Category Archives: oud

How To Trade In Gold ETFs After Robust 30-Year Rally?

Thanks to global growth concerns, reduced expectations for rate hike, geopolitical tensions and bearishness in the stock market, gold posted the biggest first-quarter gain in three decades. In addition, the adoption of negative interest rates by most central banks such as Japan, Sweden, Switzerland, Denmark and Europe boosted the demand for gold bullion and pushed the prices higher. Investors should note that most of the gains came in the first six weeks of the year and thereafter the momentum of increase slowed down. What’s In Store? The Fed signaled that interest rates in U.S. would stay low for some time and dialed back its projection from four lift-offs to two hikes in its recent meeting. This is weighing on the dollar and propelling the price of gold. The release of minutes last week showed that the Fed is unlikely to raise interest rates in April, signaling that weak global growth could hurt the ongoing recovery in the U.S. economy. Further, continued rise in the Japanese currency dampened investors’ faith in central banks’ ability to boost growth across the globe. Further, an erratic market showed up again as volatility in oil price and weak corporate earnings in the U.S. raised demand for the yellow metal as a store of value and hedge against market turmoil ahead of the Q1 earnings season. However, the recent slew of encouraging data especially on the manufacturing activity and job growth fronts reflect strength in the U.S. economy and perked-up risk-on sentiment. As a result, the strongest Q1 rally of the yellow metal seems to be fading given that gold was up just 1.3% in the first few trading sessions of April. Considering the robust gains in the first quarter, gold is still off about 35% from its 2011 all-time high of $1,900 per ounce (read: ETFs to Gain or Lose After Strong Jobs Report ). To sum up, the stability in the financial market and an improving U.S. economy could bolster the case for rate hike again and may dull the appeal for the safe haven asset in the coming months. Given the volatile environment for gold investment, investors should place their bet on gold ETFs cautiously or could take advantage of the quick turn in sentiment with the help of leveraged or inverse ETFs. Gold ETFs These ETFs are directly linked to the spot gold price or futures and are worth watching in the coming months. These have a favorable Zacks ETF Rank of 3 or ‘Hold’ rating with a Medium risk outlook. SPDR Gold Trust ETF (NYSEARCA: GLD ): This is the largest and most popular ETF in the gold space with AUM of $32.6 billion and average daily volume of around 8.8 million shares. The fund tracks the price of gold bullion measured in U.S. dollars, and kept in London under the custody of HSBC Bank USA. Expense ratio comes in at 0.40%. The fund has added 0.6% so far this month. iShares Gold Trust ETF (NYSEARCA: IAU ) : This ETF offers exposure to the day-to-day movement of the price of gold bullion and is backed by physical gold under the custody of JP Morgan Chase Bank in London. It has AUM of $7.5 billion and trades in solid volume of more than 8 million shares a day on average. The ETF charges 25 bps in annual fees and has gained 0.7% this month (read: Ride on Gold Rally with Best ETFs and Stocks of 2016 ). Van Eck Merk Gold ETF (NYSEARCA: OUNZ ): This product seeks to provide investors with a convenient and cost-efficient way to buy and hold gold through an exchange-traded product with the option to take physical delivery of gold when desired. It charges 40 bps in fees per year but is unpopular and an illiquid option with AUM of $99.5 million and average daily volume of 42,000 shares. OUNZ is up 0.7% this month. Leveraged Gold ETFs Investors who are bullish on gold right now may consider a near-term long on the precious metal with the following ETFs depending on their risk appetite. ProShares Ultra Gold ETF (NYSEARCA: UGL ): This fund seeks to deliver twice (2x or 200%) the return of the daily performance of gold bullion in U.S. dollars. It charges 95 bps in fees a year and has amassed $89.3 million in its asset base. Volume is light at under 40,000 shares per day. The ETF has gained 0.86% in the first few trading sessions of April. PowerShares DB Gold Double Long ETN (NYSEARCA: DGP ): This ETN seeks to deliver twice the return of the daily performance of the DBIQ Optimum Yield Gold Index Excess Return, charging 75 bps in fees per year. It has accumulated $131 million in its asset base so far and trades in an average daily volume of 69,000 shares. The ETN is relatively flat so far this month. VelocityShares 3x Long Gold ETN (NASDAQ: UGLD ): This product provides three times (3x or 300%) exposure to the daily performance of the S&P GSCI Gold Index Excess Return plus returns from U.S. T-bills net of fees and expenses. The ETN has been able to manage an asset base of $64.6 million while charging a higher fee of 1.35% annually. However, the note trades in solid volume of over 546,000 shares a day on average and has returned 2% this month. Inverse Gold ETFs Any encouraging data on the economy could provide investors’ a near-term short opportunity on the bullion according to their risk appetite. DB Gold Short ETN (NYSEARCA: DGZ ): This ETN offers inverse (opposite) exposure to the performance of the DBIQ Optimum Yield Gold Index Excess Return. It has managed assets of $23.7 million so far this year and trades in a solid volume of 146,000 shares a day on average. It charges 0.75% in annual fees and has lost about 0.7% so far in April. ProShares Ultra Short Gold ETF (NYSEARCA: GLL ) : This fund seeks to deliver twice the inverse return of the daily performance of gold bullion in U.S. dollars, charging 95 bps in fees a year. It has $75.4 million in AUM and trades in lower average daily volume of 25,000 shares. The ETF has shed about 2% so far this month. VelocityShares 3x Inverse Gold ETN (NASDAQ: DGLD ): This product provides three times inverse exposure to the daily performance of the S&P GSCI Gold Index Excess Return. It has been able to manage an asset base of $17.4 million while charging investors a higher fee of 1.35% annually. The note trades in a light average daily volume of 43,000 shares and is down 2.1% so far this month. Link to the original post on Zacks.com

