Author Archives: Scalper1

HPE Stock Beats HPQ In 1st Quarter Since Splitting Hewlett-Packard

Having just completed their first quarter since the Nov. 1 split of their former parent company, the stock of Hewlett Packard Enterprise , the Big Data and hybrid cloud operations of the old Hewlett-Packard Co., has outperformed its sibling HP Inc. , which retained the legacy personal computer and printer business. The new Hewlett Packard Enterprise ( HPE ) fell 2.5% in the stock market today , to 13.45. True, that’s 15% off its all-time set Dec. 1 at 15.88, but HP Inc. ( HPQ ) is trading 33% below its post-Nov. 1 high of 14.82, touched Nov. 24. It fell 0.9% to 9.88 on Tuesday. “Upon the split we argued in favor of HPE over HPQ stock,” wrote UBS analyst Steven Milunovich in a research note Tuesday. “Hewlett Packard Enterprise has momentum with expected slight revenue growth in constant currency and an improving operating margin in fiscal 2016. This outlook was reinforced on the last earnings call (Nov. 25). “In contrast, HP Inc. told investors it would be investing for long-term gain. Our initial issue was the unsustainability of printer margins, but then unit demand fell apart last quarter. We remain concerned that HPQ estimates could be too high.” For the fiscal first quarter ended Jan . 31, analysts polled by Thomson Reuters expect the Enterprise company to report earnings down 17% to 40 cents per share on revenue down 2.7% to $12.68 billion, vs. a pro forma 48 cents on $13.03 billion in the 2015 Q1. Analysts expect the performance of HP Inc., the PC/printer company, to slide further than Enterprise, with Q1 earnings down to 36 cents on falling sales to $12.23 billion. For fiscal 2016 ending Oct. 31, the Enterprise company expects earnings of $1.85-$1.95 per share minus items, vs. the $1.84 pro forma earned in 2015.  It guided revenue to $50.81 billion, down from the pro forma $52.12 billion of 2015. Analysts expect 2016 EPS of $1.87 minus items on revenue of $50.68 billion. Hewlett Packard Enterprise and analysts expect profitability and sales to improve in 2017 and beyond. Reiterating a buy rating and 18.50 price target on Enterprise, Milunovich said: “HPQ is slightly less expensive than HPE on all measures, but we prefer HPE’s better earnings momentum. Even discounting HPE’s segment P/Es by 20%-30% relative to comps results in an overall multiple of almost 10x and a price target of $18.50. The stock looks more expensive on current but inexpensive on normalized free cash, which we expect to be achieved in fiscal 2018.” UBS rates HP Inc. as neutral with a 15 price target. Meg Whitman, who remains chair of both companies, took the CEO title of Hewlett Packard Enterprise as she had with the former company, but named Dion Weisler CEO of HP Inc. Both companies are expected to report fiscal Q1 earnings this month.    

A New Cybersecurity ETF From Global X Is On Its Way (Revised)

The year 2015 may have been soft for the cybersecurity ETFs, but the craze for issuing more cybersecurity funds has not abated at all. Issuers are still seeing long-term prospects in it. Most recently, ETF issuer Global X announced plans to dip its toes into the space and filed for a cybersecurity ETF. Inside the Proposed Fund The fund looks to track the Cyber Security Index. The fund invests a minimum of 80% of its total assets in global securities, and in ADRs and GDRs based on the securities in the underlying index, per the filing . How Does It Fit in the Portfolio? The newly filed ETF can be a good choice for investors seeking exposure to the fast-growing and high-potential space of cybersecurity. While technology has been a great boon to mankind, it has lugged with it the ills of “cybercrime”. Enterprises and government agencies constantly face cyber attacks and are always in the want of rigorous cybersecurity to fight hackers. Per the Center for Strategic and International Studies and McAfee, cybercrime is a fast expanding industry with high returns and low risks. Their study projects that cybercrime costs the world over $400 billion per year. Also, “Key Findings from the Global State of Information Security Survey 2015” by PWC indicated that cybersecurity instances increased at a CAGR of 66% from 2009. These data clearly explain the latent potential of the newly filed product. ETF Competition While no one has any doubt over the success of the fund, provided it gets an approval, thanks to the budding potential in the space, competition seems to be a little tough. The PureFunds ISE Cyber Security ETF (NYSEARCA: HACK ) and the First Trust NASDAQ CEA Cybersecurity ETF (NASDAQ: CIBR ) are presently operating in the regular cybersecurity field with about $1.02 billion and $105.8 million, respectively. HACK is about a year old while CIBR is just six months old. HACK charges 75 bps, and CIBR charges 60 bps as fees. Investors should also note that Direxion – a renowned player in the leveraged and inverse leveraged ETF world – is also in the arena with two products focusing on the cybersecurity sector – one providing a leveraged bull play and the other an inverse leveraged bear play. The Direxion Daily Cyber Security Bull 2x Shares ETF (NYSEARCA: HAKK ) looks to offer double the daily exposure to the ISE Cyber Security Index while the Direxion Daily Cyber Security Bear 2x Shares ETF (NYSEARCA: HAKD ) gives twice the opposite exposure of the daily performance of the same index. If Global X fund manages to get an approval, it needs to offer competitive expense ratio and a better balancing in portfolio to garner investors’ assets. After all, the proposed fund lacks the first-mover advantage. So, to beat HACK and CIBR over the long term, the proposed fund should offer attractive options as far as exposure, stock-specific concentration risk and expense ratios are concerned. Original post

AQR To Close Top-Performing Alternative Funds To New Investors

AQR will be closing its Style Premia Alternative (MUTF: QSPIX ) and Style Premia Alternative LV (MUTF: QSLIX ) funds to new investors as of March 16. The funds, which posted respective gains of 8.76% and 4.02% in 2015, closed out the year as two of the top three multialternative funds in December. Clearly, they are not being closed due to poor performance – both funds finished in the top 3% of their Morningstar category for the recently concluded year. Instead, the funds are being closed to new investors because they’re nearing the maximum capacity of their strategies. QSPIX, with $2.2 billion in assets, and QSLIX, with $218 million, aren’t the only alternative funds AQR has had to close for this same reason: In June 2012, the firm closed the AQR Diversified Arbitrage Fund (MUTF: ADAIX ). The fund ranked in the top 2%, 41%, and 26% of its category from 2010 through 2012. In November 2012, AQR barred new investors from buying shares of its Risk Parity Fund (MUTF: AQRIX ). That fund launched in late 2010 and ranked in the top 2% and 11% in 2011 and 2012. And in September 2013, the AQR Multi-Strategy Alternative Fund (MUTF: ASAIX ) had to be closed, too. Today, the fund has a five-star rating from Morningstar, and it ranked in the top 2% of its category in 2015 (top 4% in 2014). The procedure for how AQR will wind down new investments in QSPIX and QSLIX, and how existing shareholders will be impacted, is outlined in a January 26 SEC filing . Past performance does not necessarily predict future results. Jason Seagraves contributed to this article.