Author Archives: Scalper1

Solar ETFs Soar On Tax Credit Extension

Congress’ vote for an environmental tax credit extension on Wednesday helped the solar sector to register healthy gains thereafter. After getting a boost from historical Paris deal, credit extension news set the tone for the solar sector, which is on a track to finish the week on a positive note. ETFs having significant exposure to the solar energy sector are also poised to gain from this scenario. Extension in Focus The legislation approves an additional five years of an investment tax credit (ITC) which will allow solar power companies to keep claiming federal ITC at 30% of the price of solar energy systems which was set earlier to expire at the end of 2016. However, the credit will be slashed gradually to 10% in 2022. Any solar project that starts before the end of 2021 will get the benefit. Moreover, the solar sector is also poised to be benefited from the production tax credit (PTC) extension. The PTC pays 2.3 cents per kilowatt-hour of electricity generated and technically expired at 2014 end due to Congressional gridlock. It has been decided that the PTC will be extended through 2020 but will be gradually reduced over the next four years before being completely phased out. The environmental tax credit extension came as part of the $1.15 trillion federal spending bill which prevented a government shutdown and lifted the 40-year-old ban on exporting American crude oil. The extension initiative along with the historic Paris meet that struck a deal to limit greenhouse gas emissions and shift toward clean energy indicated that investments in clean energy sectors may prove fruitful in the near future. What’s Store for Solar? It has been clearly indicated that most of the nations want the world to be free from pollution and be a better place to live in. This signals that importance and demand of clean energy, including solar, over fossil fuels will increase with time. The Zacks Industry Rank for Solar is #16 out of 257, also confirming the bright prospect of this sector. Meanwhile, recent trends also showed growing demand of solar in the U.S. The Solar Energy Industries Association (SEIA) forecast that 2015 may prove to be a record-breaking year. Installation of 1,361 megawatt DC in the third quarter helped the market to increase installations to 4.1 gigawatt (GW) DC through the first nine months of 2015. Meanwhile, SEIA said: “the extension is likely to add another 140,000 jobs or more.” 2 Solar ETFs to Watch Like solar stocks, solar ETFs also got a massive boost from these developments throughout the week. In this scenario, we have highlighted two solar ETFs that are likely to remain on investors’ radar in the coming months. Guggenheim Solar ETF (NYSEARCA: TAN ) This ETF follows the MAC Global Solar Energy Index, holding 31 stocks in the basket. American firms dominate the fund’s portfolio with nearly 50.9% share, followed by Hong Kong (19.8%) and China (17.5%). The product has amassed $290.9 million in its asset base and trades in moderate volume of around 216,000 shares a day. It charges investors 70 bps in fees per year. The fund has returned 16.8% over the past five trading days. Market Vectors Solar Energy ETF (NYSEARCA: KWT ) This fund manages $18.8 million in its asset base and provides global exposure to 28 solar stocks by tracking the Market Vectors Global Solar Energy Index. In terms of country exposure, the U.S. and China account for the top two countries with 27.5% and 32.9% allocation, respectively, closely followed by Taiwan (20.5%). The product has an expense ratio of 0.65% and sees paltry volume of about 2,000 shares a day. The ETF has returned 15.6% over the past five trading days. Original Post

Managed Futures Funds: Best And Worst Of November

Managed futures funds performed solidly in November, with the Morningstar category gaining 2.68% in the aggregate – the second best month for 2015 behind January. The month’s gains accounted for more than 100% of the entire year’s gains for the category, as its one-year return improved to +2.60% through November 30. Longer term, the managed futures category has underperformed the private fund index as represented by the Credit Suisse Managed Futures Liquid TR USD Index. This is seen in the negative alpha for the category of 2.13% versus the index. However, the group of mutual funds and ETFs included in the category do behave somewhat differently from a risk perspective given the low beta of 0.57 relative to the Credit Suisse index. In this month’s category review, we look at the three best- and worst-performing managed futures funds in November, in terms of their monthly returns, as well as their long-term term performance. As you will note, only three of the funds have track records of 3 years or more. (click to enlarge) Top Performing Funds The best-performing managed futures funds in November were: Each of these funds posted November gains well in excess of the +2.68% category average, and all three solidly outperformed for the year ending November 30, too. Only one of the funds – the Arrow Managed Futures Strategy Fund – had a three-year track record, with annualized gains of 3.65%, and a Sharpe ratio of 0.43 over that time. Broken down, the fund’s long-term returns consisted of a 0.68 beta and -2.57 alpha versus the Credit Suisse index. At +5.92% in November, it was the third-best managed futures mutual fund to own that month, and at +9.14% for the year ending November 30, it trailed only Salient Trend Fund on that basis. Speaking of which, the Salient Trend Fund was the month’s top-performing managed futures mutual fund, with gains of 7.37%. For the year ending November 30, the fund handily beat the category average of +2.60% with gains of 10.65%. The Equinox BH-DG Strategy Fund was November’s second-best performer among managed futures funds, with gains of 7.06%. For the year ending November 30, the fund returned 7.37%, which while being the weakest of the month’s other top funds, was still well in excess of the category average. (click to enlarge) Worst Performing Funds The worst-performing managed futures funds in November were: At -2.19% for the month, the Equinox IPM Systematic Macro Fund was November’s worst-performing managed futures fund. The fund only debuted in July 2015, and thus it doesn’t have longer-term performance data available, but according to Morningstar, $10,000 invested in the fund at its inception would have turned into $9,810 as of November 30, compared to $10,127 for the category as a whole. The Dunham Alternative Strategy and Altegris Macro Strategy funds were both launched more than three years ago, which gives us more return data to analyze. First, for the month of November, the funds posted respective losses of 1.31% and 0.84%. For the year ending November 30, their respective returns were -3.10% and -0.36%. Longer term, DNASX posted three-year annualized gains of 1.16%, while MCRAX had three-year annualized losses of 3.25% through November 30. In terms of three-year beta, alpha, and Sharpe ratios, DNASX definitely looked more attractive. Through November 30, its three-year beta stood at 0.01 – almost entirely uncorrelated with the broader managed futures market – and its alpha stood at 1.16. MCRAX, by contrast, had a three-year beta of 0.46 and -7.55 alpha. The funds’ respective Sharpe ratios stood at 0.23 and -0.52. (click to enlarge) Conclusion Category-wide gains of 2.68% in November come on top of the 1.82% gains from October, which had reversed the prior month’s 1.21% losses. With the Federal Reserve’s long, and much anticipated interest rate increase now complete, the divergence in global interest rate policy is fully under way. December, and 2016, could prove fruitful for the managed futures category as a whole. Past Performance does not necessarily predict future results. Meili Zeng and Jason Seagraves contributed to this article.

Global X Southeast Asia ETF: Un-Emerging Market

Regional growth is very dependent on China’s economy. The fund is very heavily weighted in financial services. A few of the holdings operate in unique niches, with little competition. A proverb is timeless and has application generation after generation. For example, in Southeast Asia one might often hear that ‘ a tray full of money is not worth a mind full of knowledge ‘. That proverb will no doubt catch the attention of any ‘experienced’ investor. There’s quite a difference between “not knowing something” and “not realizing something”. The former seems to imply a lack of information: not knowing. The latter seems to imply that the information is there, but not understood: not realizing. Unfortunately, investors are often lost in the misty in-between of not knowing and not realizing. However, logic dictates that in either event, the odds are not in your favor. With that in mind, the question must be asked: has the emerging market expansion run its course? A critical bit of information is determining whether the Chinese economy is experiencing a normal correction, or looking for a sustainable bottom in an ongoing economic contraction. It’s difficult to say. There is one certain fact, though: the amazing bull market expansion of China’s once emerging economy pulled the entire global economy along with it and, in particular, the economies of Southeast Asia. Hence, are the odds in favor of a rebound in Southeast Asia? Picking and choosing individual investments from among countries with different varied rules and regulations would be a daunting task. If an investor were to choose an ETF, there’s only one way to enter that market: Global X Southeast Asia ETF (NYSEARCA: ASEA ) . According to Global X, the fund ” …seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the FTSE/ASEAN 40 Index …” The fund employs a passive methodology; 80% of total assets are invested in American Depository or Global Depository receipts; hence, most of the companies will be listed on OTC exchanges. The index is one of the five FTSE ASEAN Index series. The selected stocks of all of the ASEAN indexes are selected from “… Bursa Malaysia, Hanoi Stock Exchange, Ho Chi Minh Exchange, Indonesia Stock Exchange, The Philippine Stock Exchange, Singapore Stock Exchange and the Stock Exchange of Thailand… ” According to FTSE-Russell, the FTSE/ASEAN 40 index “… is designed to represent the performance of the largest companies in the ASEAN region’s markets …” So, the first bit of basic information is to know the geographic allocation of the fund. Data from Global X A quick overview of the included country’s annualized growth is outlined in the table below. Country Annualized GDP as of Q3, 2015 Core Inflation Debt/GDP Unemployment Rate Sovereign 10-Year Bond Ratings S&P, Moody, Fitch Singapore 1.9% 0.3% 99.3% 2.0% AAA, Aaa, AAA Malaysia 4.7% 2.5% 52.5 3.2% A-, A3, A- Indonesia 4.73% 5.02% 25.02% 6.18% BB+, Baa3, BBB- Thailand 2.9% 0.88% 45.7% 0.9% BBB+, Baa1, BBB+ Philippines 6.0% 1.8% 45.4% 5.7% BBB, BAA2, BBB- Averages 10.93% 3.60% Data from Trading Economics No doubt, these particular emerging markets have experienced a rate of growth that is the envy of the entire region, even when compared to the larger, more established economies such as Japan and Korea. However, this seems to be the ‘modus operandi’ of emerging markets throughout history. So without the economic pull of China, can these economies readjust and grow organically? Data from Global X Clearly, the fund heavily weights the Financial sector. Of the fund’s 40 holdings, 14 holdings, totaling 35% of the fund, are financials. Several of these financial services companies are global and importantly, most offer Sharia compliant financial services in a region of the world where 240 million Muslims or 40% of the entire population resides. Of the 14 financial holdings, there’s only one REIT. Also, six are either ‘holding companies’ or ‘groups’. This may serve as an advantage as the financial services of these holding companies are well diversified among the full spectrum of financial services, and in several cases, diversified internationally. Lastly, DBS Group Holdings ( OTC:DBSAY ) , Malayan Banking ( OTCPK:MLYNF ) , CIMB Group Holdings ( OTCPK:CIMDF ) , and Bangkok Bank ( OTC:BGKKF ) all have offices in the UK or New York, thus established in the major