Author Archives: Scalper1

Virtus Plans To Roll Out Actively Managed Japan ETF

Last month, Bank of Japan’s (BOJ) move to impose a negative interest rate for the first time in its history took the markets by surprise (read: Japan ETFs to Buy on Negative Interest Rates ). The BOJ’s step will help the third-largest country in the world to get closer to its target inflation rate of 2% by the first half of next year and boost confidence and spur demand. The BOJ Governor Haruhiko Kuroda stated that there is no limit to efforts for easing monetary policy. The central bank may further expand asset purchases if required (read: Japan ETFs to Tap on Renewed Stimulus Hopes ). Encouraged by this, Virtus has recently filed for an actively managed ETF, Virtus Japan Alpha ETF (EJA) , targeting this market. While a great deal of the key information, such as expense ratio, was not available in the initial release, other important points were released in the filing. We have highlighted those below for investors who may be looking for a fresh out-of-oven play targeting Japan from Virtus should it pass regulatory hurdles: Proposed Fund in Focus As per the SEC filing , the fund will generally comprise securities of Japanese companies listed on the JPX-Nikkei 400 Total Return Index. Japan Tobacco Inc. ( OTCPK:JAPAY ), Takeda Pharmaceutical Company Limited ( OTCPK:TKPYY ), Toyota Motor Corporation (NYSE: TM ) and Nippon Telegraph and Telephone Corporation (NYSE: NTT ) are some of the top weighted stocks in the index. The fund’s basket will include approximately 80-100 stocks from the Index based on quantitative and qualitative factors such as cash flow return on invested capital, earnings quality and momentum, operational quality, corporate governance policies and capital stewardship. The proposed ETF looks to provide long-term capital appreciation. Although Virtus ETF Advisers LLC is the fund’s adviser, it has appointed Euclid Advisors LLC as sub-adviser. The fund’s investments will be managed by Euclid Advisors. The issuer may exit from any stock, if it believes that the stock has become overvalued or if the stock’s weightage in the portfolio is too large. How does it fit in a portfolio? This proposed product could be an interesting choice for investors seeking exposure to the Japanese market. This is because the prime minister, Shinzo Abe, has started implementing his stimulus program, popularly known as Abenomics, in an effort to lift the economy out of feeble growth and deflationary pressure. Abenomics is a combination of aggressive quantitative easing policies from BOJ, increased public infrastructure spending and a boost to exports. In such a scenario, a Japan focus seems to be a good idea. As such, the fund might be a great choice in a global slowdown. The fund does offer some diversification benefit through exposure to Japan markets. The product uses a bottom-up approach and fundamental analysis ensures the fund includes stable and sound companies. Can it succeed? The proposed ETF does not have any direct competitor as there are currently no actively managed Japan ETFs available to U.S. investors. The proposed fund, if approved, could give investors a new way to play the Japanese equity market. The product might charge higher fees from investors annually due to its unique strategy. However, there are quite a number of other Japan equity ETFs listed in the U.S. Of these, the ultra-popular fund, iShares MSCI Japan ETF (NYSEARCA: EWJ ) , has a total asset base of $17.7 billion. This fund tracks the MSCI Japan Index and holds 318 stocks in its basket. It trades in heavy volume of 46 million shares per day and charges 47 bps in annual fees. EJA could also face competition from Japan hedged funds – the WisdomTree Japan Hedged Equity ETF (NYSEARCA: DXJ ) with an asset base of $10.6 billion, the db X-trackers MSCI Japan Hedged Equity ETF (NYSEARCA: DBJP ) with AUM of $1.1 billion and iShares Currency Hedged MSCI Japan ETF (NYSEARCA: HEWJ ) with AUM of $616.5 million. Thus, the proposed ETF, if launched, has a good chance of making a name for itself if it manages to generate returns net of fees greater than the passively managed products in the Japan equity ETF space. Virtus Japan Alpha ETF’s plan of using a bottom-up approach and fundamental analysis for stock selection is noteworthy, but its success is a huge factor of the returns it manages to generate. Link to the original post on Zacks.com Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

Valeant Stock Plummets As Guidance Slashed After Q4 Earnings Miss

