Tag Archives: zacks funds

Inside JPMorgan U.S. Mid Cap ETF

The broader U.S. market has been in a tight spot since the beginning of 2016 due to a host of global issues and uncertainty about the rate hike. Amid these concerns, mid-cap funds offer the best of both worlds, growth and stability when compared to small-cap and large-cap counterparts. Mid-cap funds are believed to provide higher returns than their large-cap counterparts, while witnessing a lower level of volatility than small-cap ones. Given the swings in the broader market segment so far this year, mid-cap funds have garnered a lot of attention as they are not very susceptible to volatility (read: 5 Mid Cap Value ETFs Are Top Picks Now–Here is Why ). Recently, one of the renowned ETF issuers, JPMorgan, introduced a product in the U.S. targeting the mid-cap space. The new product – JPMorgan Diversified Return U.S. Mid Cap Equity ETF (NYSEARCA: JPME ) – hit the market on May 11. Below, we highlight the product in detail: JPME in Focus The fund seeks to track the performance of the Russell Midcap Diversified Factor Index. JPME does not seek to outperform the underlying index nor does it seek temporary defensive positions when markets decline or appear overvalued. Its sole intention is to replicate the constituent securities of the underlying index as closely as possible. JPME is a well-diversified fund, where Westar Energy Inc. (NYSE: WR ) takes the top spot with 0.61% weight. Other stocks in the fund have less than 0.60% exposure individually. In total, the fund holds about 602 stocks. Sector-wise, Consumer Goods gets the highest exposure with 15.5% of the portfolio. Utilities, Financials, Consumer Services, Health Care, Industrials and Technology also get double-digit exposure in the basket. The fund has an expense ratio of 0.34%. How Does it Fit in a Portfolio? The fund is a good choice for investors seeking high return potential that comes with lower risk than their small-cap counterparts. With the tone of the minutes from the April FOMC meeting, released last week, being more hawkish than expected, chances of a rate hike in the June meeting have gone up. This could be due to a series of recently released upbeat U.S. economic data (read more: Fed to Hike in June? Expected ETF Moves ). Meanwhile, global growth worries are still at large. So, mid-cap stocks with higher exposure to the U.S. markets than their large-cap counterparts look attractive at this point. Thus, the launch of the new ETF targeting the U.S. mid-cap market seems well timed. ETF Competition The newly launched ETF will have to face competition from mid cap-focused ETFs like the iShares Core S&P Mid-Cap ETF (NYSEARCA: IJH ) . IJH is one of the most popular ETFs in the space with an asset base of $26.3 billion and average trading volume of 1.3 million shares. The fund tracks the S&P MidCap 400 index and charges 12 basis points as fees which is much lower than the aforementioned product. The SPDR S&P MidCap 400 ETF (NYSEARCA: MDY ) is another popular fund in the space with an asset base of $15.3 billion and trades in a good volume of more than 2.1 million shares a day. The fund tracks the S&P MidCap 400 Index. The fund charges 25 basis points as fees. Apart from these, JPME could also face competition from the iShares Russell Mid-Cap ETF (NYSEARCA: IWR ) tracking the Russell MidCap Index. The fund has an asset base of $12 billion and volume of almost 359,000 shares a day. It has an expense ratio of 20 bps. Thus, the newly launched fund is costlier than the popular ETFs in the space. So, the path ahead can be challenging for JPME. Link to the original post on Zacks.com

