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Halftime: ETFs Better Bet Than Single Stocks?

Friday, 17 Dec 2010 | 1:16 PM ET

On Friday, the Fast traders turned their attention to ETFs, after published reports showed that exchange traded funds surpassed a major milestone - $1 trillion in assets.

”That’s from $0 to $1 trillion in 17 years with the bulk of that occurring in the past 3-5 years,” explains CNBC’s Herb Greenberg. “The biggest being the SPDR that tracks the S&P 500 which has over $60 billion in assets.”

Considering many of these financial instruments follow an index – allowing you to diversify risk – should you invest in ETFs over stocks?

Toping the Tape: Tech
Research in Motion, Oracle lead tech higher, with the Fast Money team.

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Instant Insights with the Fast Money traders

Joe Terranova doesn’t like using ETFs to play commodities. “The problem with commodity ETFs is tracking,” he says. “They don’t properly track the underlying future price.” Two of the ETFs Terranova dislikes most are the UNG and the USO. “They are deficient in what they are trying to give the investor. ”

Pete Najarian prefers trading individual names. “It’s a little more homework but (for traders) it’s better to get into specific names that you target.”

Steve Grasso has a strategy for getting the biggest bank for your buck out of an ETF. “Look at the ETFs top 10 holdings,” he says. “And if leaders emerge roll out of the ETF and buy the top 3 names.”

Except for a slight slip in assets following the credit crisis, money in ETFs has steadily grown every year since their creation,writes Fast Money executive producer John Melloy in his regular column.
To the detriment of mutual funds, interest in these funds, which track whole markets and sectors like they are individual stocks, have only increased over the last two years as a burned public look to take investing into their own hands.

Besides their liquidity and lower cost structure, ETFs also allow investors to bet against asset classes, something that only savvy hedge funds could do at one time.

What do you think? We want to know!

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TOPPING THE TAPE: TECH THE 2011 TRADE?

The traders are closely watching the action in tech Friday, after strong earnings from Oracle and RIM pushed the NASDAQ to 2010 highs.

How should you play it?

Oracle trades at a discount to its software peers, says Joe Terranova. I’d keep an eye on this one. $38 isn’t out of the question for this stock.

I also like Oracle, says Patty Edwards, but I’m waiting for a pullback.

Turning attention to RIM, although the stock could hit $63 short-term, I’m a seller of RIM, says Steve Grasso.

Read More:

>
Fast Gang Trades Oracle, RIM Post Earnings

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VISA -- VALUE TRADE OR TRAP?

Visa and Mastercard landed center stage Thursday after the Fed proposed capping interchange fees.

Is the recent sell-off a buying opportunity, or will regulation continue to weigh?

Credit Suisse analyst Moshe Orenbuch thinks the new rules will probably have “very little impact on Visa as well as Mastercard."

Find out why. Watch the video now!

Read More:

> Sharp Sell-Off in Visa, MasterCard Buying Opportunity?


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Trader disclosure: On December 17, 2010, following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Pete Najarian owns (YHOO). Pete Najarian owns (MSFT) call spreads. Pete Najarian owns (BMO) call spreads. Pete Najarian owns (C). Pete Najarian owns (MCD) call spreads. Pete Najarian owns (M) call spreads. Pete Najarian owns (WLT) call spreads. Pete Najarian owns (CNI) calls. Pete Najarian owns (MS). Pete Najarian owns (F) bonds. Pete Najarian owns (BBY) calls. Pete Najarian owns (GE). Pete Najarian owns (SMH) call spreads; Pete Najarian owns (DPS) calls; Joe Terranova owns (CRM), (VRTS), (C), (UPL), (PEP), (GLD) puts, (GS), (OXY), and (NKE). Steve Grasso owns (ASTM), (BA), (BAC), (BWC), (C), (CSCO); Grasso owns (JPM), (LIT), (LPX), (MOT), (MHY), (NDAQ), (PFE), (PRST), (S) and (X).