Shares of Valeant Pharmaceuticals International ( VRX ) plunged to a four-year low Tuesday after the specialty drugmaker’s Q4 earnings and guidance missed analysts’ expectations. Valeant reported adjusted earnings of $2.50 a share, 11 cents short of the consensus estimate of analysts polled by Thomson Reuters. Revenue of $2.79 billion beat consensus by about $40 million. The results were preliminary and unaudited because of an ongoing review of the company’s current and past financial reporting after a scandal broke out last fall, delaying the filing of the 10-K annual report. Valeant didn’t provide year-over-year comparisons because 2014 financials are still under review, but it previously reported Q4 2014 earnings of $2.58 a share on revenue of $2.28 billion, so on that basis EPS fell 3% and sales rose 22%. Valeant slashed its guidance for the current quarter. It now expects revenue of $2.3 billion to $2.4 billion, more than $500 million below its previous guidance, with EPS guidance down about $1 to a range of $1.30 to $1.55. For the year, Valeant hacked more than $1 billion off its sales guidance, now $11 billion to $11.2 billion, with the EPS range down more than $3 at $9.50 to $10.50. Valeant stock plunged 44.5% to 38.34 in late morning trade on the stock market today , its lowest point since November 2011. There were multiple reasons for the shortfall, many to do with the messy transition of the company’s business model in the wake of the scandal. Valeant had severed its relationship with now-defunct specialty pharmacy Philidor after a number of allegations were lodged against it. In December, Valeant announced a new partnership with Walgreens Boots Alliance ( WBA ) to distribute the dermatology and ophthalmology drugs previously channeled mostly through Philidor, but Valeant CEO J. Michael Pearson admitted on the company’s earnings conference call with analysts that the deal hadn’t been well received, and Valeant has made unspecified changes after complaints from distributors. Pearson said Valeant has also been negotiating with payers over the pricing and rebating of drugs, which also contributed to the reduced guidance. Valeant has been the target of criticism all the way up to the U.S. Congress over its historic price increases, but the Walgreens deal brought with it a 10% price cut across the board. Pearson said that, overall, Valeant’s price increases this year are among the lowest in the industry, as it’s tried to accommodate payers. Pearson said that the impact of most of this is being felt in Q1, and that “we in essence lost a quarter.” For that reason, Valeant gave guidance for the 12 months starting April 1, which it says is more representative of its business going forward. Valeant expects EPS of $10.75 to $11.25 for the period, which is still below the Street’s average estimate of $15.02. It forecast revenue of $11.6 billion to $11.8 billion, which has no point of comparison, since there isn’t a consensus revenue number for Q1 2017.

ETF Stats For February 2016: Count Up, Assets Down

Thirteen new products came to market in February: seven exchange-traded funds (“ETFs”) and six exchange-traded notes (“ETNs”). Closures were on the light side, with just three products being liquidated during the month. The net increase of 10 listings pushes the overall count to 1,863, consisting of 1,659 ETFs and 204 ETNs. Assets declined for the third consecutive month and now total $2.02 trillion. In January, three ETNs encountered early terminations. Some of the February introductions were intended to replace those previously terminated ETNs. Two UBS ETRACS ETNs providing leveraged exposure to master limited partnerships (“MLPs”) fell victim to their own anti-ruination triggers on January 20 due to the steep price plunge among MLPs. These two ETNs were liquidated on February 1, and eight days later, UBS rolled out their replacements: ETRACS 2xMonthly Leveraged Alerian MLP Infrastructure Index Series B ETN (NYSEARCA: MLPQ ) and ETRACS 2xMonthly Leveraged S&P MLP Index Series B ETN (NYSEARCA: MLPZ ). ProShares also brought out a replacement product in February. However, unlike UBS, which rushed to fill the gap created by prior terminations, ProShares brought out its “new and improved” version before its predecessor disappeared. ProShares Managed Futures Strategy (BATS: FUT ), launched 2/18/16, is a more shareholder-friendly version of the existing ProShares Managed Futures Strategy (NYSEARCA: FUTS ). The major difference between the two is that the new FUT will issue 1099s at tax time, while FUTS has been issuing K-1 forms. The underlying structural and regulatory differences prevented ProShares from a