2 Rising ETFs With 5% Yield

With global growth issues flexing muscles and corporate earnings falling flat, risk-on sentiments are finding it tough to sail smooth this year. Safe harbors like Treasury bonds are in demand, resulting in a decline in yields. As of May 16, 2016, yields on the 10-year U.S. Treasury note were 1.75%. As a matter of fact, the 10-year U.S. Treasury note did not see 2% or more yield after January 28, 2016. A dovish Fed, which lowered its number of rate hike estimates for 2016 from four to two in its March meeting citing global growth worries and moderation in U.S. growth, was also behind the decline in bond yields. Even Goldman Sachs cut its forecast for 10-year U.S. Treasury bond yields over the coming few years. Goldman Sachs now expects its year-end 10-year yield to be 2.4%, down from the 2.75% it projected in the first quarter. It does not expect the 10-year yield to rise above 3% to close out a year before 2018 (read: Time for Investment Grade Corporate Bond ETFs? ). Needless to say, this is a difficult situation for income investors that forced many to try out almost every high-yielding investing option. But higher yields sometimes come with higher risks. So, it is better to bet on investing areas that are better positioned from the return perspective and also offer a solid yield. One such option is preferred ETF. What is a Preferred Stock? A preferred stock is a hybrid security that has characteristics of both debt and equity. These do not have voting rights but a higher claim on assets than common stock ( Complete Guide to Preferred Stock ETF Investing ). That means that dividends to preferred stock holders must be paid before any dividend is paid to the common stock holders. And in the event of bankruptcy, preferred stock holders’ claims are senior to common stockholders’ claims, but junior to the claims of bondholders. The preferred stocks pay stockholders a fixed, agreed-upon dividend at regular intervals, like bonds. Most preferred dividends have the same tax advantage that the common stock dividends currently have. However, while the companies have the obligation to pay interest on the bonds that they issue, the dividend on a preferred stock can be suspended or deferred by the vote of the board. Preferred stocks generally have a low correlation with other income generating segments of the market like REITs, MLPs, corporate bonds and TIPs. However, unlike bond prices, these are also sensitive to downward changes in interest rates. If interest rates fall, issuers have the option to call shares and reissue them at lower rates. Investors should note that preferred ETFs have hit 52-week highs. Below we highlight two such options that are rising and also offer more than 5% yield. PowerShares Preferred Portfolio ETF (NYSEARCA: PGX ) The fund holds a portfolio of 237 preferred stocks in its basket, tracking the BofA Merrill Lynch Core Plus Fixed Rate Preferred Securities Index. It charges 50 bps in fees. Financials (85.1%) dominates this fund followed by utilities (6.5%). With the 30-day SEC payout yield of 5.72%, the fund is a solid income destination. The fund advanced 6.3% in the last three months (as of May 16, 2016). SPDR Wells Fargo Preferred Stock ETF (NYSEARCA: PSK ) The 151-securities portfolio invests 79% of the basket in the financial sector. The 30-Day SEC yield is 5.18% (as of May 13, 2016). The fund charges 45 bps in fees and added 5.7% in the last three months (as of May 16, 2016). Link to the original post on Zacks.com

