Author Archives: Scalper1

Is International Business Machines Corp's Stock Price Jump Sustainable?

IBM stock has been on a nice run of late. After bottoming out at $120.96 a share on Jan. 27 about a week after announcing Q4 and 2015 annual earnings

Best And Worst Q1’16: Small Cap Growth ETFs, Mutual Funds And Key Holdings

The Small Cap Growth style ranks last out of the twelve fund styles as detailed in our Q1’16 Style Ratings for ETFs and Mutual Funds report. Last quarter , the Small Cap Growth style ranked eleventh. It gets our Dangerous rating, which is based on aggregation of ratings of 12 ETFs and 451 mutual funds in the Small Cap Growth style. See a recap of our Q4’15 Style Ratings here. Figures 1 and 2 show the five best and worst-rated ETFs and mutual funds in the style. Not all Small Cap Growth style ETFs and mutual funds are created the same. The number of holdings varies widely (from 28 to 1873). This variation creates drastically different investment implications and, therefore, ratings. Investors seeking exposure to the Small Cap Growth style should buy one of the Attractive-or-better rated mutual funds from Figure 2. Figure 1: ETFs with the Best & Worst Ratings – Top 5 Click to enlarge * Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity. Sources: New Constructs, LLC and company filings The AlphaMark Actively Managed Small Cap ETF (NASDAQ: SMCP ) and the First Trust Small Cap Growth AlphaDEX Fund (NYSEARCA: FYC ) are excluded from Figure 1 because their total net assets are below $100 million and do not meet our liquidity minimums. Figure 2: Mutual Funds with the Best & Worst Ratings – Top 5 Click to enlarge * Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity. Sources: New Constructs, LLC and company filings The Smith Group Small Cap Focused Growth Fund (MUTF: SGSNX ) (MUTF: SGSVX ) and the World Funds Trust: Toreador Explorer Fund (MUTF: TMRZX ) (MUTF: TMRLX ) are excluded from Figure 2 because their total net assets are below $100 million and do not meet our liquidity minimums. The SPDR S&P 600 Small Cap Growth ETF (NYSEARCA: SLYG ) is the top-rated Small Cap Growth ETF and the PNC Small Cap Fund (MUTF: PPCIX ) is the top-rated Small Cap Growth mutual fund. SLYG earns a Neutral rating and PPCIX earns an Attractive rating. The iShares Russell 2000 Growth ETF (NYSEARCA: IWO ) is the worst-rated Small Cap Growth ETF and the PACE Small/Medium Co Growth Equity Investments (MUTF: PQUAX ) is the worst-rated Small Cap Growth mutual fund. IWO earns a Neutral rating and PQUAX earns a Very Dangerous rating. Credit Acceptance Corp (NASDAQ: CACC ) is one of our favorite stocks held by PPCIX and earns a Very Attractive rating. Over the past decade, Credit Acceptance Corp has grown its after-tax profit ( NOPAT ) by 19% compounded annually. Over this same time, Credit Acceptance has improved its return on invested capital ( ROIC ) from 11% to a top quintile 26%. Despite the improvement in business fundamentals, CACC remains undervalued. At its current price of $210/share, CACC has a price-to-economic book value ( PEBV ) ratio of 0.8. This ratio means that the market expects Credit Acceptance Corp’s NOPAT to permanently decline by 20%. If CACC can grow NOPAT by just 9% compounded annually for the next decade , the stock is worth $437/share today – a 108% upside. Beacon Roofing Supply (NASDAQ: BECN ) is one of our least favorite stocks held by PQUAX and earns a Very Dangerous rating. Over the past decade, Beacon’s economic earnings have declined from $8 million to -$11 million and have been negative for each of the past three years. Beacon’s ROIC has fallen from 12% in 2005 to a bottom quintile 4% over the last twelve months. Given the business struggles at Beacon, its stock price looks significantly overvalued. To justify its current price of $38/share, BECN must grow NOPAT by 15% compounded annually for the next 16 years . Those expectations look awfully high compared to the company’s recent declines in profits. Figures 3 and 4 show the rating landscape of all Small Cap Growth ETFs and mutual funds. Figure 3: Separating the Best ETFs From the Worst Funds Click to enlarge Sources: New Constructs, LLC and company filings Figure 4: Separating the Best Mutual Funds From the Worst Funds Click to enlarge Sources: New Constructs, LLC and company filings D isclosure: David Trainer and Kyle Guske II receive no compensation to write about any specific stock, style, or theme. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

2 New Multialternative Funds Hit The Market

In the week that saw February transition into March, two new multialternative mutual funds were launched: the Preserver Alternative Opportunities Fund (MUTF: PAOIX ), which first traded on February 29; and the PineBridge Dynamic Asset Allocation Fund (MUTF: PDAIX ), which debuted on March 2. Preserver Alternative Opportunities The Preserver Alternative Opportunities Fund’s investment objective is to provide current income and capital appreciation with low volatility compared to traditional stock and bond markets. In pursuit of this end, the fund employs three distinct alternative strategies: Event driven Structured credit Tactical trading Although Semper Capital Management is listed in the fund’s prospectus as a sub-advisor, Preserver Partners CIO Floyd Taylor will initially manage all or most of the fund’s assets. As the fund’s assets under management (“AUM”) increase, Mr. Taylor may allocate a portion of those assets to be managed by the sub-advisor, and the fund may add other sub-advisors, as well. As of March 7, the fund’s AUM stood at just $8.8 million. The Preserver Alternative Opportunities Fund’s institutional class shares have a minimum initial investment of $100,000 and a net-expense ratio of 2.18%. The retail class (MUTF: PAORX ) shares have a minimum initial investment of $2,000 and a net-expense ratio of 2.43%. PineBridge Dynamic Asset Allocation The PineBridge Dynamic Asset Allocation Fund was launched with $50 million in seed capital. It pursues its investment objective of providing absolute return by allocating across a broad range of asset classes, taking both long and short positions in stocks, bonds, ETFs, REITs, and more. According to the prospectus , the fund’s secondary objective is generating alpha, with investment selections based on the advisor’s macroeconomic views, fundamental analyses, and risk-management considerations. PineBridge was also the sub-advisor to the Redmont Resolute Fund I, which was liquidated in December 2015, and the firm still is the sub-advisor Redmont Resolute Fund II (MUTF: RMRGX ). Version “I” of the fund was liquidated despite 2015 performance in the top 15% of its peers, while Version “II” had annualized three-year gains of 1.50% through February 29, ranking in the top 34%. The PineBridge portfolio management team thus has a solid track record of outperformance. Shares of the PineBridge Dynamic Asset Allocation Fund are available in institutional and investor-servicing (MUTF: PDAVX ) classes. The institutional shares have a minimum initial investment of $1 million and a net-expense ratio of 0.65%. The investor-servicing shares have a minimum initial investment of $100,000 and a net-expense ratio of 0.80%. Past performance does not necessarily predict future results. Jason Seagraves contributed to this article.