This post is part of a special annual report — Top Stock Picks ’09 — in which TheStockAdvisors.com asked 75 leading newsletter advisors to select their favorite investment for the new year.
For those comfortable with a short position, Mike Larson looks to ProShares Trust Short Financials (NYSE: SEF) as his top 2009 pick. In Money and Markets, he looks at the inverse ETF.
“ProShares Trust Short Financials is an inverse exchange-traded fund. The ETF is designed to rise in value when the underlying index it references, the Dow Jones U.S. Financials Index, declines.
“As of September 30, the Dow index was weighted 42.5% in banks. General financial firms were the next highest weighting at 23.4%, followed by Real Estate Investment Trusts at 13.4%, non-life insurers at 13.1%, and life insurers at 6.9%.
“The top companies in the index were JPMorgan Chase (8.1%), Bank of America (8.1%), and Wells Fargo (5.9%).
“Despite the best efforts of the Federal Reserve and the Treasury Department, the credit markets remain in disarray. Credit spreads are high. New lending opportunities are few and far between.
“Mortgage delinquencies and foreclosures are already the highest in history, while default rates on commercial real estate loans, credit cards, and auto loans are climbing fast.
“Banking sector profits overall plunged 94% to just $1.7 billion in the third quarter, according to the FDIC, while failures climbed to the highest in 15 years.
“The ProShares Trust Short Financials ETF is a great hedging vehicle if you have exposure to the financial sector. And it’s a great profit vehicle if you believe, as we do, that the worst declines for the financials and the U.S. market overall are ahead, rather than behind, us.”
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