Tag Archives: alt-investing

5 Buy-Ranked Small-Cap Value Mutual Funds

Small-cap funds are a good choice for investors seeking diversification across different sectors and companies. Investors with a high risk appetite should invest in these funds. Small-cap funds generally invest in companies having market cap lower than $2 billion. The companies, smaller in size, offer growth potential, and their market capitalization may increase subsequently. Meanwhile, value stocks are stocks that tend to trade at a price that is lower than its fundamentals (i.e. earnings, book value, debt-to-equity). It is common for some investors to invest in value funds for the income or yield. However, not all value funds are comprised solely of companies that primarily use their earnings to pay dividends. Investors interested in choosing value funds for yield should be sure to check the mutual fund yield. The mutual fund yield is the dividend payments divided by the value of the mutual fund’s shares. Below, we will share with you 5 buy-rated small-cap value mutual funds . Each has earned either a Zacks Mutual Fund Rank #1 (Strong Buy) or a Zacks Mutual Fund Rank #2 (Buy) , as we expect these mutual funds to outperform their peers in the future. CornerCap Small Cap Value Fund (MUTF: CSCVX ) seeks capital growth over the long run. CSCVX invests a lion’s share of its assets in small-cap companies located in the US. The fund defines firms with market capitalizations below $3 billion as small cap. The CornerCap Small Cap Value Fund returned 9.1% over the past one year. As of June 2015, CSCVX held 220 issues with 0.71% of its assets invested in Walker & Dunlop, Inc. (NYSE: WD ). Putnam Small Cap Value Fund A (MUTF: PSLAX ) invests a major portion of its assets in domestic companies having market capitalizations within the range of the Russell 2000 Value Index. The fund emphasizes in acquiring common stocks of companies that are believed to be undervalued. Factors including valuation, financial strength and dividends are considered before investing in a company. The Putnam Small Cap Value Fund A returned 5.3% over the past one year. Eric N. Harthun is the fund manager and has managed PSLAX since 2008. JPMorgan Small Cap Value Fund A (MUTF: PSOAX ) seeks long-term capital appreciation. PSOAX uses value-based strategy to invest in equity securities of small-cap firms having market capitalizations similar to those listed in the Russell 2000 Value Index. The fund primarily invests in common stocks and REITs. The JPMorgan Small Cap Value Fund A returned 2.1% over the past one year. PSOAX has an expense ratio of 1.24% as compared to the category average of 1.33%. Dean Small Cap Value Fund (MUTF: DASCX ) invests a large chunk of its assets in equity securities of small-cap companies throughout the globe. DASCX may also invest in ETFs. Rest of the fund’s assets may get invested in securities of companies other than small-cap ones and other derivatives including put and call options and futures contracts. The fund may also invest a small share of its assets in fixed-income instruments. The Dean Small Cap Value Fund returned 3.2% over the past one year. Steven D. Roth is the fund manager and has managed DASCX since 2008. Deutsche Small Cap Core Fund S (MUTF: SSLCX ) seeks capital appreciation over the long term. SSLCX invests a majority of its assets in domestic companies with market capitalizations equal to those included in the Russell 2000 Index. Though SSLCX primarily focuses on acquiring common stocks of companies, it may invest a maximum of 20% of its assets in securities issued by the US government. The fund may also invest in other securities including preferred stocks and convertible securities. The Deutsche Small Cap Core Fund S returned 12.8% over the past one year. SSLCX has an expense ratio of 1.13% as compared to the category average of 1.33%. Original post

ETFs To Lose Or Gain From Solid July Job Data

The U.S. labor market continued its strength with steady job gains in July, which were enough to increase the chances of the Fed pulling its trigger on the first rate hike in almost a decade as early as next month. The Fed in its last FOMC meeting stated that it is on track to increase interest rates albeit at a slower pace if the job market shows further improvement. And this is exactly what happened. The U.S. economy added 215,000 jobs in July driven by higher construction and manufacturing employment that more than offset the collapsing mining sector. Though the number was marginally below the market expectation of 225,000, unemployment remained steady at seven-year low of 5.3%. Additionally, average hourly wages rose five cents to $24.99, bringing the year-over-year