Choosing investments for one's portfolio can feel like an intimidating task given the multitude of options available. For many retail traders, the time and effort required for adequately going through annual reports and related filings to determine if a company is worth buying can feel like an pipe dream.
If a retail investor wants to control his or her own investments, then one potential solution could be to look at the holdings of institutional investors or exchange-traded funds (ETFs) for ideas. In the paragraphs below, we'll take a look at a few candidates that fit this description and try to determine where prices could be headed over the coming weeks or months.
Global X Guru Index ETF (GURU)
There are many sites on the internet that track the holdings of prominent investors, but another way that could be worth considering is looking at the holding of niche ETFs such as the Global X Guru Index ETF (GURU). In case you aren't familiar, this fund is designed to seek to generate alpha over the broad market by investing in the highest-conviction ideas from a select pool of hedge funds.
Taking a look at the chart below, you can see that the price has recently fallen toward the long-term support of its 200-day moving average. The major average has provided support on sell-offs in the past, and active traders would expect this behavior to continue into the future. From a risk management perspective, traders will likely try to enter a position as close to the 200-day moving average as possible and then set their target prices near the upper trendline.
Spirit AeroSystems Holdings, Inc. (SPR)
As mentioned, traders may want to investigate the top holdings of niche funds for trading candidates. In the case of GURU, Spirit AeroSystems Holdings, Inc. (SPR) is the fund's top holding with a weighting of 1.88%. In case you aren't familiar, the company designs, manufactures, and supplies commercial aero structures in the United States. Spirit AeroSystems has a market capitalization of just over $8 billion and was founded in 1927.
Taking a look at the chart below, you can see that the price has been trading within a descending channel for most of 2019. The recent break above the upper trendline (shown by the blue circle) combined with the bullish crossover between the moving average convergence divergence (MACD) indicator and its signal line suggest that a reversal of the downtrend has begun.
D.R. Horton, Inc. (DHI)
D.R. Horton, Inc. (DHI) is another top holding of the GURU ETF that is displaying an interesting chart pattern. As you can see below, the price has recently moved above influential levels of support. The breakouts are technical signs that the bulls are in control of the momentum and that the long-term uptrend is still in its early days. Stop-loss orders will most likely be placed below $45.67 or $41.29, depending on risk tolerance and investment horizon.
The Bottom Line
During times of market volatility and increasing levels of uncertainty, one option for finding suitable investment candidates could be follow the smart money. Hedge fund managers have time, resources, and expertise to find solid candidates, and based on the charts above, now could be the ideal time to buy these securities.
At the time of writing, Casey Murphy did not own a position in any of the assets mentioned.