For the third year in a row I’ve joined some other top financial bloggers in a contest for the top stock picks over a one year period. In our first competition in 2009 I came in second to last, in our sophomore year I finished fifth out of nine participants. In my quest for moving up higher again I’m taking more risks (with fake money) in 2011 and not hedging my picks at all. My top pick in 2010 was SSO, so I’m sticking with it and adding in other similar picks that go all out (aka overboard) in support of my bullish outlook. All four are ETF picks instead of actual stock picks and all four are “ultra” type funds that attempt to produce results equal to double the daily returns of the index they track.
DVY was one of my two good picks from last year and although we are still counting dividends this year I’m not focusing on them for the contest as I put everything towards growth. Without being able to use options my focus is completely on using leverage with the funds themselves. These are my four top ETF picks for 2011:
- SSO – Closed 12/31/10 at $48.05. The ProShares Ultra S&P 500 fund only has a yield of 0.88% and an expense ratio of 0.92% compared to its category average of 0.48%. Those are the prices you pay for leverage without margin. I sold SSO naked puts a couple of weeks ago and plan to add more soon as my bullish outlook for large cap stocks continues to prove correct. Ideally we’ll get a little pull back in January which won’t help me in the competition, but will let me get in cheaper with real money since I expect any dips in the first half of the year to only be temporary.
- UWM – Closed 12/31/10 at $42.69. The ProShares Ultra Russell2000 fund, true to the small cap index, only yields 0.03% and is the lowest yielding ETF pick I have this year. Its expense ratio is 0.95% compared to its category average of 0.54%. As the economy continues to recover I’m expecting a lot from smaller companies and UWM is the ideal place to be to take advantage of that growth. I sold UWM LEAPS as my last trade of the year and plan to add more in the coming weeks.
- MVV – Closed 12/31/10 at $63.68. The ProShares Ultra MidCap 400 fund also has a tiny dividend yield at 0.08% and a higher than average expense ratio of 0.95% compared to its category average of 0.50%. Mid-Cap stocks had a very strong 2010 and I don’t see a reason for them to give in yet. I haven’t added MVV to my real account yet, but did sell MDY LEAPS recently. I plan to add some options on MVV at some point in the near future to go with this mid-cap play.
- EET – Closed 12/31/10 at $109.55. The ProShares Ultra MSCI Emerging Markets Fund is my youngest pick, only coming into existence a little more than a year and a half ago. I debated this pick over the more basic EEM fund, but decided to stick with all ultra funds and take my chances. EET yields 0.14% and has an expense ratio of 0.95% compared to its category average of 0.68%. Emerging markets funds came off their highs in November, but resumed their rally in December. While EET hasn’t made it back to its November high yet I think it has more room to run. In real life I haven’t bit into EET yet, but did add EEM LEAPS in December as the fund rallied. I doubt I’ll make a play on EET unless the category takes a hit and I see a good opportunity to get in on a dip. Picking it for the contest is one thing, but for my real money I don’t need to add extra leverage on every trade.
I’ll admit I’m not as creative this year as I was in 2009, but I was almost in last place then and now prefer to be blander and move up in the rankings. It’s not about the flash at the beginning, but the results at the end and if we get a continuation of the bull run throughout 2011 I’ll be set to rake in the gains and move up to my rightful spot at the top of the rankings.
Be sure to check out my more creative competitors’ stock picks too: