Make Money in Recovering Industrial Stocks -- the Easy Way
Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you expect industrial companies to see their fortunes improve as the global economy gets back on its feet, the Industrial Select Sector SPDR (NYS: XLI) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.
ETFs often sport lower expense ratios than their mutual fund cousins. The industrial ETF's expense ratio -- its annual fee -- is a very low 0.18%.
Despite the global economy being in the dumper in recent years, this ETF has performed reasonably well, beating the S&P 500, on average, over the past three, five, and 10 years. As with most investments, of course, we can't expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.
With an ultra-low turnover rate of 4%, this fund isn't frantically and frequently rejiggering its holdings, as many funds do.
What's in it?
Various industry-focused companies had solid performances over the past year. United Parcel Service (NYS: UPS) , for example, gained 9%. The U.S. Postal Service's woes can only help UPS, as it will likely pick up business as post offices close. Its interest in buying delivery company TNT Express can also be a plus -- if it happens, it will expand UPS' presence in Europe, China, and Brazil.
Other companies didn't do as well last year, but could see their fortunes change in the coming years. General Electric (NYS: GE) , down 4%, has a strong balance sheet and has been upping its dividend, after cutting it during the past credit crisis. It's also attractively diversified, and investing in promising business lines, such as alternative energies.
Railroad company CSX (NYS: CSX) shed 16%, but as railroads carry much of our nation's goods, it seems to have more profitable days ahead. Warren Buffett is bullish enough on the railroad industry to have bought an entire railroad, Burlington Northern, for many billions of dollars. And as predicted, it's generating a lot of cash for him.
Waste Management (NYS: WM) , down 2%, is attractive for many reasons, such as its 4% dividend, its reliable business (you can depend on garbage), and its growth prospects as it expands into recycling and energy production, among other initiatives.
The big picture
Demand for industrial goods and services isn't going away anytime soon. A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.
At the time this article was published Longtime Fool contributorSelena Maranjian,whom you canfollow on Twitter, holds no position in any company mentioned.Click hereto see her holdings and a short bio.Motley Fool newsletter serviceshave recommended buying shares of and writing a covered strangle position in Waste Management. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.