If you read the IndexUniverse ETF Watch this week you probably noticed a couple of filings from Claymore that I think could be interesting.
One is a dividend capture ETF. There are several CEFs and OEFs that employ this strategy. In its simplest form instead of buying one stock and collecting four dividends you buy one stock that goes ex-dividend in, say, May and then sell it and replace it with a stock the goes ex-dividend in June and rotate back and forth between the two.
Most of the funds in this category do this with their holdings in such a way that they qualify for the 15% tax treatment but I don't know if every dividend capture fund is tax sensitive.
The Claymore ETF will tilt to large cap and can include ADRs (hey guys about a foreign-only while your at it). The prospectus reads like the screening process will generate two lists of stocks and then the fund will rotate between the two every two months-there is a little more to it though.
I will be curious to see how this compares to the CEFs. The obstacle, if there is one at all, seems to be adhering to an index as defined in the prospectus. In a truly actively managed product the managers can make decisions to buy or sell as they see fit. That might not matter for an ETF with 100 holding but this is my only question about whether dividend capture in an ETF can stand up to active management.
Regardless of whether the ETF is better, worse or the same I still will stand by my comments from the other day about moderation. Its a great concept but no one needs some sort of freaky unintended consequence taking down their entire portfolio.
The other fund that caught my attention was the Claymore Robb Report Global Luxury ETF. I would imagine the fund would own stocks like Nordstrom and Saks but the fund can own ADRs too so we'll have to see. What little I read of the prospectus didn't give me an idea as whether there is any qualitative screening or if it is just market cap within the subsector. for now it doesn't matter, they just filed on May 4.
While I am sure Morningstar will tell us to run like the wind from this fund I might offer a "not so fast my friend" on that. Assembling the consumer discretionary portion of a portfolio with stocks like Nordstrom, Best Buy, Lowes and Viacom is far from crazy. To be clear I picked these names at random, I do not own them.
So instead of those four stocks why not four different subsector ETFs? Well maybe Lowes and Best Buy would be in the same fund. Discretionary makes up about 10% of the S&P 500. If you would allocate 10% to four stocks you could just as easily allocate that same 10% to three or four subsector ETFs without anyone thinking you are a risk junkie.
I must say this seems rather UN-complex yet a lot of MSM can't quite grab on to the idea of using narrow-based products responsibly.
Wikinvest Wire
1 comments:
Roger
I think MSM have a hard time wrapping mind around responsible use of narrow tools because there is lots of anecdotal evidence there is a lot of irresponsibility out there.
Last time I watched Cramer (about a year ago) he did this segment called "Am I diversified?" or similar. Callers would tell them the 4 stocks they owned, and if were in different industries he would pronounce them diversified. I suspect the largest portion of MSM audience is similar to Cramer's core audience, and considers a call in show responsible due diligence.
So in a convoluted way, it may be a good thing they just keep repeating the simplistic, but unlikely-to-be-fatal messages.
Besides, MSM is of course dominated by jounalists and I suspect few would know covariance from contango. That's not meant as a put-down, they just don't teach them that stuff in journalism school.
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