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| ETF
Spotlight -- Broadband HOLDR (BDH) |
Published: January 12, 2004
The Broadband HOLDR (BDH, $15.68) is an
exchange-traded fund (ETF) that tracks the performance of stocks that
are essentially suppliers to major cellular, Internet and telecom
companies. Missing from the fund is Cisco Systems (CSCO, $26.48), but
all of the other usual suspects are present.
A quick note about HOLDRS...
HOLDRS, which are managed by brokerage giant Merrill Lynch, are a bit
different from traditional ETFs in the way they trade and in their
expense ratios. For example, you cannot buy or sell less than 100 shares
of a HOLDR in any transaction. Instead, these unique instruments can
only be traded in 100-share round lots. In addition, unlike most other
types of funds, which track broad-based indices that contain hundreds
(or some cases even thousands) of stocks, most HOLDRS consist of just a
handful of stocks and are designed to track a particular industry group.
Because they only track a few companies, HOLDRS are very inexpensive to
manage. However, because they aren't highly diversified, they also tend
to be much more volatile than the average ETF.
The largest weighting in the Broadband
HOLDR is Qualcomm (QCOM, $58.97), which accounts for more than 30% of
BDH's value. Meanwhile, Motorola (MOT, $15.71), Nortel Networks (NT,
$6.15), Lucent (LU, $3.70) and Corning (GLW, $12.00) all account for
more than 6% of the fund's value as well.
BDH had been one of the worst performing funds as the Internet bubble
burst, falling from a high of $104.19 to a low of $5.53 -- a loss of
-94.7%. However, the fund has nearly tripled since hitting that low in
October 2002.
| Broadband
HOLDR (BDH) |
|
|
| Type: |
Industry
Sector |
|
|
|
| Similar
funds: |
Semiconductor
HOLDR (SMH) |
|
|
Internet
HOLDR (HHH) |
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|
Note:
HOLDRS only trade in lots of 100 shares |
| Options?: |
Yes, very
illiquid |
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| Performance
Data |
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|
| 52-week
High: |
$15.90 |
1/9/2004 |
|
Annualized
return since: |
| 52-week
Low: |
$7.47 |
2/25/2003 |
|
One-year |
79.20% |
| 2003
Return: |
78.15% |
|
|
Three-year |
-29.92% |
|
|
|
|
Five-year |
N/A |
| Dividends: |
$0.00 |
past 12-mos |
Life of fund* |
-37.20% |
| Expense
Ratio: |
$0.08
per share per year |
|
*
- Started trading 4/6/2000 |
|
|
|
|
|
|
| Correlation
Data* |
(1/02/02-12/31/03) |
Holdings* |
(as of 1/8/2004) |
| Dow
Jones Industrials |
65.6% |
|
Qualcomm (QCOM) |
30.40% |
| S&P
500 |
|
71.4% |
|
Motorola (MOT) |
17.99% |
| Nasdaq
Composite |
82.6% |
|
Nortel Networks
(NT) |
11.06% |
| Nasdaq-100 |
|
82.6% |
|
Lucent (LU) |
6.96% |
|
|
|
|
Corning (GLW) |
6.83% |
| SMH |
|
80.3% |
|
Broadcom (BRCM) |
4.61% |
| HHH |
|
69.8% |
|
Scientific-Atlanta
(SFA) |
4.14% |
|
|
|
|
JDS Uniphase (JDSU) |
3.17% |
|
|
|
|
Tellabs (TLAB) |
2.57% |
|
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Comverse Technology
(CMVT) |
2.37% |
|
|
|
|
* Percent top ten
are of total |
90.10% |
|
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|
| Average
Daily Volume |
|
Average
Daily Price Range |
| Dec-03 |
140,118 |
|
|
Dec-03 |
2.0% |
| 2003 |
248,737 |
|
|
2003 |
2.7% |
| 2002 |
177,921 |
|
|
2002 |
4.7% |
| *
- Correlation measures how closely the two items track each
other |
*
Includes prior day's close (true range) |
HOW TO MAKE
MONEY IN BDH THIS YEAR
BDH remains on fire. Even last Friday's weak payroll report couldn't
drag this fund lower. On the downside, however, BDH is now hugely
overbought. Losses of 5-10% are likely in the immediate term, which is
why I've decided to short the fund in today's "Trade of the
Week." Beyond this though, the fund should prove to be a good long
candidate in the coming months.
In terms of Elliott Wave analysis, price targets for
this third wave point to $17.30. From there, I expect the fund to
undergo a substantial correction back to the $13-$14 range. However, the
ultimate high for this rally could be well north of $20 later this year.
Of course, that would still leave BDH down more than 80% from its
all-time high!
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