Author Archives: Scalper1

Market Neutral Funds: The Best And Worst Of October

By DailyAlts Staff Morningstar’s aggregated Market Neutral category returned +0.67% in October, besting September’s returns of +0.12%. Invesco’s All Cap Market Neutral Fund (MUTF: CPNAX ) was the category’s top performer for an impressive second-straight month, adding 3.03% gains in October to the prior month’s +7.03%. But, while the top funds generally posted lighter gains in October than they did in September, the worst performers sustained even steeper losses. (click to enlarge) Top Performing Funds in October As stated above, the Invesco All Cap Market Neutral Fund was the Market Neutral category’s top performer for the second straight month. Through October 31, the fund had year-to-date returns of +10.88%, and even more impressive three-month and one-year gains of 13.42% and 11.40%, respectively. The fund, which debuted in December of 2013 and has $35 million in assets under management (“AUM”), is available in A (CPNAX), C (MUTF: CPNCX ), R (MUTF: CPNRX ), and Y (MUTF: CPNYX ) shares. The other top performers last month were the Nuveen Equity Market Neutral Fund (MUTF: NIMEX ) and the Zacks Market Neutral Fund (MUTF: ZMNAX ), which posted respective one-month gains of 2.72% and 2.58%. NIMEX, which debuted in June of 2013 and has $55.7 million AUM, had one-year returns of +2.97% through October 31. ZMNAX, which has been around since July 2008 but has just $9.8 million in AUM, was up 7.67% for the year ending on Halloween, ranking in the top 8% of the Morningstar category. All three of October’s top performers had positive returns over the past one, three, ten, and twelve months ending October 31. The Zacks Market Neutral Fund also had positive returns over the past three and five years ending October 31, as well. (click to enlarge) Worst Performing Funds in October The Hussman Strategic Growth Fund (MUTF: HSGFX ) was October’s very worst market-neutral fund to own, losing 6.53%. This is quite a bit worse than last month’s biggest loser, the Castlerigg Event Driven and Arbitrage Fund (MUTF: EVNTX ), which fell just 4.72% in September. HSGFX was down 9.58% for the year ending on October 31. The fund has been around since 2005, producing annualized three- and five-year losses of 7.96% and 7.93%, respectively, though the end of October. The fund has a one-star “negative” rating from Morningstar. The PSI All Asset Fund (MUTF: FXMAX ) and the BlackRock Emerging Market Long/Short Equity Fund (MUTF: BLSIX ) were the next worst performers in October, posting respective losses of 4.77% and 3.01% for the month. FXMAX launched in 2010 and has gone on to generate negative returns across the one-, three-, and ten-month periods ending October 31, in addition to three- and five-year annualized returns of -6.05% and -5.14%, respectively. BLSIX launched in 2011 and also has negative returns across all of Morningstar’s default time frames, including respective one- and three-year annualized losses of 7.01% and 2.54% for the periods ending October 31. (click to enlarge) September’s Best and Worst: Follow-Up Invesco’s All Cap Market Neutral Fund held on to its crown as the best-performing market-neutral fund for a second straight month, but what happened to September’s other top performers? The AQR Equity Market Neutral Fund (MUTF: QMNIX ), which posted a 5.79% gain in September, added just 0.09% in October, ranking in the bottom 38% of the category despite the modest gains. The Vanguard Market Neutral Fund (MUTF: VMNIX ), which returned +5.11% in September, lost 0.85% in October, putting it in the bottom 15% of all market-neutral funds for the month. And what about September’s worst performers? The previously mentioned Castlerigg Event Driven and Arbitrage Fund lost 4.72% in September, but bounced back (a bit) with a 0.62% gain in October. September’s other bottom-three funds in the category – the Visium Event Driven Fund (MUTF: VIDIX ) and the Arbitrage Event-Driven Fund (MUTF: AEDNX ) – which posted respective declines of 4.70% and 3.73% in September, improved with returns of +0.11% and +0.55% in October. Past performance does not necessarily predict future results. 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.

CenterPoint Energy: Investors Have Nothing To Fear

Summary The stock continued to decline after Q3. Equity investment write-down doesn’t reflect the investment’s true value. Results from core operations improved from last year. The market continues to be bearish about CenterPoint Energy (NYSE: CNP ). Given the company’s performance in 2015, it would seem that investors are doubting the stability of the utility company. After falling 20% from $23.43 at the beginning of the year to $18.68 before Q3 earnings, shares have since dropped another 8% to $17.10. Do the fundamentals support this rapid decline? Revenue continued to fall. Following Q2’s 19% drop, Q3 revenue decreased by 10% ($1.8 billion to $1.6 billion) as well, primarily as the result of lowering natural gas prices. However, this was offset by the drop in natural gas expense, which decreased from $702 million to $527 million. Due to various cost reductions, the company was able to decrease its operating expense from $493 million to $479 million. This impact may seem small, but this allowed the company to increase its operating income by 14% when compared to Q3 2014. This rise in operating profit is the first time the company achieved growth in 2015. Q1 and Q2 operating profit decreased by 13% quarter on quarter, and Q3 operating profit was flat. Isn’t this evidence that the company is improving? What are investors worried about? Possible Concern One thing that could trouble investors is the loss from equity investment ($794 million), which is the biggest reason that the company delivered a $900 million loss before taxes. The equity investment consisted solely of Enable Midstream (NYSE: ENBL ), a stock that I’ve talked about before. You can read my previous articles ( here and here ) to learn more about the company. Enable Midstream Partners is a midstream company that is suffering from industry headwinds. However, the company continues to deliver good cash flows due to its fee-based contracts. Furthermore, it is well capitalized with a good interest rate coverage ratio. Enable’s transported volume continued to grow in Q3, offsetting declining prices that negatively impacted product sales. Going forward, I believe Enable will come out on top even if natural gas prices don’t improve. What does all of this mean? I believe that the write-off of equity investment is not representative of Enable Midstream Partners’ true value. Core Operation Remains Stable Enough about Enable, what about CenterPoint’s existing operation? In my last article , I talked about the company’s stability. The Electric segment is not directly affected by commodity movements since it is not involved in power generation activities. The Natural Gas Distribution segment does have some exposure to commodity movements due to a time lag between purchases and deliveries, but the company actively uses derivatives to hedge any uncertainty. So overall, I would expect profit to be stable over the long term. CenterPoint’s stability is once again evident in Q3. Every single segment improved quarter on quarter. Operating income for the Electric segment rose 5%, Natural Gas Distribution’s operating income recovered from last year’s volatility, improving from a loss of -$8 million to a gain of $11 million, and Energy Services’ operating income increased by 17%. Takeaway I believe there’s nothing in the third quarter that was particularly alarming. The company continued to deliver stable profits amid a volatile commodity environment. Unfortunately, investors have been focusing on the wrong things. In particular, the Enable Midstream fear is overblown. Results from core operations should continue to improve, and that is what will really support the company as a whole.

Google Express Service Widens To Southern California

Google, the largest subsidiary of Alphabet (GOOGL), announced that its Google Express next-day delivery service is expanding further across Southern California. Starting Thursday, Southern California residents can shop from national stores such as Costco Wholesale (COST), Target (TGT), Kohl’s (KSS) and L’Occitane en Provence and get next-day delivery, Google said. The expansion makes quick deliveries available in “new cities, towns and rural