Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to add some highly rated stocks to your portfolio, the Guggenheim Raymond James SB-1 Equity ETF (NYSEMKT: RYJ) 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. It focuses on companies rated as "strong buys" by analysts at Raymond James.
ETFs often sport lower expense ratios than their mutual fund cousins. The Guggenheim ETF's expense ratio -- its annual fee -- is 0.75%, which is on the steep side for an ETF but still cheaper than a typical stock mutual fund. The fund is fairly small, so if you're thinking of buying, beware of possibly large spreads between its bid and ask prices. Consider using a limit order if you want to buy in.
This ETF has performed reasonably, outpacing the S&P 500 over the past three and five 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.
Why "strong buy" stocks?
Stocks deemed strong buys merit some consideration because savvy financial professionals have apparently found some appealing factors in them -- though, of course, they're not always right. (Indeed, my colleague Dan Dzombak has pointed out a blind spot they typically have.)
More than a handful of companies that have sported a "strong buy" rating recently have performed well over the past year. Valero Energy (NYSE:VLO) surged 63%, for example, profiting by processing cheap U.S. oil and then selling it at higher prices in Latin America and Europe -- thereby helping keep fuel prices in the U.S. high. It stands to benefit from the proposed and controversial Keystone XL Pipeline, and has been investing in railcars to boost profits from the Bakken shale fields.
Regions Financial (NYSE:RF) gained 42% and is attractive on many counts, having repaid its TARP obligation, posted improving net interest margin and asset quality, and had a powerful presence in the growing Southeast region. Its recent quarter featured a swing from a big loss to a big gain, among other achievements. My colleague Sean Williams has nominated the company's leader for CEO of the year.
Swift Transportation (NYSE: SWFT), a trucking company, climbed 22%. Its fourth-quarter earnings surged 27% over year-ago levels as the trucking industry enjoys a resurgence, with January tonnage having been the highest in five years. Its Moody's credit rating has been hiked recently, and analysts at TheStreet.com upped its rating from sell to hold.
Other companies didn't do quite as well last year, but could see their fortunes change in the coming years. Micron Technology (NASDAQ:MU), for example, advanced 10%, as its believers expect that growth in tablets and smartphones, not to mention laptop sales, will drive demand for memory chips. Some see the company posting strong results soon, due to surging DRAM prices. But analysts at Lazard recently downgraded Micron, expecting DRAM prices to level off. Micron's purchase of Japanese manufacturer Elpida seems promising, boosting its capacity and its relationship with Apple.
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.