merger or simple transformation of the “old” into the “new.” Therefore, ProShares went with a “launch one and close the other” plan and provided shareholders with a one-month overlap. An event occurred in February that you will not see in our statistics. On February 26, 2016, the NASDAQ began listing Eaton Vance Stock NextShares (EVSTC). You may have read some articles declaring these to be the next generation of actively managed ETFs. Technically, they are classified as exchange-traded managed funds (“ETMFs”), and ETMFs are not ETFs . For starters, the U.S. Securities and Exchange Commission has placed some tough restrictions on ETMF advertising. Namely, ETMF sponsors and issuers: Cannot call them an open-end investment company; Cannot call them a mutual fund; Cannot call them ETFs; and Must include a statement that says shares are not individually redeemable (when talking about creation/redemption of shares). There you have it. They are not ETFs and will not be included in our ETF statistics at this time. Additionally, they are not mutual funds or open-end investment companies either. They are ETMFs with their own unique set of order types (buy at a future net asset value [“NAV”] plus premium, sell at a future NAV minus discount) and only one broker (Folio Investing) that can currently process these strange orders. The quantity of ETFs with more than $10 billion in assets grew from 51 to 53 in February, and these vital few hold 59.9% of industry assets. The number of products with at least $1 billion in assets increased from 243 to 246. The median asset level is just $61.5 million, which is a far cry from the “average” level of $1.09 billion. Trading activity slid 13.9% lower for the month to $1.87 trillion, reflecting a 92% turnover ($ volume/industry assets) for the month. February 2016 Month End ETFs ETNs Total Currently Listed U.S. 1,659 204 1,863 Listed as of 12/31/2015 1,644 201 1,845 New Introductions for Month 7 6 13 Delistings/Closures for Month 1 2 3 Net Change for Month +6 +4 +10 New Introductions 6 Months 113 13 126 New Introductions YTD 20 6 26 Delistings/Closures YTD 5 3 8 Net Change YTD +15 +3 +19 Assets Under Mgmt ($ billion) $2,001 $19.4 $2,021 % Change in Assets for Month -0.1% -4.1% -0.1% % Change in Assets YTD -4.6% -9.7% -4.6% Qty AUM > $10 Billion 53 0 53 Qty AUM > $1 Billion 242 4 246 Qty AUM > $100 Million 759 33 792 % with AUM > $100 Million 45.8% 16.2% 42.5% Monthly $ Volume ($ billion) $1,789 $78.9 $1,868 % Change in Monthly $ Volume -13.8% -19.9% -13.9% Avg Daily $ Volume > $1 Billion 14 1 15 Avg Daily $ Volume > $100 Million 108 6 114 Avg Daily $ Volume > $10 Million 335 12 347 Actively Managed ETF Count (w/ change) 137 +3 mth 0 ytd Actively Managed AUM ($ billion) $24.3 +1.6% mth +5.9% ytd Data sources: Daily prices and volume of individual ETPs from Norgate Premium Data. Fund counts and all other information compiled by Invest With An Edge. New products launched in February (sorted by launch date): CS X-Links WTI Crude Oil Index ETN (NYSEARCA: OIIL ) , launched 2/9/16, is an ETN issued by Credit Suisse AG that provides exposure to the Bloomberg WTI Crude Oil SubIndex Total Return. The Index is intended to reflect the returns that are potentially available through an unleveraged investment in rolling West Texas Intermediate crude oil futures contracts, plus the Treasury Bill rate of interest that could be earned on funds committed to the trading of the underlying contracts. It has an expense ratio of 0.55% ( OIIL overview ). ETRACS 2xMonthly Leveraged Alerian MLP Infrastructure Series B ETN (MLPQ) , launched 2/9/16, is an ETN issued by UBS AG linked to the monthly compounded 2X leveraged performance of Alerian MLP Infrastructure Index, less investor fees of 0.85%. MLPQ pays a variable quarterly coupon linked to the cash distributions, if any, on the Index constituents. This ETN essentially replaces the ETRACS 2xMonthly Leveraged Alerian MLP Infrastructure ETN (NYSEARCA: MLPL ), which encountered an early termination trigger in January ( MLPQ overview ). ETRACS 2xMonthly Leveraged S&P MLP Series B ETN (MLPZ) , launched 2/9/16, is an ETN issued by UBS AG linked to the monthly compounded 2X leveraged performance of S&P MLP Index, less investor fees of 0.95%. MLPV pays a variable quarterly coupon linked to the cash distributions, if any, on the Index constituents. This ETN essentially replaces the ETRACS 2xMonthly Leveraged S&P MLP ETN (NYSEARCA: MLPV ), which encountered an early redemption trigger in January ( MLPZ overview ). Guggenheim Total Return Bond ETF (NYSEARCA: GTO ) , launched 2/10/16, is an actively managed