increase to 2.1%. Jobless claim were the lowest level since June 2008 at 10.4% against 10.5% in June. Further, the economy appears closer to full employment given that the number of full-time U.S. jobs as a share of total employment reached to 81.7%, marking the highest level since November 2008. The decent job data suggests that the economy continued to gain momentum in July after growing 2.3% in the second quarter. To make the case for rates hike stronger, a surging service sector, increasing business activity, higher consumer spending, a recovering retail and housing market, and rising consumer confidence point to even strong economic growth that would translate into more jobs and the resultant higher rates. ETFs to Watch The news has extended the losing streak for the Dow Jones Industrial Average to the seventh day – the longest since August 2011. Additionally, the index is currently hovering at its six-month low. As a result, a few ETFs were severely impacted by the solid jobs data while a few are expected to gain in the weeks ahead. Below, we have highlighted some that are especially volatile post jobs data and increased chances of rates hike: ETFs to Lose SPDR Gold Trust ETF (NYSEARCA: GLD ) Gold will continue to remain under immense pressure as higher interest rates would diminish gold’s attractiveness since the yellow metal does not pay interest like fixed-income assets and the product tracking this bullion like GLD will lose further. The fund tracks the price of gold bullion measured in U.S. dollars, and kept in London under the custody of HSBC Bank USA. It is the ultra-popular gold ETF with AUM of $23.5 billion and average daily volume of around 5.7 million shares a day. Expense ratio came in at 0.40%. The fund is down 7.9% so far in the year and has a Zacks ETF Rank of 3 or ‘Hold’ rating. iShares MSCI Emerging Markets ETF (NYSEARCA: EEM ) As the Fed moves closer to interest rate hike, emerging markets will slump further. The most popular emerging market ETF – EEM – lost about 7% in the year-to-date timeframe and has seen huge capital outflow which has pulled its total asset base down to $24.2 billion. The fund tracks the MSCI Emerging Markets Index and charges 68 bps in annual fees from investors. Holding 847 securities, the product is widely spread out across various securities but is tilted toward the financial sector at 29.3%, followed by information technology (17%). Among the emerging countries, China takes the top spot at 23.6% while South Korea and Taiwan round off the next two spots with double-digit exposure each. The fund has a Zacks ETF Rank of 3. iShares 20+ Year Treasury Bond ETF (NYSEARCA: TLT ) The U.S. government bonds and ETFs tracking the long end of the yield curve are the most vulnerable to higher interest rates. The ultra-popular long-term Treasury ETF – TLT – tracks the Barclays Capital U.S. 20+ Year Treasury Bond Index and has AUM of $4.9 billion. Expense ratio came in at 0.15%. Holding 29 securities in its basket, the fund focuses on the top credit rating bonds with average maturity of 26.9083 years and effective duration of 17.2035 years. The fund is almost flat from a year-to-date look and has a Zacks ETF Rank of 3. ETFs to Gain PowerShares DB USD Bull ETF (NYSEARCA: UUP ) A rise in interest rates will pull in more capital into the country and lead to further appreciation of the U.S. dollar. UUP is the prime beneficiary of the rising dollar as it offers exposure against a basket of six world currencies – euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc. This is done by tracking the Deutsche Bank Long U.S. Dollar Index Futures Index Excess Return plus the interest income from the fund’s holdings of U.S. Treasury securities. In terms of holdings, UUP allocates nearly 58% in euro while 25.5% collectively in Japanese yen and British pound. The fund has so far managed an asset base of $1.3 billion while sees an average daily volume of around 2.6 million shares. It charges 80 bps in total fees and expenses and has added 6.5% in the year-to-date time frame. The fund has a Zacks ETF Rank of 2 or ‘Buy’ rating. Deutsche X-trackers MSCI EAFE Hedged Equity ETF (NYSEARCA: DBEF ) The strength in the greenback is compelling investors to recycle their portfolio into the currency hedged ETFs. For those seeking exposure to the developed market with no currency risk, DBEF could be an intriguing pick. The fund follows the MSCI EAFE U.S. Dollar Hedged Index and holds 913 securities in its basket with none accounting for more than 1.82% share. However, it is skewed toward the financial sector, which makes up for more than one-fourth of the portfolio, while consumer discretionary, industrials, health care, and consumer staples round off the top five with double-digit exposure each. Among countries, Japan takes the top spot at 21%, closely followed by United Kingdom (19%), France (10%) and Switzerland (10%). The ETF has AUM of $14.4 billion and trades in a solid volume of more than 4.7 million shares a day. It charges 35 bps in fees per year from investors and has a Zacks ETF Rank of 3. Link to the original article on Zacks.com

