While the benchmark indexes flirt with new highs, let’s strategically shift our attention to a few of my favorite hidden indexes… that is, ones that tell more of a story.
The Dow, S&P 500, and NASDAQ are only three of over 7,000 indexes and indicators we track at Wall Street Daily, most of which you’ve never heard of. The beauty of these “secret” indexes is that they tell fantastic stories about very specific niches of the global market. With that in mind, here are my top five.
CBOE Crude Oil Volatility Index (CBOE Crude Oil Volatility)
When it comes to critical commodities that we all need to survive, there’s little doubt that the “Big 3” are water, oil, and electricity. But there’s a key issue with each of them. They’re all constantly in demand… yet the supply is less predictable. Prices can (and do) soar and tumble, depending on supply and demand issues. And naturally, the flexibility of today’s market allows us to play each one profitably.
Enter the CBOE Crude Oil Volatility Index.
As the name suggests, it’s a perfect way to play price swings in the oil market. Basically, the OVX tracks the prices of options on the United States Oil ETF (NYSE:USO) and bases its price on “the market’s expectation of 30-day volatility of crude oil prices by applying the VIX methodology to USO,” according to the Chicago Board of Options Exchange.
And with the oil market turned on its head right now, OVX could give savvy investors outsized returns.
Dow Jones Luxury Index (^DJLUX)
Bet you didn’t know there was an index for tracking revenue from the sale of luxury goods and services…
Well, there is.
The S&P Dow Jones Indices and the editors of The Wall Street Journal select 30 securities for the index – and you can probably guess some of the big names. We’re talking about BMW (MILAN:BMW), Michael Kors (NYSE:KORS), and Burberry (LONDON:BRBY).
The luxury index is an intriguing investment right now because of the globalization of wealth. Even though luxury goods spending has slowed in America, there’s a growing middle class in nations like China, which is hungry to buy the same goods that wealthy Americans have long enjoyed.
Not only that, but we’re also about to enter another holiday retail season, which should boost this index’s performance.
One thing is clear: As long as new millionaires are being minted, there will always be demand for Louis Vuitton suits, Porsches, and overpriced champagne – and this index gives you direct access to their lavish spending.
S&P Next Emerging 40 Index (^SPN40PU)
If you’re looking for global diversification into emerging markets – but not from the usual suspects – then this index is for you.
It basically allows investors to own a slice of 40 top companies in emerging markets outside of the BRICs (Brazil, Russia, India, and China), plus other leading markets like South Korea and Taiwan.
But rest assured… You’re not flying blind with illiquid, volatile indexes here. All the stocks in the index trade on well-established, developed indexes like the NYSE, NASDAQ, and London Stock Exchange Group (LONDON:LSE).
Ocean Tomo Patent Growth Index (^OTPATGTR)
There are very few certainties when it comes to investing… but one of the safest bets around is intellectual property. In other words, companies that own numerous valuable patents are in an incredibly strong competitive position. As a result, their shares should react accordingly. In fact, the Ocean Tomo Patent Growth Index was founded on the knowledge that a hefty 80% of corporate value today resides in intangible assets like intellectual property. That’s up from just 32% in 1985.
Thus, this first-of-its-kind index tracks the 300 companies with the most valuable patents relative to their book value. The index is well-diversified. But (unsurprisingly) information technology and healthcare boast the greatest weighting, with 40% and 19%, respectively.
Best of all, the index has walloped the S&P 500 by 1,600 basis points since its inception in January 2007.
Credit Suisse Family Index CHF (^CSFAMCHF)
This index likes to keep things in the family… literally. The management team selects 40 U.S. and European stocks that aren’t just picked for their potential to outperform the broader market, but also for the fact that they boast strong family-owned or family-managed ties.
So we’re talking about firms that are well-established, well-grounded, well-managed, and with solid, long-term values. As a result, the team looks for positive investor sentiment towards these companies, plus compelling fundamental markers – like strong cash flow and being undervalued, relative to the market and their competitors.
Onward and Upward.
BY Robert Williams