quite as profitable, but at P/Es of 8? Fundamental value will need to make a return at some point... and perhaps that is what's transpiring already.
(Think Obama won't be interested in drilling? You might think twice after reading ETFs for Obama here.)
The iShares Telecom Fund (NYSE: IYZ) is another investment that mystifies. It showed strength on the last big turnaround day for equities as well. (Read more about IYZ here.)
In September, I surmised that between a hunt for yield and the lowest price-to-book of any economic sector, investors were warming to the possibilities. At the same time, domestic telecom had one of the worst declines in the 2000-2002 bear, one of the weakest runs in the 2003-2007 bull, and 50% losses from the top are worse than the market at large.
Without question, the iShares Telecom Fund (IYZ) represents a home for the brave. It'll require a fair amount of faith, especially after a volatile, uninspiring, under-performing decade. (How else do you get to a P/B of 1.2?)
Disclosure Statement: ETF Expert is a web log ("blog") that makes the world of ETFs easier to understand. Pacific Park Financial, Inc., a Registered Investment Advisor with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.
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