As the market continues to tread water, more investors are looking towards alternative strategies to generate returns. Not satisfied with owning funds like the SPDR Dow Jones Industrial Average (NYSE:DIA) and following the tenants of plain index investing, many are taking an active role in portfolio construction. With the birth of the internet and a host of financial media outlets available, following the lead of endowments and markets gurus has never been easier. Individuals are now able to model their own portfolios after some of biggest names. Here are some of the biggest market pundits' latest calls and how you can profit from them.
TUTORIAL: Exchange Traded Funds
The Richest Man in the World
With a fortune totaling approximately $53.5 billion, Mexico's Carlos Slim beat out Microsoft founder, Bill Gates and everyone's favorite value investor Warren Buffett to be crowned the world's richest person. While the majority of Slim's fortunes lie within his vast telecommunications empire including stakes in America Movil (NYSE:AMX), the billionaire has shown his preference for Latin America. Slim's publicly disclosed shares in U.S. markets represented less than $500 million of his total holdings. The billionaire said of his investments, "We believe in all Latin America and that's why we're investing. The macroeconomic variables are sound, healthy and many of the countries have raw materials that are having good prices."
Recently, Slim has been boosting his investments in Colombia due to the country's open policy on oil exploration, overall mineral assets and its growing middle class. For investors looking to profit from Slim's moves in Latin America, the iShares MSCI Mexico (NYSE:EWW) makes an interesting choice. The ETF holds many of Carlos' companies, including America Movil, Telefonos de Mexico (NYSE:TMX) and Grupo Carso. Slim's new found love for Colombia can be accessed through the Global X FTSE Colombia 20 ETF (NYSE:GXG). More than a third of GXG's holdings are dedicated to companies from the gas and oil sectors. (For related reading, see Introduction To Exchange-Traded Funds.)
A Chinese Bear
Known for correctly predicting Enron's 2001 collapse, hedge fund manager Jim Chanos has set his sights on what he calls the biggest bubble of all time: China. Chanos believes that Chinese real estate developers have too much land on their balance sheets, echoing the U.S. housing market just before it crashed. Chanos forecasted that the Chinese housing market would crash last year. In addition, Chanos believes that many Chinese stocks are grossly overvalued and the latest market call was to short New York-listed Chinese stocks.
For those investors wanting to bet against the Asian Dragon, there are a few options. The most heavily traded is the ProShares UltraShort FTSE China 25 (NYSE:FXP). This leveraged ETF seeks the daily investment results that correspond to twice the inverse of the daily performance of the FTSE China 25 Index. Ultimately, it shorts the popular iShares FTSE China 25 Index Fund (NYSE:FXI). However, so far Chanos has been on the wrong side of this bet, with the FXI flat and FXP losing nearly 11% since the beginning of the year.
The Bond King
When it comes to bonds, no one has more clout than Bill Gross. As the manager of the PIMCO's $240 billion total return fund, when Gross speaks about the U.S. treasury market, investors tend to listen. So when he decided to not only dump his fund's U.S. Treasury holdings but actually moved into a short position on the government's debt, people took notice. The fund increased its short position to 4% in May. The ProShares Short 20+ Year Treasury (NYSE:TBF) allows investors to short long-term treasury bonds, while the Direxion Daily 20+ Yr Treasury Bear 3X (NYSE:TMV) provides a leveraged short position. (For related reading, see The Advantages Of Bonds.)
The legendary investor Jim Rogers is "incredibly pessimistic about the long term, or even the intermediate-term future," of the U.S. dollar. Roger's advice for retail investors is to stick to gold and hard commodities. As both a way to play emerging market growth and avoid being stuck in greenbacks when the levee breaks, commodities offer the best of both worlds. The ELEMENTS Rogers Commodity ETN (NYSE:RJI) tracks a commodities index designed by Rogers and the ETFS Physical PM Basket Shares (Nasdaq:GLTR) offers a way to play the precious metals sector. (For more, see ETF's Provide Easy Access To Energy Commodities.)
The Bottom Line
With the wealth of new investment products hitting the market, it's easy to follow the advice and trades of the smart money elite. The previous exchange traded funds are just some of the ways that retail investors can piggy-back some of their favorite money managers.
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