Making Money the Fun Way
Jan 16th 2013 8:31PM
Updated Jan 16th 2013 9:10PM
Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you'd like to add some diversity to your portfolio, the PowerShares Dynamic Leisure and Entertainment 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 PowerShares ETF's expense ratio -- its annual fee -- is 0.63 %. 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 well, despite our recent lackluster economy, beating the world market over the past three and five years. 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.
Why leisure and entertainment?
If you find your portfolio has a heck of a lot of, say, financial companies or some other sector, you might want to balance that out with other sectors. Leisure and entertainment companies have plenty of promise, especially as we emerge from our recent years of economic strife. As more people find jobs, more money will be spent on fun.
Plenty of leisure and entertainment companies had strong performances over the past year. Marriott Vacations Worldwide , for example, surged 142%. Spun off from Marriott and focusing on timeshares and upscale residence clubs, the company's stock now looks overvalued, with its forward P/E ratio recently topping 25%. Revenue grew modestly in its last quarter, and management upped its expectations.
Cedar Fair, L.P. , which operates theme parks, jumped 68%, as its traffic increased some and visitors have been spending more. The company has long been a solid dividend payer, recently yielding more than 4% and expected by some to top 6% in the near future. It is implementing some promising new initiatives, such as premium products, dynamic pricing, relationship management, and more.
Krispy Kreme Doughnuts gained 60%. It was on a very rocky road not so long ago, but has started posting profits in the past few years and recently hit a 52-week high. Some have speculated that it might get bought out, but even if it isn't, the company has been performing well, recently opened its 500th international store, and seems attractively valued. Meanwhile, it recently took steps to avoid a takeover, adopting a "poison pill" plan.
Bloomin' Brands is up more than 30% from its summer IPO price. The company, encompassing Outback Steakhouse and Carrabba's Italian Grill (among other names), has much more debt than cash, and isn't growing very briskly, despite some menu changes and higher prices. It recently opened its first company-owned restaurant in China, which might lead to better growth rates, but it's still too early to tell.
The big picture
Demand for leisure and entertainment isn't going away anytime soon. A well-chosen ETF can grant you instant diversification across any industry or group of companies -- and make investing in and profiting from it that much easier.
The article Making Money the Fun Way originally appeared on Fool.com.Longtime Fool contributor Selena Maranjian, whom you can follow on Twitter, has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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