Category Archives: oud

Inside The New Sovereign High Yield Bond ETF By Cambria

Disappointing macroeconomic data, global market turbulence and threats to the stability of the U.S. economy have been making headlines since the beginning of the year, leading to volatility across all asset classes. Meanwhile, Treasury yields are also showing a downtrend. Yields on Japan’s benchmark 10-year government bond slid to sub-zero for the first time in February. Following the European Central Bank, Bank of Japan introduced negative interest rates in late January. Denmark, Sweden and Switzerland adopted similar measures. Because of these factors, high-income bond ETFs have gained a lot of popularity of late as investors continue to search for attractive and stable yield in the ultra-low rate interest environment. This trend continues with Cambria, which has launched a fund with a global coverage, focusing on the high-income space. In fact, the global footprint made the fund more attractive given the ultra-low interest rate backdrop prevailing in most developed economies. Below, we have highlighted the newly launched fund – the Cambria Sovereign High Yield Bond ETF (Pending: SOVB ) – in greater detail. SOVB in Focus Listed on the NYSE Arca, the product is an actively managed ETF and does not track any specific index. It seeks income and capital appreciation by investing in securities and instruments that provide exposure to sovereign and quasi-sovereign bonds. Cambria uses a quantitative model, with yield as the largest determinant to select bond exposures for the fund. The fund has an expense ratio of 0.59% and will pay dividend on a quarterly basis. It invests in liquid debt securities across the globe. From a country perspective, India takes the top spot with about 10% of the basket, followed by Brazil (8%), Russia (6.2%), China (5.9%) and Peru (5%). As for maturity, the fund is well diversified between bonds maturing in less than 5 years (33.6%), in 5-10 years (39.8%) and 10-20 years (26.6%). Launched in the last week of February, the fund has already amassed $2.6 million in its asset base. It is up 2.1% in the last 10 days. How Could it Fit in a Portfolio? The ETF could be well suited for income-oriented investors seeking higher longer-term returns with low risk. With interest rates being low in most developed nations, the appeal of high-income bonds has increased as these offer strong yields. Meanwhile, sovereign bonds are generally issued by the government of a country and considered one of the safest options in the bond fund category, and are ideal for a risk-averse investor. However, investors looking for a high-growth vehicle may not be satisfied with this product. Additionally, changes in currency exchange rates may affect the value of the fund’s investment adversely. Competition The ETF does not have any direct competitor, as there is currently no other actively managed sovereign high yield bond ETF available to U.S. investors. The fund provides investors a new way to play the high yield bond market with liquid sovereign and quasi-sovereign bonds. The product charges moderately high fees from investors annually due to its unique strategy. However, there are quite a few international bond ETFs which specifically target particular regions. Of these, the popular fund, iShares J.P. Morgan USD Emerging Markets Bond ETF (NYSEARCA: EMB ), has a total asset base of $5.1 billion. This fund tracks the JPMorgan EMBI Global Core Index, trades in heavy volume of 1.1 million shares per day and charges 40 bps in annual fees. Another fund targeting the emerging market bond space is the PowerShares Emerging Markets Sovereign Debt Portfolio ETF (NYSEARCA: PCY ) with AUM of nearly $2.7 billion and exchanging 919,000 shares a day. Apart from these, SOVB could also face competition from international high yield bond funds – the Market Vectors International High Yield Bond ETF (NYSEARCA: IHY ) with an asset base of $125.2 million, the iShares Global High Yield Corporate Bond ETF (BATS: GHYG ) with AUM of $87.6 million and the iShares Global ex-USD High Yield Corporate Bond ETF (BATS: HYXU ) with AUM of $160.8 million. Thus, SOVB 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 international bond ETF space. The ETF’s plan of safer sovereign bond and its emphasis on liquidity are noteworthy, but its success is a huge factor of the returns it manages to generate. Original Post

Is Tesla Motors’ Stock Valuation Now In ‘Ludicrous Mode’?