Today’s Best-Bet Wealth-Builder ETF Investment

Summary From a population of some 350 actively-traded, substantial, and growing ETFs this is a currently attractive addition to a portfolio whose principal objective is wealth accumulation by active investing. We daily evaluate future near-term price gain prospects for quality, market-seasoned ETFs, based on the expectations of market-makers [MMs], drawing on their insights from client order-flows. The analysis of our subject ETF’s price prospects is reinforced by parallel MM forecasts for each of the ETF’s ten largest holdings. Qualitative appraisals of the forecasts are derived from how well the MMs have foreseen subsequent price behaviors following prior forecasts similar to today’s. Size of prospective gains, odds of winning transactions, worst-case price drawdowns, and marketability measures are all taken into account. Today’s most attractive ETF Is the ProShares UltraPro Russell2000 ETF (NYSEARCA: URTY ). The investment seeks daily investment results that correspond to three times (3x) the daily performance of the Russell 2000® Index. The fund invests in securities and derivatives that ProShare Advisors believes, in combination, should have similar daily return characteristics as three times (3x) the daily return of the index. The index is a float-adjusted, market capitalization-weighted index containing approximately 2000 of the smallest companies in the Russell 3000® Index or approximately 8% of the total market capitalization of the Russell 3000® Index, which in turn represents approximately 98% of the investable U.S. equity market. It is non-diversified. The fund currently holds assets of $79.94 million and has had a YTD price return of +6.57%. Its average daily trading volume of 140,328 produces a complete asset turnover calculation in 5.9 days at its current price of $95.76. Behavioral analysis of market-maker hedging actions while providing market liquidity for volume block trades in the ETF by interested major investment funds has produced the recent past (6 month) daily history of implied price range forecasts pictured in Figure 1. Figure 1 (used with permission) The vertical lines of Figure 1 are a visual history of forward-looking expectations of coming prices for the subject ETF. They are NOT a backward-in-time look at actual daily price ranges, but the heavy dot in each range is the ending market quote of the day the forecast was made. What is important in the picture is the balance of upside prospects in comparison to downside concerns. That ratio is expressed in the Range Index [RI], whose number tells what percentage of the whole forecast range lies below the then current price. Today’s Range Index is used to evaluate how well prior forecasts of similar RIs for this ETF have previously worked out. The size of that historic sample is given near the right-hand end of the data line below the picture. The small blue thumbnail distribution at the bottom of Figure 1 indicates the current RI’s size in relation to all available RIs of the past 5 years. The first items in the data line are current information: The current high and low of the forecast range, and the percent change from the market quote to the top of the range, as a sell target. The Range Index is of the current forecast. Other items of data are all derived from the history of prior forecasts. They stem from applying a T ime- E fficient R isk M anagement D iscipline to hypothetical holdings initiated by the MM forecasts. That discipline requires a next-day closing price cost position be held no longer than 63 market days (3 months) unless first encountered by a market close equal to or above the sell target. The net payoffs are the cumulative average simple percent gains of all such forecast positions, including losses. Days held are average market rather than calendar days held in the sample positions. Drawdown exposure indicates the typical worst-case price experience during those holding periods. Win odds tells what percentage proportion of the sample recovered from the drawdowns to produce a gain. The cred(ibility) ratio compares the sell target prospect with the historic net payoff experiences. Figure 2 provides a longer-time perspective by drawing a once-a week look from the Figure 1 source