ETF offering the opportunity to capitalize on changing relative values in fixed-income securities and sectors. GTO will normally invest in a portfolio of fixed-income instruments of varying maturities and of any credit quality. It uses a strategy that invests primarily in investment-grade fixed-income securities across multiple sectors in any country. It seeks maximum total return comprised of income and capital appreciation, and it has an expense ratio of 0.50% ( GTO overview ). UBS AG FI Enhanced Europe 50 ETN (NYSEARCA: FIEE ) , launched 2/16/16, is an ETN issued by UBS AG linked to the STOXX Europe 50 USD (Gross Return) Index. The ETNs are designed to provide a two times leveraged long exposure to the performance of the Index compounded on a quarterly basis, reduced by the accrued fees of 1.95% per annum ( FIEE overview ). ETRACS S&P GSCI Crude Oil Total Return Index ETN (NYSEARCA: OILX ) , launched 2/18/16, is an ETN issued by UBS AG linked to the performance of the S&P GSCI Crude Oil Total Return Index, less investor fees of 0.50% ( OILX overview ). ProShares Managed Futures Strategy (FUT) , launched 2/18/16, delivers a managed-futures exposure inside of an actively managed ETF. It pursues a long/short strategy with a risk-weighting methodology. It allocates holdings across a broad range of commodity, currency, and financial assets, equally weighting each component based on estimated risk. It uses the S&P Strategic Futures Index as a “performance” benchmark. The new fund will issue 1099s for tax reporting and will essentially be an “improved structure” replacement for FUTS, the ProShares managed-futures ETF that issues K-1 forms and will be closed in March . FUT has an expense ratio of 0.75% ( FUT overview ). UBS AG FI Enhanced Global Yield ETN (NYSEARCA: FIHD ) , launched 2/22/16, is an ETN issued by UBS AG linked to the return on the MSCI World High Dividend Yield USD Gross Total Return Index. The Index reflects both the price performance and the reinvestment of dividends, and therefore FIHD will not pay dividends. The ETN is designed to provide a two times leveraged long exposure to the performance of the Index compounded on a quarterly basis, reduced by its expense ratio of 1.65% ( FIHD SEC filing ). Cambria Sovereign High Yield Bond ETF (Pending: SOVB ) , launched 2/23/16, is an actively managed ETF seeking income and capital appreciation from investments that provide exposure to sovereign and quasi-sovereign bonds. The fund’s holdings consist of liquid sovereign debt issues with high-yield characteristics. It seeks high income generation and capital appreciation and provides exposure to a basket of foreign currencies. Rather than adhering to traditional notions of emerging and developed markets, the strategy seeks the most attractively priced debt securities from a global opportunity set with an expense ratio of 0.59% ( SOVB overview ). Note: The website mentions the Cambria Sovereign Bond Index, but since the EFT is actively managed, it is not clear what purpose the Index serves. Pacer Global High Dividend ETF (BATS: PGHD ) , launched 2/23/16, seeks to track the total return performance of the Pacer Global Cash Cows Dividends 100 Index. The strategy attempts to provide a continuous stream of income and capital appreciation over time by screening for companies with a high free-cash-flow yield and a high dividend yield. Starting with the FTSE All World Developed Large-Cap Index of approximately 1,000 companies in developed markets worldwide, the strategy selects the 300 companies with the highest trailing 12-month free-cash-flow yield. From those, the strategy selects the 100 companies with the highest trailing 12-month dividend yield. PGHD has an estimated initial yield of 4.4% and an expense ratio of 0.60% ( PGHD overview ). WisdomTree CBOE S&P 500 PutWrite Strategy Fund (NYSEARCA: PUTW ) , launched 2/24/16, seeks to track the performance, before fees and expenses, of the CBOE S&P 500 PutWrite Index, a collateralized put write strategy on the S&P 500 Index. The strategy is designed to receive a premium from the option buyer by selling (writing) a sequence of one-month, at-the-money, S&P 500 Index put options. However, if the value of the S&P 500 Index falls below the strike price, the option finishes in-the-money and PUTW must pay the option buyer the difference between the strike price and the value of the S&P 500 Index. This strategy attempts to partially offset a decline in the value of the S&P 500 Index to the extent of the premiums received. In theory, it could help lower portfolio beta and reduce downside risk. PUTW has an expense