Goldman Sachs When It’s Down? Try These ETFs!
20 April 2010 at 2:41 pm by Gary Gordon
It didn’t take long for SEC fraud charges to send millions of Goldman Sachs (GS) investors running for the exits. From an intra-day high of $186 per share set on Friday, April 16, it has since closed at $159.58 on Tuesday, April 20. And that was after a blockbuster earnings report!
Yet the investment community is divided over whether or not the 14% haircut is an opportunity to buy… or, conversely… the ultimate reality check on stocks. Moreover, the SEC has since revealed that it is looking into the accounting practices of 19 major banking institutions.
Still, what if you believed that Goldman will emerge stronger from the accusations? What if you want to grab some exposure while the company is getting negative publicity, rather than the positive publicity that is regularly showered upon the likes of Apple?
Sure… Goldman Sachs is a member of the S&P 500 and the S&P 100. Yet the weighting in these indexes is diluted. In other words, you’d get very little bang for a betting buck by going with the broadest benchmarks.
Here are 5 ETFs with the largest GS weighting:
| 5 ETFs With The Most Exposure To Goldman Sachs (GS) | ||||||
| % GS Weight | ||||||
| iShares DJ Broker Dealers (IAI) | 10.1% | |||||
| KBW Capital Markets (KCE) | 7.4% | |||||
| WisdomTree Large Cap Value (EZY) | 7.1% | |||||
| WisdomTree Large Cap Growth (ROI) | 6.8% | |||||
| iShares DJ Financial Services (IYG) | 4.9% | |||||
Over the last 6 months, IAI and KCE have amounted to dead money. They actually lost -2.3% and -2.9% respectively in a period that the KBW Bank Index (KBE) rocketed 20% higher.
Yet contrarian thinking over the last 6 months has paid handsome rewards. Consider how ridiculously well Vanguard REIT (VNQ) performed (25.5%) in spite of pervasive commentary on commercial property foreclosures in the pipeline. Others swore that consumers were too weak to bolster the retailers, and yet Vanguard Consumer Discretionary (VCR) packaged 25% as well.
Perhaps it’ll be beneficial to buy Goldman-friendly ETFs. I’m not recommending that you do, but I am pointing out how a contrarian investor might play it.
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Disclosure Statement: ETF Expert is a web log (”blog”) that makes the world of ETFs easier to understand. Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. The company and/or its clients may hold positions in the ETFs, mutual funds and/or index funds mentioned above. The company receives advertising compensation from Invesco PowerShares Capital Management, LLC. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.
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