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Contrarian ETFs to Go Against the Grain


Instead of chasing after performing sectors, investors can use exchange traded funds to capitalize on market segments that might be on track to do a one-eighty.

Trang Ho for Investor’s Business Daily points out a couple of contrarian ETF plays that could help investors capture a turn in some areas of the markets that have been either oversold or overbought.

“Be fearful when others are greedy and greedy when others are fearful,” Warren Buffett once famously said.

The ProShares Short S&P 500 (SH) provides a daily inverse, or -100%, play on the S&P 500 Index.

“I believe the U.S. stock market is in the late stage of the upward trend that began in March 2009,” Mike Shell, president and chief investment officer at Shell Capital Management, said in the IBD article. “Since 1932, the average bull market uptrend has lasted 36 months and the current trend is 54 months old. If history is a guide, this bull market is coming close to an end.”

Shell also points to catalysts like the Fed tapering, Syria crisis, new Fed chair appointment and debt-ceiling as potential hurdles to a continued equity rally.

The Vanguard FTSE Emerging Markets ETF (VWO) is “due for a bit of a breather” after falling 11% year-to-date in anticipation to an end to easy money, Matt Reiner, portfolio manager at Wela Strategies, said in the article. [Don’t Look Now but Emerging Market ETFs are Outperforming]

“VWO is down greater than 10% for the year, and the contrarian investor may find some value in this beaten-up investment,” Reiner added.

The Market Vectors Gold Miners (GDX) have lagged behind physical gold and are now trading at cheap valuations. [Gold Miner ETFs: ‘Raging Bulls and Raving Bears’]

Jeff Vollmer, managing partner at Hyde Park Wealth Management, also points to several factors in favor of gold miners, including rising demand for gold, rising middle class in the emerging markets, inflationary pressures and higher gold prices.

The ProShares Short Real Estate (REK) provides investors with an inverse play on the housing market.

Chad Karnes, chief market strategist at ETFguide, said he is worried about the housing market with prices falling on lumber, a leading indicator and key input to the housing market. Moreover, housing prices are beginning to dip month-over-month and interest rates are rising.

The Market Vectors Russia ETF (RSX) has declined 9% this year, but Russian stocks are doing better than the other large emerging market BRIC countries.

Brett Owens, editor of Contrarian Profits, also points out that they are dirt cheap. Russian stocks are trading at six times earnings, or less than half that of the U.S. market.

For more information on ETFs, visit our ETF 101 category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.