Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you’d like to add some global industrial stocks to your portfolio, the iShares S&P Global Industrials ETF could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this ETF to invest in lots of them simultaneously.
ETFs often sport lower expense ratios than their mutual fund cousins. The iShares ETF’s expense ratio — its annual fee — is a relatively low 0.48%, and it recently yielded about 2.2%. The fund is fairly small, too, so if you’re thinking of buying, beware of possibly large spreads between its bid and ask prices. Consider using a limit order if you want to buy in.
This ETF has performed reasonably, beating the world market over the past three years and inching ahead of it over the past five. As with most investments, of course, we can’t expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.
With a low turnover rate of 6%, this fund isn’t frantically and frequently rejiggering its holdings, as many funds do.
Why industrials?
The industrials sector will see demand grow once the world’s economies get back on track. While there are some signs that that is happening, some fear that it won’t happen soon enough.
More than a handful of global industrial companies had strong performances over the past year. 3M Co (NYSE:MMM) gained 21%. It’s long been a dividend stalwart, paying shareholders for many decades, through good times and bad. It recently yielded 2.5%. The company, known for its innovation and diversification, has been growing at a slow and steady pace, and has been investing heavily in research and development.
Honeywell International Inc. (NYSE:HON) also advanced 21%, performing well and expecting that to continue, though The Boeing Company (NYSE:BA) may deliver some challenges due to quality issues with its new Dreamliner plane and labor issues. Fortunately, this is a rather diversified company, with many other promising lines of business, such as even serving the smartphone market, wireless technology, and more. It also recently inked a $2.8 billion “lifetime” contract to supply Embraer SA (ADR) (NYSE:ERJ) E-Jets.
Eaton Corporation (NYSE:ETN) rose by 20%. The power management company has been shifting its focus from international projects to more U.S.-based ones. Management recently projected revenue growth of 42% in 2013 and that operating earnings will set a record. Eaton is also growing via acquisition, recently gobbling up Cooper Industries plc (NYSE:CBE) for more than $11 billion, which diversifies its offerings further. Analyst Stephen Simpson likes the Cooper buy, noting that it reduces Eaton’s cyclicality. Eaton has also started seeing its inventories of heavy equipment start to shrink, which is promising. It yields about 2.5%.