global financial centers. Financials 48.72% Ticker Fund Weighting Market Cap ( USD Billions) Yield P/E 5-Year EPS Growth Rate Primary Business DBS Group Holdings OTC: DBSAY 7.44% $41.267 3.66% 9.55 12.95% Global Financial Services Holding Company; Full line from retail to wealth management; Main subsidiary in London, UK; operations in Asia Overseas Chinese Banking OTC:OVCGF 7.02% $35.528 4.18% 9.48 12.23% Financial Services group; retail banking, insurance; equities and futures trading; headquartered in Singapore United Overseas Bank OTCPK:UOVEF 5.87% $30.935 4.44% 9.95 10.68% Banking Services from retail through corporate levels; asset, wealth and venture capital management; Clearing operations; Singapore Public Bank Berhad OTC:PBLOF 4.74% $16.316 3.02% 14.60 12.06% Banking group, retail, corporate lending, proprietary trading,, securities trading, some property holding; Kuala Lumpur PT Bank Central Asia OTC:PBCRF 4.23% $24.419 1.29% 18.43 19.07% a.k.a. Bank BCA conventional and Sharia retail services; underwriting and brokering; Jakarta Malayan Banking OTC: MLYNF 3.68% $18.736 6.84% 10.97 NA Holding Company for Maybank Group; offices in Singapore, Malaysia, New York, London Hong Kong and Bahrain; HQ: Kuala Lumpur Bank Rakyat OTCPK:BKRKF 2.995% $20.037 2.72% 10.90 26.92% a.k.a. Bank BRI; retail services, lending, and Sharia services; Jakarta PT Bank Mandiri Persero OTCPK:PPERF 2.12% $15.320 2.43% 10.21 20.47% a.k.a. Bank Mandiri; retail conventional and Sharia services; insurance, business finance, securities brokering; Jakarta CapitaLand OTCPK:CLLDF 2.05% $13.421 2.87% 11.79 -0.47% Real Estate investment; consulting, development, holding; shopping malls, residences; HQ Singapore CIMB Group Holdings OTC: CIMDF 2.04% $8.723 1.80% 16.89 -1.17% Financial services holding company; conventional and Sharia services; Offices in Malaysia, Indonesia, Singapore, Thailand, Cambodia and London, UK; HQ Kuala Lumpur SM Investments Corp. OTCPK:SVTMF 2.01% $13.851 1.29% 22.03 11.23% Investment holding company property, retail and banking service; convention centers, hotel holdings; merchandise trading; HQ Pasay, Philippines Siam Commercial Bank OTCPK:SMCBF 1.96% $11.665 4.86% 8.82 20.77% Financial service for retail and small-medium size business; non-performing loan solutions; Bangkok Kasikornbank PLC OTCPK:KPCPF 1.82% $10.207 2.61% 8.36 25.66% Commercial Banking; small-medium size business, credit, home loans, insurance, international transaction, security services; Bangkok Bangkok Bank Public Company OTC:BGKKF 0.75% $7.982 4.32% 8.15 12.06% Commercial Bank; retail, cash management, project and trade financing, credit; China, Hong Kong, US, UK, Singapore, Indonesia, Laos, Vietnam, Philippines; HQ: Bangkok Averages 3.48% $19.17 3.31% 12.15 1 14.04% 1 Excluding MLYNF Data from Reuters, Yahoo! The main reason mobile communication rooted itself so well in so many emerging markets is because it was far more cost efficient to construct cell-phone towers, or transmit content via satellite, than it was to run thousands of miles of copper across the country or countries . These are not so much ‘outstanding companies’ as much as they are necessary , particularly in rural areas. Telecom Service 20.05% Ticker Fund Weighting Market Cap Yield P/E 5-Year EPS Growth Rate Primary Business Singapore Telecommunications OTC:SGTCF 7.16% $43.402 4.56% 15.80 -0.66% Telecom investment holding company; consumer, enterprise, digital solutions; Singapore, Australia, Asia, Africa; HQ : Singapore PT Telekomunikasi Indonesia NYSE: TLK 3.82% $21.323 2.75% 19.31 -24.81% Domestic and international telecom services; internet, Wi-Fi, data and satellite services; HQ: Bandung, Indonesia Advanced Info Services OTC:AVIKF 2.35% $15.902 6.47% 15.27 16.60% Mobile, call centers, broadband; IT solutions; Bangkok Axiata Group OTCPK:AXXTF 2.24% $12.350 3.62% 22.16 4.84% Telecom investment holding company; network services, mobile services; Kuala Lumpur Digi.com OTC:DIGBF 1.59% $9.047 4.81% 20.66 15.21% Telecom investment holding company; mobile, internet and services; Malaysia; HQ Kuala Lumpur Maxis