Stocks and IPOs Making America Great Again

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker, financial journalist, and money manager.

There’s an old saying in the literary world that a man’s life is incomplete until he has tasted love, poverty and war.

Beginning with the latter, my closest brush came in January 1991. I was just graduating from the U.S. Army Airborne School at Ft. Benning, Georgia, when the bombs began raining down on Saddam Hussein’s Iraq. As it turned out, that conflict was so short-lived that I missed out on the war leg of the complete life.

As for poverty, well, although I come from a modest middle-class American family, I would hardly say that qualifies as “poverty” by global standards. And aside from some lean, post-college days working at the financial newspaper Investor’s Business Daily, I also would have to say that “poverty” mostly has eluded me.

When it comes to love, I think this is where I’ve more than made up for any deficit in the other two complete life components.

Love of family, friends, career, music, literature, philosophy, nature, fitness, sport, combat and, perhaps most of all, love of learning are the animating forces at the core of my being.

That love runs particularly deep when talking about the love I have for helping investors better understand — and better profit from — the financial markets.

In fact, you might say that this love is a form of war on poverty itself… the poverty of knowledge that keeps investors paralyzed into subpar performance.

Ironically, my love for this pursuit also encompasses my own desire to be a complete man, engaging in a war to help others overcome their own conception of poverty.

In this, my inaugural issue of the Weekly ETF Report, I want to thank you for fighting alongside me in this loving war against poverty.

Together, we shall prevail!

10 Stocks to Buy That Already Make America Great

Although I love to extoll the virtues of exchange-traded funds (ETFs), we also must remember that equity ETFs are comprised of, well, equities… i.e. individual stocks of individual companies.

I often write about individual companies, particularly the ones that I think are the strongest in the market.

In a recent article, “10 Stocks to Buy That Already Make America Great,” I provide a few thoughts on what I think are some of the best stocks in the market today.


Moreover, these are the stocks that refute the subtext contained in President Trump’s incessantly cited mantra, “Make America Great Again.”

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If you want to feel good about the country and about the prospects for long-term portfolio performance, check out these 10 stocks to own that already make America great.

ETF Talk: Investing in New Public Companies for the Long Run

By Eagle Staff

Initial public offerings (IPOs) allow private companies to sell shares to the public to raise capital. The First Trust U.S. Equity Opportunities ETF (FPX) is designed to seek opportunities to capture a portfolio of IPOs that will outperform the market.

Exchange-traded funds (ETFs) which focus on IPOs are special, since they provide exposure to new public companies before they join other core U.S. equity indexes. This provides investors with a better chance to benefit from the initial surge in stock price that frequently occurs in a new public offering.

FPX shares this same trait, but it also is focused on IPOs that are more likely to outperform in the long-run. This situation makes FPX a popular choice among investors who employ a buy-and-hold strategy.

As a growth fund that grants investors exposure to U.S. equity capital and private equity activity, FPX includes in its portfolio the 100 largest U.S. IPOs during the last four years. These companies also are typically among the best-performing and most liquid U.S. companies. FPX caps exposure to all of its 100 firms at 10%, and rebalances its list of companies on a quarterly basis.

With each quarterly rebalancing, firms aging out of the fund are removed and fresh IPOs are added, giving FPX a continuing supply of new offerings. FPX historically has captured around 85% of the total market capitalization created through U.S. IPO activity during the last four years, with a tilt towards mid- and large-cap stocks. FPX is a fund that moves with and adjusts to the times.

The fund is around 20% invested in health care and technology — two fast-growing sectors and two of the hottest IPO sectors — with consumer defensive, consumer cyclical and financial services coming in next with 14% each. FPX sports an expense ratio of 0.60% and a dividend yield of 0.75%.

Incepted in April 2016, FPX holds a compound return of 10.5% per year over the last 10 years, beating out the S&P 500’s 6.9% per year. Over the last year, FPX held a return of 22.09%, beating out the S&P 500’s return of 19%. Currently, FPX returns around 3.3% year to date on total assets of $647.23 million.

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The top five holdings for FPX are: Kraft Heinz Co. (KHC), 10.00%; AbbVie Inc. (ABBV) 9.28%; Shire PLC ADR (SHPG), 4.69%; PayPal Holdings Inc. (PYPL), 4.68%; and Facebook Inc. A (FB), 3.6%.

If you are looking to access a basket of relatively fresh stock issues that are geared for performance in the long-run, First Trust U.S Equity Opportunities ETF (FPX) may be worth your attention.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.


‘Trump On’ or ‘Trump Off’?
If you’ve been watching markets on a daily basis as I have for the past 20-plus years, you know that there are various periods in the market that trade with certain specific characteristics.

In the 1990s, it was “buy the dip” in Internet stocks. After the financial crisis, and for most of 2009 through Election Day 2016, the markets traded on what was known as “risk on” or “risk off.”

For most of the past seven years, getting the market right meant knowing when to go risk on (moving into stocks) and knowing when to be risk off (moving out of stocks and into bonds, gold and cash).

Now, the markets have quickly transitioned from risk on/risk off to “Trump on/Trump off.”

This is an observation first pointed out to me by my friend and uber-smart colleague Tom Essaye of The Sevens Report, and it’s one that I very much concur with.

In essence, the Trump-on trade means money is moving into stocks (especially cyclicals), as well as lifting the U.S. dollar. The Trump-on move also means money flowing out of bonds and out of gold.

It largely is the reverse with Trump off. That means stocks fall, the dollar declines and bonds and gold trade higher. Here’s how Tom explained it to me:

“If past is prologue, and markets are still enormous pools of central bank supplied money sloshing from one strategy (risk on or Trump on) to another (risk off or Trump off), then the key to getting this market right, especially in the beginning of 2017, will be knowing whether the policy efforts from Washington and economic data is positive or negative.”

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Bingo! Hey, I told you he was uber smart.

With Trump now officially in the Oval Office, getting the market right in 2017 — and knowing which sectors of the market to embrace — will be largely a matter of knowing about the nitty-gritty political developments influencing the Trump/Republican agenda.

Issues such as regulatory reform, fiscal stimulus and Obamacare repeal and replace all are important market movers, particularly in the first 200 days. Yet by far the biggest market-moving policy is corporate tax reform. And, the reason why is simple.

If corporate tax reform can get passed, and if the corporate tax rate can go down to 20%, then that will be a huge windfall for corporate bottom lines. And, that would easily send stocks on a Trump-on rocket ride to all-time highs.
So, pay close attention to politics, as that will determine the Trump-on/Trump-off trade in 2017 and likely well beyond.

If you’d like to find out exactly how we’re taking advantage of the Trump-on/Trump-off trade in markets this year, then I invite you to check out my Successful ETF Investing advisory service, today.

Adventure or Nothing

“Life is either a great adventure or nothing.”

— Helen Keller

I’ve always believed that life is a goblet to drink from. With all the intellectual discoveries to make, experiences to embrace, relationships to nurture and success to capture… why would anyone be happy settling for less? So, the next time you feel unmotivated in life, remember this saying from the great Helen Keller. May it kick you into high gear.

Wisdom about money, investing and life can be found anywhere. If you have a good quote you’d like me to share with your fellow readers, send it to me, along with any comments, questions and suggestions you have about my audio podcast, newsletters, seminars or anything else. Click here to ask Jim.

In case you missed it, I encourage you to read the e-letter article from last week about Doug Fabian’s farewell words.

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