ratio capped at 0.38% ( PUTW overview ). Janus Small Cap Growth Alpha ETF (NASDAQ: JSML ) , launched 2/25/16, seeks investment results that correspond to the performance of the Janus Small Cap Growth Alpha Index. The underlying strategy seeks risk-adjusted outperformance relative to the U.S. small-cap growth asset class by investing in resilient Smart Growth companies that have proven operational excellence and represent the top 10% of the eligible universe. The Index follows a disciplined process that evaluates key fundamental factors such as growth, profitability, and capital efficiency that are believed to more accurately identify companies poised for long-run sustainable growth. The new ETF has an expense ratio of 0.50% ( JSML overview ). Janus Small/Mid Cap Growth Alpha ETF (NASDAQ: JSMD ) , launched 2/25/16, seeks investment results that correspond to the performance of the Janus Small/Mid Cap Growth Alpha Index. It is a small- and mid-cap growth ETF that systematically identifies Smart Growth companies using a process based on Janus’ fundamental research. The strategy seeks to provide risk-adjusted outperformance by identifying top-tier U.S. small- and mid-cap companies with some of the strongest fundamentals and the capability of delivering sustainable growth in a variety of market environments. It has an expense ratio of 0.50% ( JSMD overview ). Product closures in February and last day of listing : ETRACS 2xMonthly Leveraged Alerian MLP Infrastructure ETN ( MLPL ) 1/29/16* ETRACS 2xMonthly Leveraged S&P MLP ETN ( MLPV ) 1/29/16* Janus Equal Risk Weighted Large Cap (NASDAQ: ERW ) 2/24/16 *Note: The last day of listing for MLPL and MLPV was 1/29/16 (the last business day of January), and they were available to trade throughout January. Therefore, the closures are classified as occurring in February. Product changes in February: Van Eck Global acquired the Yorkville MLP ETFs. The Yorkville High Income Infrastructure MLP (NYSEARCA: YMLI ) became the Market Vectors High Income Infrastructure MLP ETF ( YMLI ), and the Yorkville High Income MLP (NYSEARCA: YMLP ) became the Market Vectors High Income MLP ( YMLP ) effective February 22. Announced product changes for coming months: EGShares Emerging Markets Domestic Demand (NYSEARCA: EMDD ) will become EGShares EM Strategic Opportunities (EMSO) and reduce its expense ratio to 0.65% effective March 1. Despite the name and ticker change, the underlying index still claims to be “a 50-stock free-float market capitalization-weighted index designed to measure the performance of companies in emerging markets that are tied to domestic demand.” Global X FTSE Greece 20 ETF (NYSEARCA: GREK ) will change its underlying index and its name to Global X MSCI Greece ( GREK ) effective March 1. The iShares iBonds target maturity ETFs will be renamed to include “Term” in their names, and the “AMT-Free” funds will be renamed “Muni Bond” ETFs effective March 1. ETFS Physical White Metal Basket Shares (NYSEARCA: WITE ) will close and liquidate, with its last day of trading occurring March 2. Invesco PowerShares will change the names and underlying indexes on four ETFs , with two receiving new ticker symbols, effective March 18. PowerShares S&P Emerging Markets High Beta (NYSEARCA: EEHB ) will become PowerShares S&P Emerging Market Momentum (EEMO), PowerShares S&P International Developed High Beta (NYSEARCA: IDHB ) will become PowerShares S&P International Developed Momentum (IDMO), PowerShares S&P International Developed High Quality (NYSEARCA: IDHQ ) will become PowerShares S&P International Developed Quality ( IDHQ ), and PowerShares S&P 500 High Quality (NYSEARCA: SPHQ ) will become PowerShares S&P 500 Quality ( SPHQ ). Invesco PowerShares will close four ETFs , with March 18 being their last day of listed trading. The affected funds are PowerShares China A-Share (NYSEARCA: CHNA ), PowerShares Fundamental Emerging Markets Local Debt (NYSEARCA: PFEM ), PowerShares KBW Capital Markets (NYSEARCA: KBWC ), and PowerShares KBW Insurance (NYSEARCA: KBWI ). ProShares Managed Futures Strategy ( FUTS ) will have its last day of trading on March 18. Barclays is seeking shareholder approval to add an early termination trigger to the iPath S&P GSCI Crude Oil Total Return ETN (NYSEARCA: OIL ) and reduce the investor fee from 0.75% to 0.70% effective April 29. Previous monthly ETF statistics reports are available here . Disclosure: Author has no positions in any of the securities, companies, or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) is received from, or on behalf of, any of the companies or ETF sponsors mentioned.