ETF ‘Freebie’ Portfolio Update: Still Crushing It!

At the end of last year, I promised my Wednesday e-letter readers:

Next year, I plan on picking up right where I left off …

If you’ve been reading my weekly columns, you know I’m referring to delivering more ‘free’ ETF selections in 2017.

This year through mid-May, I’ve already featured six new ETFs. (More than one per month.)

• Guggenheim S&P Spin-Off ETF (CSD)

• ROBO Global Robotics & Automation Index ETF (ROBO)

• Davis Select Worldwide ETF (DWLD)

• BlueStar TA-BIGITech Israel Tech ETF (ITEQ)

• Guggenheim S&P 500 Equal Weight ETF (RSP)

• Reality Shares DIVS ETF (DIVY)

These half-dozen plays have outperformed the S&P 500 — over their corresponding times — by a cumulative 16% year-to-date.

And four of these six selections are already beating the S&P 500 so far in 2017.

You can review how all my 20 ETF picks (including the newest six above) have performed in the table below:

A full archive of all my actionable ETF ideas is located right here.

Your brokerage account should be reaping the benefits if you’ve followed my ETF recommendations over the last year and a half …

First, a 60% win-rate — or anything north of 50% — is impressive.

And second, the outperformance lines — or the actual results — are even more important. Cumulative outperformance of 62.5% and average outperformance of 3.1% per ETF pick are no easy feat.

As outlined last week, it’s a tall order to think that active managers can beat their benchmarks.

The S&P Dow Jones SPIVA 2016 scorecard reports that 66% of large-cap managers underperformed the S&P 500 Index … 89% of mid-cap managers underperformed the S&P MidCap 400 Index … and 86% of small-cap managers underperformed the S&P SmallCap 600 Index. That’s just last year. The numbers get worse over time. (You can see the longer-term results of active management here.)

I even recommended a unique ETF — the Emerging Markets Internet & Ecommerce ETF (EMQQ) — to my Disruptors & Dominators subscribers last month. It already ran past its buy-up-to price. Through just six weeks, EMQQ is up 14%. In contrast, the S&P 500 is flat and conventional emerging-market funds are up less than 3%, on average.

EMQQ is up 14.4% over the past month. Compare that to the iShares MSCI Emerging Markets Index (EEM), up 4.9%, and the S&P 500, up 1.9%, in that same time frame.

C’mon! Who says active management can’t outperform?

Albeit, this is a different form of active management since I’m using largely passive vehicles for exposure.

But, honestly, there’s no real rocket science here.

I’m not getting caught up in ETF creations gone wild …

Some newer ETFs include: Direxion Daily MSCI Mexico Bull 3X Shares ETF (MEXX) … Medical Marijuana Life Sciences ETF (HMMJ) … Spirited Funds/ETFMG Whiskey & Spirits ETF (WSKY) … Obesity ETF (SLIM) … USCF Restaurant Leaders ETF (MENU) … and Global X Catholic Values ETF (CATH).

Related story: Can You Have Your CAKE and Get Rich Too?

And now, as if the ETF market needed higher-leveraged vehicles for outright speculation … the SEC has been wavering on its decision to approve 4X-leveraged ETFs. On deck: ForceShares Daily 4X US Market Futures Long ETF (UP) and ForceShares Daily 4X US Market Futures Short ETF (DOWN).

No thanks. I’ll pass on all those.

Instead, I prefer to choose ETFs for plain-vanilla reasons in conjunction with in-depth research:

• Strategies that historically outperform. Dividend growth (NOBL and SDY), insider sentiment (KNOW), size factor: small beats large (IWC), spin-off stocks outperform (CSD) and equal-weight beats market-cap-weight (RSP).

• Discounted valuation. Regional banks (KRE) and airlines (JETS).

• Disruptive innovation themes. Cyber security (HACK), 3D printing (PRNT) and robotics & automation (ROBO).

• Undiscovered areas of the market with catalysts. Israel equities (ITEQ).

• Access to star managers at lower expense levels. Davis Advisors (DWLD).

With 1,832 ETFs (plus 196 ETNs) in existence and 1,300-plus ETFs in registration (as of 5/18/17), the U.S. exchange-traded product universe is — and will remain — a bountiful marketplace.

As I continue my due diligence on this booming industry, look for more ETF "freebie"picks in the second half of 2017!

Grant Wasylik

Your thoughts on “ETF ‘Freebie’ Portfolio Update: Still Crushing It!”

  1. I read Uncommon Wisdom all the time but have never seen anything about the free ETF’s. How can I get on this list?

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Originally from Pennsylvania, Grant graduated from Juniata College with an economics major and accounting minor. Since graduation, Grant has worked in the investment industry for almost two decades by serving in various roles … Prior to coming to…