Hot Stocks You're Buying Now

Welcome back to another Foolish review of the hottest stocks as ranked by Motley Fool CAPS. We're looking at the three best-performing industries over the past 30 days and your favorite long and short candidates in each.

Health-care information service providers are the hottest of the hotties for the third consecutive week, up an average of 28% over the past 30 days (through July 6). Yawn.

Our second- and third-place finishers are more interesting. UltraShort ETFs -- exchange-traded funds that aim to deliver compounded returns when the market falls, as it has -- are, as a group, up 23.9% over the past 30 days.

Top performers include the UltraShort Real Estate ProShares (AMEX: SRS  ) fund, which aims for twice the inverse return of the Dow Jones U.S. Real Estate Index. So, if the index is down 10%, the ETF -- ideally -- will be up 20%.

Molecular, rather than market, gimmickry has produced excellent returns for neuroscience specialists. Pfizer (NYSE: PFE  ) , Elan, and their peers are up an average of 7.6% since early June.

According to you, our Foolish readers, the best stocks in these industries to own now -- i.e., those with four or five of the maximum five stars in CAPS -- are:

Company

CAPS Rating

No. of CAPS Ratings

Percent

Bulls

30-Day Price Change

SXC Health Solutions

*****

153

95.4%

(17.3%)

Quality Systems

*****

2,057

97.5%

(12.6%)

Sources: Motley Fool CAPS, Yahoo! Finance (current as of July 7).

And your favorite short candidates -- i.e., those rated with one or two stars in CAPS -- are:

Company

CAPS Rating

No. of CAPS Ratings

Percent

Bears

30-Day Price Change

UltraShort Basic Materials

(AMEX: SMN  )

*

146

52.1%

20.2%

UltraShort Dow 30

(AMEX: DXD  )

**

363

39.1%

18.1%

Cyberonics

**

94

38.3%

20.3%

UltraShort S&P 500 ProShares

(AMEX: SDS  )

**

633

31.6%

17.5%

Sources: Motley Fool CAPS, Yahoo! Finance (current as of July 7).

This week -- I can't believe I'm saying this -- my favorite is a short position, the UltraShort Dow 30. To me, CAPS All-Star twinterm1 best explained the thesis in early June:

The overall Dow Jones is in trouble because it is heavily weighted with companies that will do poorly in this economy. On the financial side, you have Citigroup [NYSE: C], Bank of America, AIG, and American Express. Gas prices will [eat] Disney's earnings, and GM's [NYSE: GM] stock just hit a 26-year low. For every 1% the Dow goes down, this ETF goes up 2%.

Even so, there's risk with these so-called leveraged ETFs. Our Champion Funds advisor, Amanda Kish, explained it. "With a leveraged fund, losses have a much bigger effect on a daily basis," she writes. "Even if the index rebounds on Day 3, the leveraged fund may not make up all of its lost ground, because the losses reduced the original base from which the fund can grow."

True. But leverage always has this effect -- whether you're investing in options, using margin, or buying a short-side ETF. The added risk puts more pressure on the investor to be correct. I think twinterm1 is correct. Economic, and therefore earnings, growth is simply lacking at the moment.

But that's my take. I'm more interested in what you think. Would you buy the UltraShort Dow 30 at today's prices? Let us know what you think by signing up for CAPS today. It's 100% free to participate.

Related CAPS Foolishness:

Fool contributor Tim Beyers, who is ranked 20,444 out of more than 110,000 participants in CAPS, is also a member of the Rule Breakers team.

Disney and Quality Systems are Stock Advisor selections. American Express and Pfizer are Inside Value picks, and the Fool owns shares of American Express. Pfizer, like Bank of America, is also an Income Investor recommendation. SXC Health Solutions is a Motley Fool Hidden Gems Pay Dirt pick. Try any of these market-beating services risk-free for 30 days.

Find Tim's portfolio and his latest blog commentary. The Motley Fool's disclosure policy is hotter than city asphalt in the summer heat.


Read/Post Comments (0) | Recommend This Article (5)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 680466, ~/Articles/ArticleHandler.aspx, 11/23/2014 2:46:04 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement