Categories: ConstructionU.S. Investing

ETF Talk: Putting Industrials to Work for You

Let’s look at the housing recovery. The rebound actually began last year, about five years after the housing bubble burst. Key reasons for the resurgence are an improving labor market and low mortgage rates, which have caused an increase in home buying. One way to capitalize on what is projected to be a continued and successful recovery for the housing market is to buy an exchange-traded fund such as the Industrial Select Sector SPDR (XLI).

This non-diversified fund seeks investment results that, before expenses, correspond generally to the price and yield of companies in The Industrial Select Sector Index. That index includes companies in the industrial conglomerates, machinery, road & rail, electrical equipment, construction & engineering and building products industries.

XLI rose 10.14% in 2012, and it already is up 4.83% so far this year. If you like income, the fund yields 2.27%. The housing recovery should continue to boost XLI’s per-share gains. Increased housing prices also boost the wealth of homeowners, and a byproduct can be further spending and economic growth.

As expected with a sector ETF, XLI has 99.51% of its holdings in the industrials sector. The remaining 0.49% is invested in basic materials. The fund’s top ten holdings comprise 48.83% of its total assets. The top holding is General Electric, which constitutes a sizable 12.06% of XLI’s assets. The next four top holdings are United Technologies, 5.31%; Union Pacific, 4.76%; Caterpillar, 4.62%; and 3M, 4.48%.

As the housing recovery continues, the industrials sector and XLI should benefit. If you invest in the fund, you will have a chance to ride the momentum, too.

If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my Successful Investing newsletter. As always, I am happy to answer any of your questions about ETFs, so do not hesitate to email me by clicking here. You just may see your question answered in a future ETF Talk.

Doug Fabian

Doug Fabian is the Editor of Weekly ETF Report, a free weekly e-newsletter, and the newsletter Successful ETF Investing. He’s also the host of the syndicated radio show, “Doug Fabian’s Wealth Strategies.” Doug also edits the fast-paced trading service ETF Trader’s Edge, for investors who want to take their profits to the next level. Taking over the reins from his dad, Dick Fabian, back in 1992, Doug has continued to uphold the reputation of the newsletter as the #1 risk-adjusted market timer as ranked by Hulbert’s Investment Digest. Doug became a member of the “SmartMoney 30” in 1999 — a listing of the most influential individuals in the mutual fund industry. In the feature, SmartMoney magazine exclaims that Doug is the best-known “trend follower” among the $56 billion (and growing) group of financial advisors. In 2001, Doug wrote “Maverick Investing,” published by McGraw-Hill. He also regularly appears at seminars around the country, stands out on the pages of the largest newspapers (The Wall Street Journal, The Los Angeles Times, and The New York Times), and speaks on national television (CNBC, Fox News, and Bloomberg Forum). For more than 35 years, Successful ETF Investing (formerly the Telephone Switch Newsletter and Successful Investing) has produced double-digit percentage annual gains. Doug has become known for his expert knowledge and timely use of innovative tools, such as exchange-traded funds, bear funds, and enhanced-index funds to profit in any market climate. For more information about Doug’s services, go to http://www.fabian.com/