forecasts, back over two years. Figure 2 (used with permission) What does this ETF hold, causing such price expectations? Figure 3 is a table of securities held by the subject ETF, indicating its concentration in the top ten largest holdings, and their percentage of the ETF’s total value. Figure 3 source: Yahoo Finance URTY holdings reveal how an average of assets in each of its top ten commitments, all swap contracts in either the Russell 2000 index or the ETF tracking that index, iShares Russell 2000 (NYSEARCA: IWM ) provide a 3x leverage to the price movements of that small-cap index. Please note that the top ten swap contracts equal 278% of the ETF’s total assets. To have an idea of the composition of the Russell 2000 index, Figure 4 is a table of data lines similar to that contained in Figure 3, for each of the top ten holdings of the ETF tracking the Russell 2000 index, IWM. Figure 4 source: Yahoo Finance Now note that the Russell 2000 index does indeed contain 2,000 securities of small-capitalization companies, many of which are in quite volatile circumstances. The IWM’s top ten holdings (by size of holding) quite probably are intended to be the better-performing issues. While these ten represent only 2 ½% of the fund’s total assets, they are five times the size of ten average pieces of 2,000 securities at 0.05% of the total. The IWM’s top ten holdings provide only a peek at the kinds of companies contained in the Russell 2000 index, but it is better than nothing (or of everything). In order to fill out some sense of these emphasized holdings of the fund and the index, Figure 5 gives the details of MM price range hedging-derived forecasts for each of the ten, and compares them with data from our ranked top20 securities list for the same day. Figure 5 (click to enlarge) In an index as unpredictably dynamic as this, wide variations in market experience seem to be the rule. Column (5) contains the upside price change forecasts between current market prices and the upper limit of prices regarded by MMs as being worth paying for price change protection. The average of +12.7% of the top ten IWM/index holdings is close to our list’s population average of all 2500+ equities MM forecasts of +13.1%. It is about 2 ½ times the upside forecast for SPY price change prospects. The other side of the coin is column (6), which shows what actual worst-case price drawdowns typically have been in the 3 months following each time there has been a forecast like those of the present day. Those risk exposures have averaged -6.3% in the holdings top ten, better than -8.6% experienced by list equities at large, but larger than the only -3.3% on the SPY ETF. These holdings have attractive reward tradeoffs between returns and risks, with the top ten (column 14) at a ratio of 2.0, compared to equities overall at 1.5 times. This is better than the market average of SPY at a ratio of 1.7 times risk avoidance, which has a cost of an anticipated reward (column 5) only half that of the ten best index stocks. Another qualitative consideration is the credibility of the ten IWM/index big holdings after previous forecasts like today’s. The net average price change (column 13) of the ten has been 0.8 times the size of the (column 5) upside forecast average, +10.6% (column 9) compared to +12.7%. The equity population’s actual price gain achievement, net of losses has been a pitiful +3.7% compared to promises of 13.1%. The ability of IWM/index holdings to recover from those worst-case drawdowns and achieve profits occurred in 83% of experiences (column 8). The equity population only recovered less than two thirds of the time, and while the SPY experiences were about the same as the ten IWM/index holdings, the achieved gains were much smaller. SPY has had only +3.4% gains previously from like forecasts of +5.7%. In many respects the IWM/index holdings are quite similar to the average of our daily best20 list. That should be no surprise, since URTY is one of those 20 best ranked issues on this day. Conclusion URTY provides attractive forecast price gains, supported by its equally appealing largest holdings. Both the ETF and many of its major holdings offer very attractive prospects in near-term price behaviors, demonstrated by previous experiences following prior similar forecasts by market makers. The diversity of its holdings is very broad, providing a wide opportunity to share in constantly developing discoveries across the biotechnology as well as software applications and other high-technology fields. URTY’s price now, in comparison to the forecast price expectations of market professionals, appears to be quite attractive. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.