ETF Research and Analysis
by Paul Justice, CFASuitability
Given the fund's extremely narrow subsector focus, treat this as a satellite specialty holding. Investors buying this fund likely believe that high oil and natural gas prices are going higher. We would expect the underlying firms to exhibit Read more
Given the fund's extremely narrow subsector focus, treat this as a satellite specialty holding. Investors buying this fund likely believe that high oil and natural gas prices are going higher. We would expect the underlying firms to exhibit Read more
Bull Case
There is no expense ratio with HOLDRs--just an $0.08 per share annual charge.
The portfolio-construction rules couldn't be simpler. There is no rebalancing and no additions to the portfolio. Read more
Bear Case
With the HOLDR structure, investors essentially own the underlying stocks directly and can receive shares of spin-offs directly in their brokerage accounts. So, investing in a HOLDR requires a little more commitment than with other ETFs.
All oil-services stocks are extremely sensitive to oil prices because oil companies spend more when oil and gas prices high. The stocks in this portfolio will all get hammered if oil prices plummet.
The portfolio is extremely concentrated. If we're wrong on the fair values on some of the top holdings, we'll also be wrong on this ETF's fair value. For that reason, we would not allocate substantial amounts of capital to this sector. Read more
The Best ETF Sector Idea for 2010
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