Author Archives: Scalper1

Frontier Downgraded By Citi On Post-Verizon-Deal Synergies

Citigroup downgraded Frontier Communications ( FTR ) saying synergies expected from its acquisition of residential lines in three states from Verizon Communications ( VZ ) may fall short of consensus estimates. Verizon’s sale of wireline assets in California, Florida and Texas for $10.5 billion to Frontier is expected to close by March 31. Verizon, No. 4 on the latest IBD Big Cap 20 list of top-performing big-cap stocks, is aiming to strengthen its balance sheet ahead of an auction of radio spectrum controlled by local TV stations, which is slated to begin this month. Verizon, which acquired AOL last year for $4.4 billion, also has stated interest in acquiring parts of Yahoo ’s ( YHOO ) Internet business. Citigroup analyst Michael Rollins on Wednesday lowered his rating on Frontier to sell from neutral. “We are lowering our pro-forma OIBDA (operating income before interest tax, depreciation and amortization) outlook for Frontier,” wrote Rollins. “Our study of the company’s last two acquisitions suggests net synergy realization is much lower than the guided gross synergy figures. We do not think the emerging consensus is discounting the guided synergy contributions enough.” Frontier stock was up 21% in 2016 through Tuesday, though it has a mediocre IBD composite rating of 68. But shares were down more than 5%, near 5.30, in early trading in the stock market today . AT&T ( T ), No. 2 on the IBD Big Cap  20 and an IBD Leaderboard stock, is the highest-rated phone company in IBD’s Telecom Services-Integrated group. AT&T’s cash flow has been bolstered by its acquisition of satellite TV broadcaster DirecTV. Frontier will assume $600 million in debt as part of the deal Verizon deal, involving former GTE assets in California, Florida and Texas. In 2010, Verizon sold Frontier 4 million phone lines in 14 states for $5.3 billion. Frontier in 2013 acquired AT&T’s wireline assets in Connecticut for $2 billion in cash. Both AT&T and Verizon have been shedding residential lines as well as noncore assets such as cellphone towers. Verizon stock was up a fraction in early trading Wednesday, near 53 and within range of a 51.30 buy point first touched Feb. 25. Image provided by Shutterstock.

Market Lab Report – Premarket Pulse 3/9/16

Major averages fell yesterday on lower volume as oil took a 4% hit. That said, the Dow Jones Utility Average had another strong day as it made a higher-high. It is up 11.2% year-to-date while the NASDAQ Composite is down -7.2%, the S&P 500 is down -3.2%, and the Russell 2000 is down -6.0% year-to-date. This pronounced divergence along with the tough time the few leading stocks have had in their ability to follow-through with any reasonable gains suggests the life expectancy of this bounce may be limited. Futures are up owing to higher oil prices and European stocks one day ahead of the European Central Bank meeting. The ECB tends to be dovish and has indicated more easy money is on the way. The ECB will deliver a policy decision on Thursday. The central bank is widely expected to push its deposit rate further into negative territory, but analysts are also betting on an expansion of the ECB’s aggressive quantitative-easing program as well as another round of cheap loans to banks. That said, the ECB could disappoint markets again, as it did in December when its rate cut and QE extension massively underwhelmed investors. European markets remain in downtrends overall as QE has yet to spark any sort of economic recovery.

Smart Beta ETFs That Stood Out Amid Market Volatility

The ‘smart beta’ rage has lately taken the charge of the ETF world. Simply put, the days of plain vanilla ETFs or market-cap weighted ETFs are gone and products with several winning attributes are coming on stream. By now, investors are quite familiar with what the smart-beta concept actually is. As the name suggests, this approach calls for a strategic procedure rather than a plain vanilla market-cap oriented method of portfolio construction. Smart beta funds normally follow the passive investment strategy but with a slight twist which enables it to generate market-beating returns. Many people call it an enhanced investing strategy. A survey conducted by Create-Research shows that smart beta ETFs make up for around 18% of the U.S. ETF market. Another survey pursued by FTSE Russell reveals that 68% of financial advisors are eyeing smart beta ETFs while 70% are focusing on multiple strategic beta techniques. Investors dream of sweeping off the market and scooping up capital gains through this approach. The love for smart beta products was best reflected when renowned investment house Goldman Sachs recently forayed into the ETF industry with a host of smart-beta products (read: Can Goldman Dominate the Smart Beta ETF Industry? ). Below we have highlighted five ‘Smart Beta’ options that outperformed the broader U.S. market ETF SPDR S&P 500 ETF (NYSEARCA: SPY ), which has lost about 1.7% so far this year (as of March 4, 2016) (read: How You Can Beat the Market with Dividend Aristocrat ETFs ). PowerShares DWA Utilities Momentum ETF (NYSEARCA: PUI ) As bond yields fell on a flight to safety triggered off by global growth concerns and oil price declines at the initial part of the year, rate-sensitive sectors like utilities soared. The sector is known for its relatively high dividend payout and defensive but capital-intensive nature. As a result, a low-yield environment is a winning backdrop for it. While all utilities ETFs performed well in the stormy first two months of 2016, PUI – comprising utility companies that are showing relative strength – fared better. PUI is up 8.2% in the year-to-date frame (as of March 4, 2016). PowerShares S&P 500 High Dividend Low Volatility ETF (NYSEARCA: SPHD ) The drive for high current income along with focus on low volatile stocks has made this high dividend low volatility ETF a winner this year. The underlying index of the fund looks to track the performance of 50 securities selected from the S&P 500 Index that have historically provided high dividend yields with lower volatility. The fund yields 3.47% annually and is up 7.1% so far this year (as of March 4, 2016) (read: 3 Safe High Dividend ETFs to Beat the Volatile Market ). ALPS Emerging Sector Dividend Dogs ETF (NYSEARCA: EDOG ) The fund benefited from the return of the emerging markets and investors’ lure for dividends. The underlying index of the fund picks five stocks in each of the 10 sectors that make up the S-Network Emerging Markets which offer the highest dividend yields. The fund is equal-weighted in nature. The fund yields 4.48% annually and is up 12.3% so far this year (as of March 4, 2016) (read: Emerging Markets Back On Track: 5 Outperforming ETFs ). IQ Global Resources ETF (NYSEARCA: GRES ) Since commodities have enjoyed a phenomenal run in the year-to-date frame, this fund has found a place in the top-performers’ list. The IQ Global Resources ETF focuses on momentum and valuation factors to identify global companies that function in commodity-specific market segments and whose equity securities trade in developed markets, including the U.S. These segments include the major commodity sectors, plus Timber, Water and Coal. The fund has added 11.3% so far this year (as of March 4, 2016). The fund yields 2.60% annually. PowerShares S&P Mid-Cap Low Volatility ETF (NYSEARCA: XMLV ) As volatility spiked to start 2016, this mid-cap low volatility fund gained considerable investor attention. The fund measures the performance of 80 of the least volatile stocks from the S&P MidCap 400 Index over the past 12 months. XMLV is up over 3.4% and yields 1.83% annually. Original Post