With stocks soaring Thursday on reports that regulators will form a 1990s' style resolution trust to rescue banks, traders are hoping markets can mount a sustainable rally in coming days.

But some of the most actively managed exchange-traded funds aimed at long-term investors are holding steady. In fact, their recent shifts into heavily sold sectors such as Financials and Energy stand as a stark contrast to what's going on with short-term stock traders.

What these quasi-active, quantitative-based ETF managers aren't doing is more interesting in the current environment as what they are, in many respects.

Of course, they don't agree in all areas. But consider that while investors have been rushing to the exits, the Claymore/Zacks Sector Rotation ETF (AMEX: XRO) has kept a fairly healthy exposure to Financials. After its underlying index's latest rebalancing at the end of June, the fund had some 14.2% in the sector. That compares to 14.3% in the SPDR S&P 500 ETF (AMEX: SPY), which follows a much more static index.

From a historical perspective, valuations of the Financial sector appear attractive for long-term-oriented investors, says Christopher Huemmer, vice president of index strategies at Zacks Investment Research, which created the XRO's underlying benchmark.

When you look at some of the other factors, such as earnings growth and broader economic issues, it lessens the attractiveness of the sector, he admits.

Leading Component 

"But when you look at the various valuation multiples of Financials over time, the sector as a whole still remains attractive enough to remain as a leading component in the index for the present time," Huemmer said.

That's another interesting point considering the ETF can hold as few as three sectors. But it also can go up to 13 compared to the S&P 500's constant tie to 10 major stock sectors. Right now, XRO has nine, which is interesting. In bullish markets, it typically holds fewer sectors. When markets go down, the model tends to diversify and hold more rather than fewer sectors, says Huemmer.

The ETF's benchmark divides up the blue chip market into 16 different sectors, six more than the S&P 500, to screen for stocks. That more granular view of markets can provide a more in-depth peek into what's going on these days in blue chip markets. Using more than 10 different factors, the Zacks process also takes a top-down approach, using more than 10 different factors to size up stocks. It compares sectors based on macro trends, relative sector valuations and earnings growth trends.

The model is rebalanced quarterly. "This last rebalance was done at the end of June, so there was already fallout from financials included in the model," Huemmer said. "At the end of this month, it'll be interesting to see how the portfolio reacts when the index is rebalanced again with the sell-off in Lehman Brothers and the problems with AIG and other financials."

The caveat here is that the fund is badly underperforming the S&P 500 so far this year. But in the past 12 months, XRO is still whipping the S&P 500 by more than 2 percentage points. With XRO nearing its two-year-old mark, Huemmer also points out that the benchmark is designed as an alternative to give index investors a way to implement a rules-based sector strategy. That's quite different from how long-term passive investors normally attack markets using broad asset classes to set allocations.

Another more active ETF taking a contrarian approach is the SPA MarketGrader 40 (AMEX: SFV). It's based on a set of indexes that have been around for a few years and built excellent three-year records against the broader market. In fact, the MarketGrader methodology has been picked by Barron's magazine to base its new Barron's 400 index.

And SFV, like most of other MarketGrader-based funds, has been beating its most direct peers this year. Heading into Friday, it had returned -23.7% so far. That compared to a 24.8% loss by its traditional market-cap-weighted rival Vanguard Mid-Cap Growth ETF (AMEX: VOT).  

Lately, the quant-based process has been finding plenty of energy names. Some 30% of SFV's assets are invested in the sector. The ETF is rebalanced every quarter, most recently in the third week of August.

"A lot of the companies continue to report strong earnings, even though their stock prices aren't reflecting that right now," said Carlos Diez, president of MarketGrader.com Corp., SFV's index provider.

A prime example of that, he adds, is with energy sectors. Diez notes that despite the steep correction in oil during the past month, prices are still some $20 a barrel above where they were a year ago.

Earnings yield is a key metric monitored by MarketGrader's computers and factored into its index modeling work. That data is crunched for every company in the provider's benchmarks. "Since the market has been down so much this year, and since the companies we've selected for the index still have relatively high earnings, earnings yields are up," said Diez.

The MarketGrader 40—designed to identify a select list of companies with the best long-term business fundamentals on an ongoing basis—has an average earnings yield of 10.3%.

To put that into perspective, the Merrill Lynch High-Yield 100 Index is yielding 10.4%.

Dislocated Prices 

"In this environment where everyone's shunning risk, you have a bond index and a high-quality stock index yielding almost the same," said Diez. "That illustrates how dislocated market prices are from underlying market fundamentals."

Critics argue that price-earnings ratios for companies selected in the MarketGrader 40 are quite low—around 10.5 times 2009 estimates. That compares to the S&P 500's forward PE of 13.5.

"Some people might argue that the index's valuations are based on overly optimistic earnings estimates," Diez said. "But while that might be true for some companies, it's certainly not true for all."

He points out that earnings estimates for the S&P 500 have been revised down an average 4.7% in the past three months. In that same period, earnings estimates for an average company in the MarketGrader 40 have gone up by 7.5%.

"The danger in this market is very real. People are offering very irrationally. But our system doesn't market-time."

Owning well-managed companies with proven track records—and keep growing—is possible even in these times, Diez says. But keeping a long-term focus is essential, he adds, along with the discipline to avoid short-term market timing.  

"The fundamentals show that this is a buying opportunity. But market conditions are very volatile," said Diez. "You've really got to understand what type of index your fund uses and shop for the right index to meet your particular investing strategy and style."