Coolcat ETF Portfolio Rockets 40% in Past Year

Exchange traded funds, or ETFs as they are better known, are dramatically growing in popularity. While many investment newsletters are having trouble wading through this new alphabet soup to pick ETF winners, The Coolcat ETF & Fidelity Select Report has taken the ETF world by storm with its performance in the past year.

The newsletter's Coolcat ETF Portfolio has posted a sizzling 39.7% return in the 12 months through March 31, more than 12% better than the second-best ETF portfolio tracked by The Hulbert Financial Digest, the leading investment newsletter watchdog. The Coolcat ETF Portfolio also jumped 13.4% in the first quarter.

At the same time, as Hulbert Financial Digest Editor Mark Hulbert pointed out in a recent New York Times article, most investment newsletters which have jumped into this emerging marketplace to establish ETF portfolios are lagging both the market as well as their other non-ETF portfolios.

Published regularly by CoolcatReport.com Publisher Kevin Kennedy since June 2004, The Coolcat ETF & Fidelity Select Report includes momentum-based rankings of the top-performing ETFs and Fidelity Select mutual funds. The newsletter, which has been featured in Investor's Business Daily and MarketWatch.com, is sent monthly by email at the beginning of each month.

The dramatic outperformance of international ETFs like iShares Brazil Index Fund (AMEX: EWZ) was responsible for most of the Coolcat ETF Portfolio's gains. iShares Brazil Index Fund is up 92% since being added to the portfolio in December 2004.

Kennedy also added iShares Mexico Index Fund (AMEX: EWW) and iShares Emerging Markets Index Fund (AMEX: EEM) to the Coolcat ETF Portfolio that same month, and they have risen 60% and 54%, respectively. Another key holding, the S&P 500 Energy Sector (Amex: XLE), was added in June 2004 and has rocketed 86%.

While Kennedy has started to diversify into other sectors by taking partial gains in the top winning positions above, international ETFs continue to be the largest component of the Coolcat ETF Portfolio, making up 61%. That's down from 71% at the end of January, a month when the portfolio soared 15.1%. Eight of the portfolio's current 14 positions are international ETFs.

Kennedy has also trimmed energy from 21% of the portfolio at the end of January to less than 7% now. Two technology ETFs account for 13% of the portfolio, up from about 8% at the end of January. Gold, transportation, alternative energy and energy are represented by one ETF each and make up 4%-10% of the portfolio.

New positions that have recently been added to Kennedy's report include iShares South Africa Index Fund (AMEX: EZA), PowerShares WilderHill Clean Energy (AMEX: PBW), PowerShares Dynamic Semiconductors (AMEX: PSI) and iShares Dow Jones Transportation Average (AMEX: IYT.

ETFs are similar to mutual funds, but are traded like stocks. Assets invested in ETFs have doubled in the past two years to more than $300 billion, and there are now more than 200 ETFs for investors to choose from. These funds allow for greater diversification of your portfolio by being able to invest quickly in major market indexes, hot sectors, foreign countries and even commodities.

Kennedy currently ranks prospective Coolcat ETF Portfolio positions by six-month gain. ETFs also have to have at least a 1.3-to-1 ratio between their 52-week highs and lows to ensure some volatility, trade at least 100,000 shares daily to ensure some liquidity and be priced above $5. If they are Merrill Lynch HOLDRs, they also have to be priced to enable buying of round 100-share unit lots within 10% of $10,000.

The number of qualifying funds for the portfolio has increased from 15 in December to 38 in the past month. The rising market and the increasing number of ETFs and the rising volume in them behind the surge in qualifiers. Eight new ETFs made the list last month and none fell off it.

This approach continues to place international funds at the top of the list with 17 separate foreign country funds qualifying under Kennedy's methodology. Ten of the top 16 performers in the past six months are foreign ETFs. Other hot areas include gold, transportation, technology, real estate, biotechnology and energy.

The newsletter's Fidelity Select Portfolio has also performed well, rising 23.2% in the past 12 months.

For more information, visit www.CoolcatReport.com.