Loading the player… Not only are Tesla Motors ‘ ( TSLA ) cars equipped with “Ludicrous mode,” but one analyst now seems to think Tesla’s stock valuation is ludicrous. The stock dropped 5% Wednesday after getting a downgrade to sell by S&P Global Market Intelligence. The analyst called the electric car maker’s shares “volatile,” and sees “significant execution and valuation risk in the premium priced stock.” The sell rating comes despite the analyst’s belief that sales and earnings will “surge” this year. (The car’s Ludicrous mode, in case you’re wondering, allows it to go from 0 to 60 mph in 2.8 seconds.) The stock crumbled in slightly lighter-than-average volume, breaching support at the 200-day line. Tesla just climbed above that level last Friday. The stock had rallied in anticipation of the company’s Model 3 reveal and had just reached its highest level so far this year. But now the shares are back further in the red for 2016. The $30,000 mass market Model 3 will be unveiled next Thursday evening, with a live stream of the event available on Tesla’s website . Reservations for the new car begin on March 31, and production for the Model 3 is scheduled to begin in late 2017. This week, the rival Chevy Bolt EV from parent company General Motors ( GM ) entered pre-production, with the testing of assembly tools. Production is expected to start at the end of 2016, an entire year ahead of the Model 3.

Heavy Construction Emerging As A Hot Industry

The heavy-construction industry group is rising sharply in IBD’s rankings, unearthing a few interesting choices for investors. The group ranked No. 25 out of 197 in Wednesday’s edition. That’s a huge jump from No. 156 six weeks ago. Unlike many other groups, it has paced the broad market’s advance since the mid-February lows. A combination of new taxes, a new highway bill and the entry of private equity into government projects has been driving the industry’s advance, says William Bremer, senior industrial and infrastructure analyst at Maxim Group in New York. Some state and local governments, seeking to make up lost revenue from the commodity crunch, raised gasoline taxes and other fees, which provided some new funding. Then in December, a five-year, $305 billion federal highway bill was signed into law. After years of patchwork funding, the bill gave governments the ability to move forward on major road and bridge projects. In addition, Bremer says, private equity firms have been partnering with some government agencies on public works projects. That has helped governments limit risks. Labor-force trends also favor construction companies. A couple of the group’s leaders started rallying after their earnings reports and have broken out of bases. Granite Construction ( GVA ) — on which Bremer has a buy rating and a 50 price target — is a bit extended from a 44.50 buy point. The roadway construction company has a backlog of $2.9 billion. “It’s staggering what’s coming down this pipeline,” he told IBD Wednesday. Granite, which is more focused on highway projects than some other companies in the industry group, last week won a $209 million job for an interstate project in Alabama. Thinly traded Primoris Services ( PRIM ) has also broken out of a base. Shares are trading near the 24 buy point amid indecisive behavior following the March 17 breakout. Dallas-based Primoris has grown into one of the largest infrastructure-building companies in the nation. It works largely on oil-industry projects, but it also does work on roads, utilities and other areas. In an investor presentation, the company highlighted 11 acquisitions it’s made since it went public in 2008. It is still seeking buyouts. Aecom Technology ( ACM ) is forming a base and is approaching a buy point at 33.22. Although it’s crafting a decent-looking base, the company’s EPS Rating is lagging below 60. Despite a minuscule EPS increase of 1%, the company’s results for the December-ended quarter topped expectations. Sales have been declining for four quarters in a row. Jacobs Engineering ( JEC ) is forming a similar base, this one with a buy point at 45.51. Both bases suffer from a substantial show of accumulation, although they are not exactly laden with distribution. Jacobs, based in Pasadena, Calif., is not the hard-hat company that others in the group are. The company is a leader in telecom, life sciences and other high-tech fields. As a NASA contractor, Jacobs supports the space agency’s experiments at the Ames Research Center in California. Image provided by Shutterstock .