Biotechs are zooming again. We trimmed some more fat from our biotech holdings today. I still believe the First Trust NYSE Arca Biotechnology Index Fund (FBT : $FBT) is a great investment. You can read why we invest in FBT right here: Discovering Value in Growth Stock Funds: Biotech ETFs. Price paid $92.38. Price sold $129.68.
As most portfolio managers know, building a broadly diversified portfolio has one key building block. Low or negatively correlated assets. Ideally, if each of these building blocks has low correlation to the others, one or more will be falling in value while the others are going up in value. This ideal scenario lends itself to arbitrage opportunities and the ability to buy assets when the market has placed them ‘on-sale’. With that said, have you considered diversifying a portion of your portfolio into the Utilities sector? If you want low correlated assets in your portfolio, I would suggest considering the Utilities sector. The utilities sector has maintained a very low correlation to the U.S. Stock Market over the last 19 years, at just 0.39. I wrote more in depth about this low correlation phenomena right here: Which Equity Asset Class has the Lowest Correlation to the U.S. Stock Market?
Utilities Sector Correlation to U.S. Markets January 1999 – December 2017
Source: Portfolio Visualizer
It’s been a very long time since we last accumulated Utilities sector equities. But, they’ve finally started to show some weakness. We prefer the Guggenheim S&P 500® Equal Weight Utilities ETF (RYU : $RYU) in this sector. Folks, you’ve gotta buy this stuff when it’s on sale. You can read why we invest in the Utilities sector right here: Which Equity Asset Class has the Lowest Correlation to the U.S. Stock Market?
It’s been a long ride with the Energy Select Sector SPDR® Fund (XLE : $XLE), but it’s finally beginning to pay off. XLE is still a great ETF; we’re still invested in it and I still recommend it. You can read why we invest in XLE right here: Discovering Value in the Top 3 Energy ETFs. Price paid $70.90. Price Sold $74.97.
For those who are new to the Deep Value ETF Accumulator website, you may be wondering why we are selling shares of PXI instead of XLE, which is listed on the daily list. Well, the reason behind that is, I could not decide between XLE & PXI when I was accumulating shares, so we accumulated both. For now, we are going to continue holding both, but eventually we will divest from one or the other, but not both.
You can read about why we are invested in PXI and XLE right here: Discovering Value in the Top 3 Energy ETFs
Additionally, I wrote an article specifically about PXI right here: Looking Under the Hood of the PowerShares DWA Energy Momentum Portfolio ETF (PXI) $PXI