OTC:MAXSF 1.45% $11.386 4.71% 30.70 -3.44% Telecom investment holding company; mobile, fixed line, international, broadband Philippine Long Distance NYSE: PHI 1.31% $8.984 6.63% 13.51 -5.62% Telecom services; fixed line, wireless, satellite and fiber networks; Makati, Philippines Averages 2.85% $17.48 4.79% 19.63 0.30% Data from Reuters, Yahoo! The industrial companies, again, are often diversified holding companies which span many other sectors. For example, Jardine Cycle & Carriage ( OTCPK:JCYCF ) may be considered a consumer discretionary holding via its marketing and sale of motor vehicles, but it also has investments in heavy equipment manufacturing, mining, agriculture and infrastructure management. Similarly, Sime Darby ( OTCPK:SMEBF ) has investments in agriculture, property holdings, equipment leasing, energy, utilities and land management. The most notable, unique and focused holding in the sector is Singapore’s Kepple Corp. (STI: KPLM) . Kepple is one of the few global, large scale, diversified marine engineering and construction companies. Further, its base of operation is centered among the busiest seaports on the planet. Industrials 9.69% Ticker Fund Weighting Market Cap Yield P/E 5-Year EPS Growth Rate Primary Business PT Astra International OTCPK:PTAIF 3.20% $18.103 3.66% 14.31 13.82% Diversified vehicle component manufacture; financing, service; agri-logistics and IT; Jakarta Keppel Corp. Ltd. STI: KPLM 2.32% $8.199 7.55% 6.30 2.13% Marine construction, service, management; ship construction, repair, refitting; Singapore Sime Darby OTC: SMEBF 2.01% $10.347 3.46% 21.02 20.11% Industrial agriculture investment holdings; property, equipment; energy, utilities; palm oil, rubber, land management Wilmar International OTCPK:WLMIF 1.53% $13.079 2.78% 11.71 -7.97% Industrial agri-investment holdings; palm products, oil seeds, grains, sugar; Singapore Singapore Airlines Ltd. OTCPK:SINGF 1.39% $9.351 2.46% 23.58 11.70% Passenger and cargo transport; air charter services; operations managements, maintenance services; Singapore Airports of Thailand OTC:AIPUF 1.33% $11.811 2.00% 24.96 55.81% Airport and hotel management and services; Bangkok SM Prime Holdings OTC:SPHXY 1.24% $12.885 0.99% 21.90 4.60% Property Developer: malls, residence, office, hotel and convention centers; Pasay, Philippines Jardine Cycle & Carriage OTC: JCYCF 0.97% $9.473 3.46% 12.32 9.90% Auto and motorcycle, heavy equipment, mining manufacturer, mining, agribusiness, infrastructure management Averages 1.86% $11.97 3.27% 17.86 14.31% Data from Reuters, Yahoo! The utilities sector is pretty much focused on just that: utilities. These three companies focus on gas and electricity distribution, with some overlap in the energy sector via exploration and drilling. Utilities 5.60% Ticker Fund Weighting Market Cap Yield P/E 5-Year EPS Growth Rate Primary Business Tenaga Nasional OTC:TNABF 3.90% $17.086 2.21% 12.12 13.05% Electric Utility; generation and distribution; Kuala Lumpur Petronas Gas OTC:PNAGF 1.50% $10.340 2.56% 19.88 NA Gas utility; processing, storage, transport and distribution; Kuala Lumpur Perusahaan Gas Negara OTCPK:PPAAF 0.70% $4.338 5.82% 9.91 3.36% Gas Utility; natural gas distribution; oil and gas exploration; Jakarta Averages 2.03% $10.59 3.53% 13.97 2 8.21% 2 Excluding PNAGF Data from Reuters, Yahoo! In consumer staples, CP ( OTC:CPBQF ) has a unique niche as the exclusive manager of all 7-Eleven stores in Thailand. Consumer Staples 4.69% Ticker Fund Weighting Market Cap Yield P/E 5 Year EPS Growth Rate Primary Business CP All Public CPBQF 1.79% $10.421 1.92% 30.44 15.27% Convenience store management; includes 7-Eleven; bakery, coffee shops, health and beauty; Bangkok Unilever Indonesia Tbk OTCPK:UNLRF 1.03% $20.052 2.19% 45.05 13.52% Household, personal care and food products under a dozen brand names; Jakarta Averages 1.41% $15.24 2.06% 37.75 14.40 Data from Reuters, Yahoo! There’s only one discretionary holding, Genting ( OTCPK:GIGNF ) , a diversified hospitality company. What makes it interesting, on its own merits, is its global reach, managing properties