ETF Filings Portfolio

A thought occurred to me the other day as I was looking at the filings page on the IndexUniverse weekly ETF Watch. It might be interesting to create a portfolio from some of the funds that are in registration. To be clear these funds do no exist (yet) and many of the filings are so old that it is quite clear to me that, assuming they are still active filings, some of the funds will never list but I'd very probably be a buyer of the WisdomTree Chilean Peso ETF if it ever listed. For purposes of this post I won't speculate on the likelihood that any filing will become a fund.

The approach will be to build at the sector level as best as I can which could be difficult for some funds where index composition is not available somewhere unless it is otherwise obvious by the name of the fund.

Financials
iShares MSCI New Zealand Investable Market Index Fund
iShares MSCI Egypt Investable Market Index Fund

Tech
First Trust Nasdaq CEA Smartphone Index Fund
sShares FTSE Environmental Technologies Index ETF

Industrial
SPDR Transportation ETF
SPDR Aerospace & Defense ETF

Healthcare
RevenueShares S&P 500 Health Care Sector Fund
EG Shares DJ Emerging Markets Titans Healthcare ETF

Energy
IQ Global Crude Oil Small Cap Equity ETF
IQ Global Natural Gas Small Cap Equity ETF

Consumer
Claymore China Consumer ETF
iShares MSCI New Zealand Investable Market Index Fund

Materials
GlobalX Fishing ETF
Market Vectors Minor Metals ETF

Telecom
EG Shares DJ Emerging Markets Titans Telecom Fund

Utilities
GlobalX Brazil Utilities

For the financial ETFs I was not able to find the constituents of the particular New Zealand ETF but the benchmark NZ 50 Index is very heavy in financial sector stocks and of those many are real estate stocks. The reason that the NZ ETF is also listed in with consumer stocks is that there are even more stocks from that sector in the NZ 50. Interestingly there are relatively few agricultural stocks in the index. Likewise I was not able to find the constituents of the Egypt index but the Market Vectors Egypt Index ETF (EGPT) is almost 50% in financial stocks.

The Smartphone ETF is a very recent listing and will clearly be a very popular trading vehicle and can play a role in the explore part of a portfolio for people with positive expectation for the group and also looking to add a little volatility. Yeah, I've never heard of sShares either.

The two industrial ETFs have a chance to offer some pretty good diversification within the sector. Transportation stocks tend to be more economically sensitive than defense contractors and this played out in 2H 2007 as the already existing iShares Transportation ETF (IYT) started rolling over months before the iShares Aerospace & Defense ETF (ITA).

The RevenueShares Healthcare fund takes the SPX healthcare stocks and weights them by revenue. Quite a few of their funds do well performance wise versus competing funds. The index components of the EG Shares Healthcare fund are available on the site. Like many of their sector funds it is BRIC heavy but interestingly Hungary is one of the larger countries at 9%. Something like this fund could offer meaningful exposure to medical tourism although that appears not to be the case; I don't believe there are a ton of those stocks out there.

Energy lends itself to a lot of themes but maybe a lot of the funds already exist based the lack of anything very interesting (read new) in the filings.

The increase in disposable income for consumers in emerging markets like China and Brazil and in a couple of years the CIVETS countries is a well known theme and there are already a couple of funds out there to capture this idea. Consumers in these countries will have more to spend in the coming years, indeed this trend has already started, and it seems reasonable to think that stocks in this space would benefit, they may not do well but it is a reasonable thesis. The consumer sector in New Zealand captures an economy that is less volatile than many of the countries we all talk about and read about and I believe NZ is a country that is in its own world--a term I think I can take credit for that I used to write about more often. By that I mean the economy just chugs along playing a small role in the world economic order with its relatively large trade deficit and generally higher interest rates than most destinations.

The materials sector offers a lot of potential for access to "new" parts of the market. Long time readers won't be surprised to see my continued interest in the GlobalX Fishing ETF which I hope will come and capture some of the very difficult to access stocks I've mentioned before (hopefully excluding Chinese reverse mergers). We'll have to see if it even lists. Minor metals also has potential to be very interesting as we all learn more about them and see demand continue to grow. The difficult thing about this sector is that it has a very small weighting in most broad benchmarks making even a 10% in the sector a huge overweight.

Telecom and Utilities are simple enough and stand to benefit from a flourishing middleclass, maybe utilities a little more so. To the extent someone wants more yield then individual stocks would make more sense. For example Marc Faber has mentioned a company called Thai Tap Water (TTAPF) a couple of times (that I have seen) in the last few months maybe longer. It has been a great performer and yields 6% even after going up a lot. Unfortunately the stock is very difficult to access but it makes the point that at some point investors will benefit from owning more than just ETFs.

I got a little pushback at Seeking Alpha on the dividend idea from the other day questioning the utility of posts like this which is reasonable of course but I do believe this sort of thing can be constructive. One concept that gets very little attention elsewhere (correct me if I am wrong) is how the blending together of holdings creates a portfolio with characteristics that can be managed in small increments and big changes. I believe this has contributed mightily to the result we have achieved over the last six plus years of composite returns.

To the extent this site is about sharing process I spend time looking at all sorts of stocks, assessing how they might blend in, following them and maybe at some point working a couple of new names in based on this. I go through this with far more stocks than actually get added to the portfolio. Additionally after reading the mention of Thai Tap Water, which I do not own, some of you will research it, no doubt find other names you don't know to look at and thus you've learned a little more about the water theme and while Thai Tap Water might not be an ideal candidate for inclusion a little more info about the theme is a productive use of time.