Author Archives: Scalper1

ETF Update: A Look Back At November And 9 Funds To Kick Off December

Summary Every week, Seeking Alpha aggregates ETF updates in an effort to alert readers and contributors to changes in the market. There were 9 launches last week and a total of 21 in November. Have a view on something that’s coming up or a new fund? Submit an article. Welcome back to the SA ETF Update. My goal is to keep Seeking Alpha readers up to date on the ETF universe and to gain some visibility, both for the ETF community, and for me as its editor (so users know who to approach with issues, article ideas, to become a contributor, etc.) Every weekend, or every other weekend (depending on the reader response and submission volumes), we will highlight fund launches and closures for the week, as well as any news items that could impact ETF investors. There were 21 launches in November, with just 2 closures, so a net gain of 19 funds. Taking a look back, we see a continuing focus on Smart Beta ETFs. These are funds that hope to capitalize on the perceived systematic biases or inefficiencies in the market, rather than the traditional index construction around market capitalization or sectors. This has been a growing trend in the industry and I expect to see more before the end of the year. November Total Launches Fund Name Ticker iShares Currency Hedged MSCI ACWI Minimum Volatility ETF HACV iShares Currency Hedged MSCI EAFE Minimum Volatility ETF HEFV iShares Currency Hedged MSCI EM Minimum Volatility ETF HEMV iShares Currency Hedged MSCI Europe Small-Cap ETF HEUS iShares Currency Hedged MSCI Europe Minimum Volatility ETF HEUV BlueStar TA-BIGITech Israel Technology ETF ITEQ First Trust SSI Strategic Convertible Securities ETF FCVT PowerShares Russell 1000 Low Beta Equal Weight Portfolio USLB PowerShares FTSE International Low Beta Equal Weight Portfolio IDLB AlphaClone International ETF ALFI Goldman Sachs ActiveBeta International Equity ETF GSIE FlexShares Currency Hedged Morningstar DM ex-US Factor Tilt Index Fund TLDH FlexShares Currency Hedged Morningstar EM Factor Tilt Index Fund TLEH Global SmallCap Dividend Fund GSD iShares Core International Aggregate Bond ETF IAGG First Trust Heitman Global Prime Real Estate ETF PRME WisdomTree Global Hedged SmallCap Dividend ETF HGSD Etho Climate Leadership U.S. ETF ETHO Deutsche X-trackers FTSE Developed ex US Enhanced Beta ETF DEEF Deutsche X-trackers Russell 1000 Enhanced Beta ETF DEUS FlexShares Real Assets Allocation Index Fund ASET Fund launches for the week of November 30th, 2015 SPDR Fossil Fuel Free ETF opens for business (12/1): Among the top holdings of the SPDR S&P 500 Fossil Fuel Free ETF ( SPYX ) are Apple (NASDAQ: AAPL ), Microsoft (NASDAQ: MSFT ), GE (NYSE: GE ), J&J (NYSE: JNJ ), Wells Fargo (NYSE: WFC ), Amazon (NASDAQ: AMZN ), Berkshire Hathaway (NYSE: BRK.A ), JPMorgan (NYSE: JPM ), Facebook (NASDAQ: FB ), and Alphabet (NASDAQ: GOOG ). The gross expense ratio is 0.25%, the net 0.20%. Alpha Architect launches a new active ETF (12/2): The MomentumShares U.S. Quantitative Momentum ETF (BATS: QMOM ) picks its holdings with a quantitative model designed to find positive momentum firms. As detailed by the company’s whitepaper on QMOM, “We consider the term momentum to mean a continuation of past returns-past winners tend to be future winners, while past losers tend to be future losers.” State Street launches 3 new factor-focused SPDR funds (12/4): State Street’s (NYSE: STT ) new funds all select high-value, high-quality and low-size firms from within the Russell 1000. However, each tracks a different fourth factor as well, included in the name of the funds: The SPDR Russell 1000 Momentum Focus ETF (NYSEARCA: ONEO ), the SPDR Russell 1000 Low Volatility Focus ETF (NYSEARCA: ONEV ) and the SPDR Russell 1000 Yield Focus ETF (NYSEARCA: ONEY ). These 3 funds all fall into SPDR’s growing selection of Smart Beta ETFs. Direxion launches a new fund and brings 2 back from the dead (12/4): The Direxion Daily S&P Biotech Bear 1X Shares (NYSEARCA: LABS ) offers inverse exposure to the S&P Biotechnology Select Industry Index, which is the index of choice for the SPDR S&P Biotech ETF (NYSEARCA: XBI ). If the Direxion Daily Natural Gas Related Bear 3X Shares (NYSEARCA: GASX ) and the Direxion Daily Healthcare Bear 3X Shares (NYSEARCA: SICK ) sound familiar, it’s because we have seen them before. GASX and SICK were shut down in Q3 2014 and Q3 2014 respectively. SICK’s bull counterpart, the Direxion Daily Healthcare Bull 3x Shares ETF (NYSEARCA: CURE ), had been seeing strong growth until May, which may have been when Direxion decided to give SICK another chance. The first ETF focused on Latin American REITs (12/4): The Tierra XP Latin America Real Estate ETF (NYSEARCA: LARE ) offers investors access to real estate investment trusts (REITs) and real estate operating companies (REOCs) in Latin America. According to a press release at the launch, this ETF was a big team effort: “The ETF was introduced by a partnership between Tierra Funds, ETF Managers Group, ISE ETF Ventures, and XP Gestão de Recursos, an XP Group company.” This is the first ETF targeting Latin American REITs specifically. There were no fund closures for the week of November 30, 2015 Have any other questions on ETFs or ETNs? Please comment below and I will try to clear things up. As an author and editor I have found that constructive feedback is the best way to grow. What you would like to see discussed in the future? How can I improve this series to meet reader needs? Please share your thoughts on this first edition of the ETF Update series in the comments section below. Have a view on something that’s coming up or a new fund? Submit an article .