not just in Southeast Asia, but also in Australia, the UK and the Bahamas with plans to expand to China and Japan. Consumer Discretionary 4.64% Ticker Fund Weighting Market Cap Yield P/E 5-Year EPS Growth Rate Primary Business Genting Singapore PLC OTC: GIGNF 1.18% $6.558 1.31% 54.22 NA Resorts, Hotels and Casinos, Australia, Bahamas, Malaysia, Philippines, Singapore, UK. Other regions in development Data from Reuters, Yahoo! The ‘drag’ on any fund these days is the energy company holdings, particularly the smaller scale exploration and drilling companies. The current market price simply cannot justify costs. Energy accounts for 3.12% of the fund. Energy 3.12% Ticker Fund Weighting Market Cap Yield P/E 5-Year EPS Growth Rate Primary Business PTT Public OTC:PUTRF 1.95% $17.460 5.00% 12.65 1 -1.59% Gas and petroleum fuel and chemical products domestic and overseas distribution; Bangkok PTT Exploration and Products PCL OTCPK:PEXNY 0.75% $6.177 4.46% 15.15 1 -4.15% Petroleum exploration and production; pipeline and general energy investment; Bangkok Averages 1.35% $11.82 4.73% 13.9 -2.87% 1 Approximate Data from Reuters, Yahoo! Similarly, many materials manufacturers, like building and plastic related chemicals, have experience decreasing demand during the regional economic slowdown. The two materials manufacturer holdings are in those sub-sectors: chemicals and building materials. Materials account for 2.92% of the fund. Materials 2.92% Ticker Fund Weighting Market Cap Yield P/E 5-Year EPS Growth Rate Primary Business Petronas Chemicals Group OTC:PECGF 1.61% $12.31 2.40% 20.72 NA Material investment holdings; chemicals, olefins, glycols, polymers, aromatics, fertilizers; Kuala Lumpur Siam Cement OTC:SCVPF 1.28% $14.203 3.40% 11.94 6.67% Industrial Supplies and building materials, ready mix, concrete, pulp, and chemicals; Bangkok Averages 1.45% $13.26 2.90% 16.33 ——– Data from Reuters, Yahoo! Lastly, the most defensive sector, Health Care, accounts for only 1.48% of the fund with IHH Health Care ( [[ IHHHF]]) . In a perhaps ‘over bought’ health care sector, this company occupies an interesting niche as a hospital management company with services in Central and Eastern Europe, the Middle East and North Africa. Health Care 1.48% Ticker Fund Weighting Market Cap Yield P/E 5-Year EPS Growth Rate Primary Business IHH Health Care BHD OTC: IHHHF 1.48% $0.416 0.48% 68.38 Health Care holding company; hospital management in CEE, Middle East, N. Africa and Malaysia; Kuala Lumpur Data from Reuters, Yahoo! As for the fund itself, it first listed in February 2011. It’s comparatively small with $13.7 million in net assets. Its yield is relatively good, although it must be seen in the context of an ‘EM’ region with slowing growth. Management fees are rather high at 0.65% and the 3-month average daily volume is low at approximately 9,500 shares a day. The returns reflect the region’s economic slowdown: -19.57% year to date, -22.50% in the past year and -6.14% over 3 years. Since inception, the fund has been essentially flat, totaling a -1.26% return. If the fund presents any advantage, it’s in the list of those 40 companies. A few have what seems to be great future potential when the region turns the corner. (click to enlarge) Currently, there’s more risk on the downside than there is on the upside. The chart demonstrates clearly that. The shares traded at an all-time low in mid-August and well off the May 2013 all-time high. There’s absolutely no doubt that Southeast Asia has made remarkable strides among emerging markets. However, these cycles simply don’t go on forever. Even the arguably second largest global economy, China, has admittedly met the end of its externally sourced expansion and is now transitioning to a domestically driven economy. It’s just as reasonable to expect that China’s economy will find a bottom and start an expansion cycle again. Hence, the point of the matter is that, right now, realizing the risk is worth far more than knowing that there will be a turnaround, eventually. Editor’s Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.