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JOE TERRANOVA
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
Virtus Investment Partners Owns More Than 1% Of (ABAX)
Virtus Investment Partners Owns More Than 1% Of (ALK)
Virtus Investment Partners Owns More Than 1% Of (AMKR)
Virtus Investment Partners Owns More Than 1% Of (CCG)
Virtus Investment Partners Owns More Than 1% Of (CASS)
Virtus Investment Partners Owns More Than 1% Of (CSVI)
Virtus Investment Partners Owns More Than 1% Of (EPR)
Virtus Investment Partners Owns More Than 1% Of (EXR)
Virtus Investment Partners Owns More Than 1% Of (FCFS)
Virtus Investment Partners Owns More Than 1% Of (IGE)
Virtus Investment Partners Owns More Than 1% Of (KRC)
Virtus Investment Partners Owns More Than 1% Of (LDR)
Virtus Investment Partners Owns More Than 1% Of (LPHI)
Virtus Investment Partners Owns More Than 1% Of (MGRC)
Virtus Investment Partners Owns More Than 1% Of (NRCI)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (XLB)
Virtus Investment Partners Owns More Than 1% Of (XLV)
Virtus Investment Partners Owns More Than 1% Of (XLP)
Virtus Investment Partners Owns More Than 1% Of (XLY)
Virtus Investment Partners Owns More Than 1% Of (XLE)
Virtus Investment Partners Owns More Than 1% Of (XLI)
Virtus Investment Partners Owns More Than 1% Of (XLK)
Virtus Investment Partners Owns More Than 1% Of (XLU)
Virtus Investment Partners Owns More Than 1% Of (SUBK)
Virtus Investment Partners Owns More Than 1% Of (WDFC)
Virtus Investment Partners Owns More Than 1% Of (YDNT)
Virtus Investment Partners Owns More Than 1% Of (CLB)
Virtus Investment Partners Owns More Than 1% Of (DRYS)

PATTY EDWARDS
Edwards owns (AAPL) for clients
Edwards owns (MSFT) for clients
Edwards owns (GS) for clients
Edwards owns (BMO) for clients
Edwards owns (C) for clients
Edwards owns (CME) for clients
Edwards owns (V) for clients
Edwards owns (NKE) for clients
Edwards owns (AMZN) for clients
Edwards owns (F) for clients
Edwards owns (XLK) for clients
Edwards owns (GLD) for clients
Edwards owns (SLV) for clients
Edwards owns (GE) for clients
Edwards owns (TIF) for clients
Edwards owns (COH) for clients

STEVE GRASSO
Stuart Frankel & Co and its partners own (AAPL)
Stuart Frankel & Co and its partners own (AMGN)
Stuart Frankel & Co and its partners own (BP)
Stuart Frankel & Co and its partners own (CUBA)
Stuart Frankel & Co and its partners own (GE)
Stuart Frankel & Co and its partners own (GERN)
Stuart Frankel & Co and its partners own (HPQ)
Stuart Frankel & Co and its partners own (HSPO)
Stuart Frankel & Co and its partners own (NWS.A)
Stuart Frankel & Co and its partners own (NYX)
Stuart Frankel & Co and its partners own (OPEN)
Stuart Frankel & Co and its partners own (PDE)
Stuart Frankel & Co and its partners own (PFE)
Stuart Frankel & Co and its partners own (PRST)
Stuart Frankel & Co and its partners own (RDC)
Stuart Frankel & Co and its partners own (TLM)
Stuart Frankel & Co and its partners own (XRX)
Stuart Frankel & Co and its partners own (SDS)
Stuart Frankel & Co and its partners own (UNM)
Stuart Frankel & Co and its partners are short (QQQQ)
Stuart Frankel & Co and its partners are short (AAPL)

MOSHE ORENBUCH
Credit Suisse Is A Market Maker Or Liquidity Proivder For (V), (MA)
Credit Suisse Securities (USA) LLC Is A Market Maker In (MA)
(MA) is or in past 12 months was a client of Credit Suisse
Credit Suisse provided investment banking services to (MA) within the past 12 months
Credit Suisse expects to receive/seek investment banking comp. from (MA) within next three months
Credit Suisse expects to receive/seek investment banking comp. from (V) within next three months
Credit Suisse owns 1% or more of (V)

RICH ILCZYSZYN
Ilsczyszyn has no disclosures

CNBC.com with wires.

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SPY
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UNG
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USO
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V
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MCD
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