Get Your Big and Undervalued Stocks Here
Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to add some large stocks to your portfolio, the PowerShares Fundamental Pure Large Value Portfolio ETF 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 PowerShares ETF's expense ratio -- its annual fee -- is a low 0.39%, and it recently yielded 2.1%. The fund is very small, so if you're thinking of buying, beware of possibly large spreads between its bid and ask prices. Consider using a limit order if you want to buy in.
This ETF is too young to have a meaningful track record to assess, though it did outperform the S&P 500 handily in 2012. 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.
Why large companies?
Large companies can add some ballast to your collection. Many may not grow as briskly as their smaller counterparts, but in order to reach their current size, they likely have some strong assets and features. And some can grow quite briskly. This ETF focuses on ones that seem undervalued according to some measures, which can boost the overall margin of safety for the basket.
More than a handful of large companies had strong performances over the past year. Oil and gas refining and marketing concern Valero Energy soared 83%, while its peer Phillips 66 is near the top of its 52-week range. Both companies have been profiting by processing cheap U.S. oil and then selling it at higher prices in Latin America and Europe -- thereby helping keep fuel prices in the U.S. high. Phillips management recently signaled confidence via a dividend hike of about 25%.
General Electric gained 25%, with its dividend yield of 3.2% topping both refiners above. That dividend is likely to keep growing -- GE is sitting on a lot of cash. The company is extending its diversification further, as it expands into relatively new areas such as 3-D printing and the "industrial Internet," not to mention its enhanced focus on mining and alternative energies. GE is also expanding geographically, for example, in Asia, where it's now tackling the Japanese health-care market.
Other companies didn't do as well last year, but could see their fortunes change in the coming years. Ford Motor , for instance, is up just 3% over the year. The car maker has been turning itself around impressively recently, but some troubles persist, such as softness in Europe and competitive threats, such as from VW. Ford shines in profitability, though, and it has been investing heavily in environmentally friendly vehicles, which are growing in popularity.
The big picture
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.
Ford has been performing incredibly well as a company over the past few years -- it's making good vehicles, is consistently profitable, recently reinstated its dividend, and has done a remarkable job of paying down its debt. But Ford's stock seems stuck in neutral. Does this create an incredible buying opportunity, or are there hidden risks with the stock that investors need to know about? To answer that, one of our top equity analysts has compiled a premium research report with in-depth analysis on whether Ford is a buy right now and why. Simply click here to get instant access to this premium report.
The article Get Your Big and Undervalued Stocks Here originally appeared on Fool.com.Longtime Fool contributor Selena Maranjian, whom you can follow on Twitter, owns shares of Ford. The Motley Fool recommends and owns shares of Ford. It also owns shares of General Electric. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.