Behold: The Part of the Market That Can Grow Faster

Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to add non-large-cap companies to your portfolio because of their superior growth potential, the Vanguard Extended Market Index ETF (NYSEMKT: VXF  ) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.

The basics
ETFs often sport lower expense ratios than their mutual fund cousins. The Vanguard ETF's expense ratio -- its annual fee -- is a very low 0.14 %. (Vanguard is known for low fees.) The ETF focuses  on the part of the stock market that doesn't include the 500 big companies in the S&P 500 – in other words, smaller and mid-sized enterprises.

This ETF has performed well, beating the S&P 500 over the past three, five, and 10 years. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.

With a low turnover rate of 14%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.

Why smaller companies?
It's common, and reasonable, to invest in lots of large-cap companies, as they've typically proved themselves enough to grow large, and tend to have some competitive strengths. But it's also smart to include smaller companies in your portfolio, since the best of them can grow rapidly, as they eventually become large-caps.

More than a handful of mid-sized and smaller companies had strong performances over the past year. Sirius XM Radio (NASDAQ: SIRI  ) , for example, soared 57%, while many called it overvalued. (They've been saying that for a long time, and the stock's 10-year average annual return is 14%.) Some worry that streaming music competition will sink Sirius, but it has been growing its subscribership and monthly price. (A recent smart move that could boost its subscriber rolls is its temporary activation of dormant accounts.) My colleague Rick Munarriz thinks Sirius might want to buy rival Pandora (NYSE: P  ) . Sirius recently announced a special dividend and a boost in its share-buyback plans.

Circuitry maker Maxim Integrated Products (NASDAQ: MXIM  ) , up 20%, is a technology stock with a sizable dividend yield, recently of 3.3%. It's also at a 52-week high. In its last quarter, the company posted revenue down 2% over year-earlier levels, and a backlog of $400 million of business. Net income was also down a mite.

Other companies didn't do as well last year but could see their fortunes change in the coming years. Las Vegas Sands (NYSE: LVS  ) , for example, gained just 7%. It recently announced a big special dividend and has been challenged by slowing growth in China (it's a major operator in gambling haven Macao) and now also by China's crackdown on gambling junkets. Some wonder whether the company is erring by not getting involved in online gambling.

Finally, VMWare (NYSE: VMW  ) , down 4%, sports a hefty valuation, with a P/E ratio of 55 and a forward P/E ratio of 30. It's majority owned by storage giant EMC (NYSE: EMC  ) , and the two recently announced plans to combine their cloud-computing application and "Big Data" offerings. VMWare, unlike some rivals, is focusing more on "private" cloud services, which are of interest to corporations, for example. Some analysts are bullish on the company's prospects, though EMC might be the better bargain right now.

The big picture
A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.

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  • Report this Comment On December 12, 2012, at 1:05 PM, cp757 wrote:

    Las Vegas Sands adds the World’s first Fast Action Baccarat

    12/12/2012

    The Venetian Macau launched the world’s first baccarat table that allows as many as 60 players to enjoy the game together. As part of the month-long “Stars of the Cotai Strip”, celebrity models Li Ying Zhi and Han Zi Xuan joined Sands China Ltd.’s Executive Vice President and Chief Operating Officer David Sisk last Friday to launch Fast Action Baccarat (FAB) at the casino-resort.

    The new fast-action version of the game is an innovative development, and its Macau launch is said to provide a brand-new way to play the popular casino classic. “Sands China Ltd. is continuously looking for ways to innovate the gaming experience for our customers and FAB offers an exciting twist on the much-loved baccarat game,” commented Mr. Sisk. “Its rapid pace, lower minimum game limit and space to accommodate up to 60 players per table are what really set it apart from traditional baccarat games – it’s unlike any other baccarat gameplay in Macau.”

    FAB is made possible by an innovative new table design, which features automated chip collection via trap doors built into the table and mobile chip trays that allow dealers to quickly hand out chips for winning bets. The result is a high-energy, rapid-fire baccarat experience able to accommodate large groups of players in one game.

    “It is a priority for us to explore avenues to bring different experiences to our customers and ensure that we diversify our gaming offer within the market; FAB is one big way we’re doing that,” Mr. Sisk added. FAB is first being introduced to visitors of Sands China’s Cotai Strip development at The Venetian Macao, and will be launched at other Sands China Ltd. properties in the future.

    On arrival, guests were welcomed to the FAB launch by a beautiful McLaren sports car on display in The Venetian’s West Lobby entrance, as well as by music from violinist triplet-sisters Alizma.

  • Report this Comment On December 12, 2012, at 1:09 PM, cp757 wrote:

    Macau will be at 50 billion in the next 3 years and LVS will have 40% of that.

    They own mass gaming in Macau and will have 14,000 rooms plus they may add 10,000 rooms on the island that is close to the venetian. That would give them 24,000 rooms in Macau.

    Macau's biggest ever stadium-style installation of electronic games--using Shuffle Master's Rapid Roulette, already a proven performer in Singapore--is now live at The Venetian Macao.

    Known as ‘Imperial Stadium’ the installation has 150 individual touch-screen stations for betting. The stadium is divided into three segments of 50 stations, each served by one roulette wheel. Each wheel operates independently, giving a different game outcome from the others.

    Each wheel has a live dealer and each wheel is tracked by live video camera so that real time pictures of every game can be piped to customers at their terminals.

    The Venetian's management says Imperial Stadium, next door to Imperial House Dim Sum on the main floor, is designed to attract new types of customers who like fast action electronic games with a live dealer. The appeal for operators is that Rapid Roulette can deliver more games per hour than conventional live dealer roulette, and no mispays on bets

  • Report this Comment On December 12, 2012, at 1:14 PM, cp757 wrote:

    With 24,000 rooms it would be great to have an easy way to bill the people of China for those rooms.

    This just in from Macau.

    Sands China starts accepting Alipay

    12/11/2012

    The Venetian Macao and Sands Macao now accept payments via Alipay, China’s most widely used third-party online payment solution, according to a press release from Sands China Ltd.

    The service provider had more than 700 million registered accounts as of June, and began facilitating transactions from the Venetian Macao and Sands Macao websites on November 28.

    Alipay is an affiliate of Alibaba Group.

    “Offering Alipay as an additional payment option when booking our hotels online represents a fabulous convenience for our guests who book online from the mainland,” said David Sisk, chief operating officer of Sands China.

  • Report this Comment On December 12, 2012, at 1:29 PM, cp757 wrote:

    Investers need to have better information. 700 million registered accounts in China that will be able to go and have a good time in Macau. Las Vegas gets 20 to 30 million visitors per year.

    As to online gambling when will they have the new federal department to regulate the gambling ? Which company will get the most of the regulation? CZR, FB. MGM, or any of the other hundred companys that will try and get in on the market.

    If an investor can figure out that they can bet on online gaming now but I find it funny that the companies with the most debt are the ones crying that they will make a lot of money with online gaming.

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