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

By | February 26, 2016

Scalper1 News

The All Cap Growth style ranks seventh out of the twelve fund styles as detailed in our Q1’16 Style Ratings for ETFs and Mutual Funds report. Last quarter , the All Cap Growth style ranked sixth. It gets our Neutral rating, which is based on aggregation of ratings of 17 ETFs and 568 mutual funds in the All 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 All Cap Growth style ETFs and mutual funds are created the same. The number of holdings varies widely (from 20 to 2206). This variation creates drastically different investment implications and, therefore, ratings. Investors seeking exposure to the All Cap Growth style should buy one of the Attractive-or-better rated ETFs or mutual funds from Figures 1 and 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 Five ETFs 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 Catalyst/Lyons Hedged Premium Return Fund (MUTF: CLPFX ) is excluded from Figure 2 because its total net assets are below $100 million and do not meet our liquidity minimums. iShares Core US Growth ETF (NYSEARCA: IUSG ) is the top-rated All Cap Growth ETF and JPMorgan Intrepid Growth Fund (MUTF: JGISX ) is the top-rated All Cap Growth mutual fund. IUSG earns an Attractive rating and JGISX earns a Very Attractive rating. Calamos Focus Growth ETF (NASDAQ: CFGE ) is the worst-rated All Cap Growth ETF and Sparrow Growth Fund (MUTF: SGFFX ) is the worst-rated All Cap Growth mutual fund. CFGE earns a Neutral rating and SGFFX earns a Very Dangerous rating. Gilead Sciences (NASDAQ: GILD ) is one of our favorite stocks held by JGISX and earns a Very Attractive rating. Gilead is also one of only seven S&P 500 stocks to rise 10% or more in 2008 . Over the past 10 years, Gilead has grown after-tax profits ( NOPAT ) by 43% compounded annually. The company has consistently earned a double-digit return on invested capital ( ROIC ) and currently earns a top-quintile ROIC of 80%. Despite the impressive growth in profits and profitability throughout its history, GILD is currently undervalued. At its current price of $90/share, Gilead has a price to economic book value ( PEBV ) ratio of 0.7. This ratio means that the market expects Gilead’s NOPAT to permanently decline by 30% from current levels. If Gilead can grow NOPAT by just 13% compounded annually for the next five years , the stock is worth $170/share – an 88% upside. Splunk Inc. (NASDAQ: SPLK ) is one of our least favorite stocks held by ITCBX and earns a Dangerous rating. Splunk was placed in the Danger Zone in July 2015 . Throughout its history, Splunk has failed to convert robust revenue growth into real profits. In fact, since 2013, Splunk’s NOPAT has fallen from -$20 million to -$260 million over the last twelve months. Making matters worse, Splunk’s NOPAT margin has fallen from -10% to -44% over the same time frame, and the company currently earns a bottom-quintile -25% ROIC. Despite these issues, investors have driven SPLK to an astronomical valuation. To justify its current price of $49/share, Splunk must immediately achieve NOPAT margins of 4% and grow revenue by 30% compounded annually for 19 years. In this scenario, Splunk would be generating just over $69 billion in revenue in 19 years, which would be equal to Comcast’s (NASDAQ: CMCSA ) 2014 revenue. The future cash flow expectations embedded in the current stock price are dangerously high. Figures 3 and 4 show the rating landscape of all All 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. Scalper1 News

Scalper1 News