Real Estate Inflows Highest In 6 Months: 6 MF And ETF Picks

While U.S.-based stock funds continued to witness significant outflows, real estate funds emerged as one of the few bright spots in terms of inflows, according to Lipper. The stock funds registered an outflow of $3.9 billion for the week ending May 18, raising the total withdrawals in the year-to-date frame to $45 billion. Moreover, stock funds have not seen inflows for two consecutive weeks since November. However, real estate funds are the ones that emerged as one of the few sectors that attracted significant investor sentiment during the week. These funds registered an inflow of $750 million, the biggest inflow witnessed since November 2015. Encouraging data related to the sector and a bright outlook may have boosted investor sentiment. Against this backdrop, investing in mutual funds and ETFs from this sector may prove profitable for investors in the coming months. Concerns Affecting Stocks Weak first-quarter earnings and intensified rate hike fears affected financial markets. As of May 18, total earnings for 466 S&P 500 members were down 7.0% from the same period last year on 1.2% lower revenues. Like the last few quarters, disappointing results from energy companies marred the first-quarter earnings season. Without energy earnings results, total earnings of the S&P 500 members would have been down 1.3% from the year-ago quarter. Also, minutes of the Federal Reserve’s two-day policy meeting in April indicated that most of its officials remain optimist for a rate hike in the June meeting. Moreover, New York Fed President William Dudley said that he is “quite pleased” to see strong possibilities of a rate hike in June-July. Dudley also said that the Fed is “on track to satisfy a lot of the conditions” for a rate rise. Also, Richmond Fed President Jeffrey Lacker pointed to a June rate hike, after “risks from global and financial developments having virtually entirely dissipated.” Lacker previously wanted a rate hike in April, and now agrees that “the case would be very strong for raising rates in June.” These have intensified rate hike fears among investors, which in turn affected the major benchmarks recently. What is Boosting Real Estate Funds? Despite these concerns, real estate mutual funds registered a return of 8.5% over the past three months, banking on optimism in the sector, according to Morningstar. While most of the broader sector found it difficult to post encouraging first-quarter earnings results, total earnings for S&P 500 construction companies jumped 27.5% from the same period last year on 3.9% higher revenues. Encouraging first-quarter results from the sector indicated that it is on a track for impressive growth at least in the near future. Along with the upbeat earnings results, the sector also got a boost from recently released housing data and a positive outlook. Encouraging Housing Data Among the recent encouraging data, a 1.5% uptick in residential construction spending led expenditure on construction to rise 0.3% from February to a seasonally adjusted annual rate of $1,137.5 billion in March. Over the last 12 months, construction spending has gained 8%. During this period, non-residential construction has increased by 8.3%. Also, the National Association of Home Builders (NAHB) reported that the home builder sentiment index (HMI) remained flat at 58 in May for the fourth consecutive month. This also indicates that the sector continues to experience steady growth, fueled by an improving job market and low mortgage rates. Moreover, the National Association of Realtors reported that existing homes sales gained 1.7% last month to a seasonally adjusted annual rate of 5.45 million, higher than the consensus estimate of 5.38 million. Existing homes sales rose for the second consecutive month. Meanwhile, housing starts increased 6.6% from March to an annual rate of 1,172,000 in April. Housing starts increased by 10.2% during the first four months of 2016, compared with the year-ago period. Significantly, single-family housing starts increased 16.8% year over year during this period. Also, building permits increased 3.6% from March to 1,116,000 last month. Bright Outlook Recently, economists in the NAHB Spring Construction Forecast Webinar predicted that single-family construction may jump 14% from 2015 to 812,000 units this year. Moreover, single-family construction is expected to surge another 19% next year. They also projected 3.3% and 1.3% gains in residential remodeling activity in 2016 and 2017, respectively. Separately, as per the Freddie Mac forecast, total home sales may hit the highest level of 5.9 million units in 2016 in nearly a decade. Sales were estimated to increase further to 6.2 million units next year. Mutual Funds and ETFs to Buy Banking on this encouraging scenario, we have highlighted three mutual funds and three ETFs from the real estate sector that carry favorable Zacks Ranks. Mutual Funds Each of these real estate mutual funds carries a Zacks Mutual Fund Rank #1 (Strong Buy). We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund. Moreover, these funds have encouraging year-to-date and one-year returns. The minimum initial investment is within $5000. Also, these funds have a low expense ratio and carry no sales load. Fidelity Real Estate Investment Portfolio No Load (MUTF: FRESX ) primarily focuses on acquiring common stocks of companies involved in operations related to the real estate domain. FRESX has year-to-date and one-year returns of 3.6% and 9.5%, respectively. Its annual expense ratio of 0.78% is lower than the category average of 1.29%. John Hancock II Real Estate Securities Fund (MUTF: JIREX ) invests a large chunk of its assets in equity securities of companies from the real estate sector and REITs. JIREX has year-to-date and one-year returns of 2.8% and 6.5%, respectively. The annual expense ratio of 0.79% is lower than the category average of 1.29%. VY Clarion Real Estate Portfolio S (MUTF: IVRSX ) invests the lion’s share of its assets in equity securities, including common and preferred stocks of domestic real estate companies, including REITs. IVRSX has year-to-date and one-year returns of 1.4% and 4.7%, respectively. The annual expense ratio of 0.96% is lower than the category average of 1.29%. ETFs The three popular real estate ETFs carry a Zacks Mutual Fund Rank #2 (Buy) each and have Medium risk outlook. These ETFs have also attracted significant inflows in the month-to-date period and gained significantly in recent times. Vanguard REIT Index ETF (NYSEARCA: VNQ ) provides exposure across 150 stocks of REITs by tracking the MSCI US REIT Index. With $30.6 billion assets under management (AUM) and a strong daily average volume of around 4 million shares, VNQ is the most popular ETF in its category. The ETF has 0.12% in expense ratio, compared with the category average of 0.45%. The fund has returned 7.7% and 2.9% over the three-month and year-to-date frame, respectively. VNQ has seen an inflow of $535.17 million in the month-to-date period. iShares U.S. Real Estate ETF (NYSEARCA: IYR ) provides exposure across 117 domestic real estate securities by tracking the Dow Jones U.S. Real Estate Index. With $4.6 billion AUM and strong daily average volume of around 9 million shares, it is the second most popular ETF in its category. The ETF has 0.43% in expense ratio, compared with the category average of 0.45%. The fund has returned 8.6% and 2.2% over the three-month and year-to-date frame, respectively. IYR has seen an inflow of $557.95 million in the month-to-date period. iShares Cohen & Steers REIT ETF (NYSEARCA: ICF ) provides exposure across 30 securities large-cap real estate companies by tracking the Cohen & Steers Realty Majors Index. It has $3.7 billion AUM and moderate daily average volume of around 220,000 shares, and is currently the third largest ETF in its category in terms of AUM. The ETF has 0.35% in expense ratio, compared with the category average of 0.45%. The fund has returned 6.9% and 1.2% over the three-month and year-to-date frame, respectively. ICF has seen an inflow of $26.35 million in the month-to-date period. Original Post