The One ETF to Own for 2011

It’s become a bit of a holiday tradition. Each year in October, I step back and take a long hard look at where I think the market will be heading for the next year.

It’s easy to get caught up in the trivial aspects of day-to-day market watching. But when you take a breath and really look at what’s happening, I find that it gets easier to predict what’s coming next… and how to profit from it.

Of course, I don’t just do this for myself. With a clear mind focused on the coming year, I first put my first forecasts into the November issue of my premium Market Advisor newsletter. It’s in this issue where I release my “Top 10 Predictions” for the coming year. So far, my calls for 2011 are off to a promising start; two of my financial predictions have already come to pass just weeks after I made them.

Then, just as most folks are putting the last touches on their Thanksgiving logistics, I’m finishing off my December issue, which features my “Top 10 Stocks” for the coming year.

These top picks are my best of the best. And as you would guess, I’m normally tight-lipped about these ideas, unless you are a Market Advisor subscriber.

But today I have a special treat. I’m peeling back the curtain and giving you a sneak-peek at one of my “Top 10 Stocks” for 2011. This idea is an exchange-traded fund (ETF) and I think it’s the ideal way to play the trends that will unfold during the next year…

A great way to play the coming year

The bureaucrats can say all they want about benign inflation. Apparently, they haven’t been to a grocery store lately.

If prices for staple products like milk, butter and cereal seem to be creeping higher, it’s not just your imagination — supermarket tabs really are going up. Back in August, egg prices climbed from $0.98 to $1.35 per dozen within a few weeks. Soon after, bacon prices hit a record $4.35 per pound, up from $3.59 a year earlier.

And prices are still rising at the wholesale level, which means more retail markups in the weeks and months ahead. According to the USDA, producers fetched higher prices for corn, soybeans, eggs, milk and apples last month.

Corn futures have spiked more than +60% since June. Wheat prices have spiked +80% so far this year. Soybeans and sugar are +25% and +55% higher, respectively.

And since beef, pork and dairy producers have to buy mountains of feed for their livestock, rising grain prices will likely spill over into the meat aisle as well (there’s typically a six-month lag).

This is one industry where demand is unwavering — people have to eat. And given the tight state of these markets, any major supply disruption could spark a food crisis like the one of 2008.

Action to Take –> That’s why I like PowerShares DB Agriculture (NYSE: DBA), which is built around an index of the most liquid and widely traded agricultural commodities (corn, soybeans, wheat, cattle, coffee, etc.). If food prices continue rising, you better believe this fund will follow suit.

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But why should you listen to me?

Well, I told you earlier that Market Advisor’s “Top 10 Stocks” has become somewhat of a tradition. Of course, that wouldn’t be the case if these ideas didn’t consistently outperform the market. As you can see from the table, since it began in 2003, the annual “Top 10 Stocks” have beaten the S&P 500 seven out of eight years.

I’m confident DBA will build upon that past success, but to be honest, it’s just the tip of my “Top 10” iceberg. This year I’ve found what I think are some of the most exciting — and potentially profitable — stocks on the market. From a Chinese company that will help feed 1.3 billion Chinese to a tiny company with first-mover advantage in wireless advertising, I’m forecasting great things from these picks.   

If you’re a Market Advisor subscriber (and many thousands of you are), then you received your December issue — including full write-ups on my top 10 picks — just a few days ago. If you aren’t yet a subscriber, you can click here to learn more about Market Advisor and how you can access my “Top 10 Stocks” for 2011.