Valuation Dashboard: Financials – Update

Summary 4 key factors are reported across industries in the Financial sector. They give a valuation status of industries relative to their history. They give a reference for picking stocks in each industry. This is part of a monthly series of articles giving a valuation dashboard in sectors and industries. The idea is to follow up a certain number of fundamental factors for every sector, to compare them to historical averages. This article covers Financials. The choice of the fundamental ratios used in this study has been justified here and here . You can find in this article numbers that may be useful in a top-down approach. There is no analysis of individual stocks. You can refine your research reading articles by industry experts here . A link to a list of stocks to consider is provided in the conclusion. Methodology Four industry factors calculated by portfolio123 are extracted from the database: Price/Earnings (P/E), Price to sales (P/S), Price to free cash flow (P/FCF), Return on Equity (ROE). They are compared with their own historical averages “Avg”. The difference is measured in percentage for valuation ratios and in absolute for ROE, and named “D-xxx” if xxx is the factor’s name. For example, D-P/E = (AvgP/E – P/E)/AvgP/E. It can be interpreted as a percentage in under-pricing relative to a historical baseline: the higher, the better. It points to over-pricing when negative. ROE is already a percentage. A relative variation makes little sense. That’s why we take the simple difference: D-ROE = ROE – AvgROE. The industry factors are proprietary data from the platform. The calculation aims at eliminating extreme values and limiting the influence of the largest companies. These factors are not representative of capital-weighted indices. They are useful as reference values for picking stocks in an industry, not for ETF investors. Industry valuation table on 12/3/2015 The next table reports the 4 industry factors. For each factor, the next “Avg” column gives its average between January 1999 and October 2015, taken as an arbitrary reference of fair valuation. The next “D-xxx” column is the difference as explained above. So there are 3 columns for each ratio. P/E Avg D- P/E P/S Avg D- P/S P/FCF Avg D- P/FCF ROE Avg D-ROE Commercial Banks 15.85 15.24 -4.00% 3.02 2.06 -46.60% 18.45 13.44 -37.28% 8.79 8.89 -0.1 Thrifts & Mortgage Finance* 19.29 20.66 6.63% 2.92 2.03 -43.84% 21.57 14.75 -46.24% 6.08 5.02 1.06 Diversified Financial Services 23.8 17.85 -33.33% 4.41 2.94 -50.00% 18.4 16.13 -14.07% 4.78 6.38 -1.6 Consumer Finance* 10.62 13.15 19.24% 1.4 1.47 4.76% 7.11 8.22 13.50% 11.13 11.83 -0.7 Capital Markets* 16.22 18.07 10.24% 3.57 3.06 -16.67% 17.55 19.62 10.55% 8.2 7.89 0.31 Insurance 14.46 13.7 -5.55% 1.3 1.07 -21.50% 11.67 8.99 -29.81% 9.05 8.71 0.34 REITs** 34.38 35.42 2.94% 5.19 4.56 -13.82% 45.45 38.74 -17.32% 4.97 4.07 0.9 Real Estate Management** 35.72 31.19 -14.52% 3.44 3.06 -12.42% 22.08 25.55 13.58% 4.01 -1.33 5.34 * Averages since 2003 – ** Averages since 2006 Valuation The following charts give an idea of the current status of industries relative to their historical average. In all cases, the higher the better. Price/Earnings: Price/Sales: Price/Free Cash Flow: Quality (ROE) Relative Momentum The next chart compares the price action of the SPDR Select Sector ETF ( XLF ) with the SPDR S&P 500 Trust ETF (NYSEARCA: SPY ) (chart from freestockcharts.com). (click to enlarge) Conclusion The financial ETF has the same return as SPY in the last 3 months. On this period, the 5 best performing S&P 500 financial stocks are Blackrock Inc (NYSE: BLK ), Cincinnati Financial Corp (NASDAQ: CINF ), Equinix (NASDAQ: EQIX ), Plum Creek Timber Co (NYSE: PCL ) and Public Storage (NYSE: PSA ). CINF, PCL and PSA hit an all-time high this week. Some financial industries look overpriced, but all of them are above or close to their baseline in quality, with ROE in a [-1.6,+5.4] interval from the historical average. REITs have improved since last month in valuation and are stable in quality. Consumer Finance is the only industry with 3 valuation factors pointing to underpricing. For Capital Markets, 2 out of 3 are pointing to underpricing. Commercial Banks, Diversified Financial Services and Insurance are overpriced for the 3 valuation ratios. Diversified Financial Services look the less attractive industry, with all metrics in negative territory. However, there may be quality stocks at a reasonable price in any industry. To check them out, you can compare individual fundamental factors to the industry factors provided in the table. As an example, a list of stocks in Financials beating their industry factors is provided on this page . If you want to stay informed of my updates on this topic and other articles, click the “Follow” tab at the top of this article.

Mark Zuckerberg’s philanthropy earns praise, laughs

Facebook (FB) founder and CEO Mark Zuckerberg is making positive headlines with his charitable and family leave plans. But comedians still found ways to poke fun at the billionaire and his announcements. Zuckerberg announced Tuesday that he and his wife, Priscilla Chan, plan to give 99% of their Facebook shares (now worth over $45 billion) to charitable purposes during their lives. They made the pledge in an open letter to their newborn daughter,