Sprint Downgraded; ‘Light In Tunnel May Be A Train’

Sprint ( S ) is stuck competing only on price vs. its wireless services rivals  AT&T ( T ), Verizon Communications ( VZ ) and T-Mobile US ( TMUS ), says Pacific Crest Securities, which downgraded Sprint stock to sell. Analyst Michael Bowen, in a research note late Tuesday, calls Sprint a “tactical short” ahead of March-quarter earnings. Verizon reports earnings on April 21; AT&T follows on April 26. Sprint stock, which has traded below 6 the past 17 months, was down more than 4% in early trading in the stock market today , near 3.50. Sprint, majority-owned by Japanese telecom  SoftBank ( SFTBY ), extended its “cut your bill in half” promotion into the March quarter, its fiscal Q4. The promotion offers subscribers that switch from AT&T, Verizon or T-Mobile a 50% price cut on their existing plans. Sprint recently also relaunched a 30-day guarantee for new users. “Despite the continuation of its aggressive 50%-off promotion, we expect Sprint to report net postpaid additions and churn worse than our previous expectations,” Bowen wrote. “Sprint’s 2016 guidance should not be taken at face value, and the company has a long turnaround ahead of it. “Sprint’s lack of competitive tools other than price suggests fundamental issues. If 50% off isn’t working, what will? We recommend investors take cover into Sprint’s fiscal Q4 earnings, and we would be selling shares.” He titled his report “Light In Tunnel May Be A Train.” Regulators have been opposed to any Sprint merger with T-Mobile, an occasional rumor that has cooled lately. Image provided by Shutterstock .

Infosys Outlook Might Impress Wall Street More Than Q4 Improvement

Wall Street seems to be more interested in what the Indian outsourcing companies will do next than how they performed previously. No surprises are expected when one of the biggest, Infosys ( INFY ), reports its fiscal 2016 fourth-quarter earnings way after the close Thursday, scheduled for 11:45 p.m. ET — or about 9:15 a.m. Friday in Bangalore. The consensus of analysts polled by Thomson Reuters suggests Infosys will report earnings up 5% to 23 cents minus items, on revenue up 13.6% to $2.43  billion for the quarter ended March 31. That would be its best revenue growth rate in six quarters and its best earnings growth in the last five quarters. Robert W. Baird analyst David Koning sees the EPS consensus as “reasonable,” but anyone expecting a tad above consensus for revenue “seems aggressive based on historical trends,” he said in a Tuesday research note. Baird rates Infosys stock neutral, with a 19 price target. Cowen analyst Bryan Bergin, who rates the stock as market perform with an 18 price target, says the company’s Q4 “results tend to be seasonally soft, and we don’t expect any surprises there with low single-digit sequential revenue improvement, modeled at 1.4% (quarter to quarter in U.S. dollars, or about 2% in constant currency).” Instead, Bergin said, “the primary focus will be its FY’17 guide. In sum, expectations are somewhat elevated going into this print, given INFY’s recent momentum. We think a year-on-year top-line (in constant currency) growth midpoint of (about) 12% is benchmark for expectations. (We model a foreign-exchange headwind of 2.5%.) Its guide on operating margin will also be a key focus; we think at worst, a flat operating margin target range of 24%-26% is built into expectations, given its ambitious long-term target of 30% by 2020.” Analysts expect fiscal 2017 EPS of 98 cents minus items on revenue of $10.41 billion, up from an expected 90 cents and $9.46 billion, respectively, the previous year. For fiscal 2015, Infosys earned 87 cents per share minus items on $8.61 billion. Will Infosys Impact Cognizant? Analyst Koning seems as interested in what Infosys’ guidance does for rival Cognizant Technology Solutions ( CTSH ) as what it does for Infosys. He issued a separate research note just on Infosys’ impact on Cognizant. “CTSH likely holds up OK, even if INFY guides fiscal 2017 revenue a bit below the Street,” Koning said. “When INFY provided initial full-year guidance below the Street in each of the last three years, INFY was down 5%-21%, but CTSH was (down) 3% to (up) 1%.” Cognizant stock was flat in early trading in the stock market today, near 59.50. Infosys stock was down a fraction, near 18. Cognizant is trading 14% off a 69.80 record high set Oct. 28. Infosys is trading 6% off a 16-year high of 19.49 set April 4. While Infosys earns a strong IBD Composite Rating of 83 — meaning it’s outperforming 83% of S&P 500 companies on earnings, sales, institutional ownership, stock activity and other metrics — Cognizant rates even better with an 87. Bigger tech outsourcer Accenture ( ACN ) rates an 89, while the best in the group are the relatively small CGI Group ( GIB ) (with a 92 CR) and CDW ( CDW ) (with a 91). As organizations look to digitize their operations and move to the cloud, Cognizant, Infosys and other tech outsourcers are becoming increasingly important as a way to start or accelerate the process, as a means to contract-out process management entirely and as a way to limit or reduce expenses. Service-level agreements “are changing to reflect this (conversion from business-process outsourcing to business-process management ), becoming more business-outcome-focused and leading the market to shift from a pure RFP (requests for proposal) procurement approach to a managed-service, end-to-end solution offering,” Cowen’s Bergin said in an April 1 research note.