With the year more than half over many investors are beginning to look ahead to next year. For the major benchmark ETFs such as the S&P500 (
SPY) and iShares MSCI EAFE (
EFA) and Emerging Markets (
EEM) funds, earnings growth is expected to slow dramatically next year.
So we scanned our database for ETFs holding stocks with the fastest overall EPS growth based on estimates for 2011. However, to help eliminate funds where earnings growth is mostly the result of easy comparisons against depressed earnings this year, we set an additional criteria that the current P/E ratio had to be less than 15x. A higher figure would be a good sign that current earnings were cyclically depressed.
The resulting list contains several Financial-related funds (where earnings are far below what they were a few years ago, but where low P/E multiples also imply the market does not expect them to attain previous levels of profitability anytime soon) as well as a number of commodity-related ETFs.
But this chart is only the starting point for ideas: we can't even rate the first fund on the list, the Claymore NYSE/Arca Airlines fund (
FAA) because--though profits look decent this year and next--over the course of the business cycle airlines operate at a net loss.
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