Tag Archives: alternative

New Buy-Write Mutual Fund Aims To Outperform BXM Index

By DailyAlts Staff The CBOE S&P 500 Buy-Write Index (“BXM”) is a benchmark designed to track the performance of a hypothetical buy-write strategy on the S&P 500 Index. So-called “buy-write” strategies involve buying a stock or portfolio of stocks (in the case of the BXM, it is the S&P 500 Index itself), and “writing” (or selling) call options on those securities. The objective of BXM and all buy-write strategies is to generate attractive risk-adjusted returns with lower volatility and less tail risk than long-only equity investments by generating income from the sale of call options. This isn’t a free trade however, as the seller of a call option caps the upside of the underling equity investment. Thus, when the underlying equity portfolio is experiencing strong returns, the buy-write portfolio can lag. This has certainly been the case over the past five years when the S&P 500 Index has had a strong run: (click to enlarge) Source: CBOE. Data as of November 6, 2015. However, when equity market returns are flat to slightly positive, or even negative, buy-write strategies can perform well, as we have seen this year on a year-to-date basis: (click to enlarge) With the outlook for equity market returns being relatively subdued, now may be a good time to consider a hedged equity strategy, such as a buy-write fund. Actively Manged Buy-Write Strategies While the BXM is a passively invested index, many buy-write funds take a more active approach (see Options Based Funds Outperform with Lower Volatility for more details on this category of funds). Thus, for investors interested in buy-write strategies with the potential to outperform BXM and possibly the S&P 500 Index, an actively managed fund is the right choice. And the good news is that one new fund is now available: the IRON Equity Premium Income Fund (MUTF: CALIX ). The IRON Equity Premium Income Fund’s objective is to provide risk-adjusted returns that best those of BXM. While BXM provides passive investment exposure, the IRON Equity Premium Income Fund utilizes an actively managed options overlay strategy. It is IRON’s belief that buy-write returns can be enhanced by “opportunistically writing” and actively managing options on underlying securities, rather than “unnecessarily writing options” and thus capping performance during bull markets, as passive strategies might. One of the greatest risk to buy-write strategies is that underlying stocks are “called” away during periods of greater-than-expected capital appreciation, thus limiting upside participation. Multiple Strategies to Add Value In addition to using a systematic approach to select options with appropriate expiration dates and lower odds of being exercised, IRON also utilizes proprietary “roll strategies” as part of its ongoing, active management of the fund’s options portfolio. Much of the fund’s performance depends on the performance of its underlying securities – the securities it holds and on which it writes calls – since the fund doesn’t overwrite or use leverage to sell more options than it could cover in the event of the options being exercised. Shares of the IRON Equity Premium Income Fund are available in A ( CALIX ) and I (MUTF: CALLX ) shares, with respective net-expense ratios of 1.45% and 1.10%. Both share classes require minimum initial investments of $10,000, and minimum subsequent investments of $1,000.

PRGTX: Superb Performance From This Best Of Breed Fund

Summary PRGTX has consistently ranked #1 in its category for the last 10 years. Relatively low expense ratio along with excellent stock picking. New manager Joshua Spencer has done a great job since assuming responsibility in 2012. Overall Objective and Strategy: Growth and Income The T. Rowe Price Global Technology Fund (MUTF: PRGTX ) invests at least 80% of net assets in global companies that are expected to generate a majority of their revenues from the development, advancement, and use of technology. They focus on leading global technology companies. The fund normally seeks to invest in at least 5 countries and allocate 25% of the fund’s investments to stocks of companies outside the U.S. The fund pursues long-term capital growth by investing in foreign and US companies that are expected to benefit from rapid advances in technology. Less diversified than a non-focused fund, so it has substantial reward potential coupled with significant risk. Foreign holdings can be affected by declining local currencies or adverse political or economic events. Fund Expenses The expense ratio for PRGTX is 0.91% which is below average for an actively managed sector fund. Morningstar has computed the average expense ratio of similar funds to be 1.49%, so you pick up about 60 basis points of relative outperformance through lower expenses alone. Minimum Investment PRGTX has a minimum initial investment of $2,500 (only $1,000 for IRA accounts). Past Performance PRGTX is classified by Morningstar in the “Specialty Technology” or ST category. Compared with other mutual funds in this category, PRGTX has performed extremely well, largely because of its lower expenses and outstanding stock selection. For all time periods over the last ten years it has achieved “best of breed” performance. These are the long-term annual performance figures computed by Morningstar. The one-year and three year performance has been excellent and was produced by the newest portfolio manager- Joshua K. Spencer who started in June 2012. PRGTX Category (NYSE: ST ) +/- Category Percentile Rank in Category YTD +21.51% +7.52% +0.63% 1 1 Year +23.42% +10.35% +2.66% 1 3 Year +29.37% +18.76% +0.43% 1 5 Year +21.13% +11.83% +0.97% 1 10 Year +14.78% +9.01% +2.17% 1 15 Year +6.07% +1.49% +1.10% 14 Source: Morningstar Mutual Fund Ratings Lipper Ranking : Funds are ranked based on total return within a universe of funds with similar investment objectives. The Lipper peer group is Global Science and Technology. 1 Yr#1 out of 47 funds 5 Yr#1 out of 39 funds 10 Yr#1 out of 19 funds Morningstar Rating : Overall 5 Stars (out of 196 funds) 3 Yr5 Stars(out of 196 funds) 5 Yr5 Stars (out of 195 funds) 10 Yr5 Stars (out of 153 funds) Fund Management The fund has been managed by Joshua K. Spencer since June 2012. Spencer has a BA in Economics from John Hopkins, and an MA Economics and an MBA from the University of Chicago in 2000. He began his career as a research analyst at Fidelity and moved to T Rowe Price in 2004. Volatility Measures Beta: 1.02 R Squared: 0.59 Sharpe Ratio: 1.68 Standard Deviation: 12.75 PRGTX is a concentrated fund and is not an index hugger. It has $2 billion in assets invested in 59 securities. These are the top ten holdings as of September 30, 2015: Top 10 Holdings % Weight Amazon (NASDAQ: AMZN ) 11.21% Tesla Motors Inc (NASDAQ: TSLA ) 5.43% LinkedIn Corp Class A (NYSE: LNKD ) 5.19% Ctrip Intl. Ltd. ADR (NASDAQ: CTRP ) 5.18% Tencent Holdings Ltd. ( OTCPK:TCEHY ) 4.95% Microsoft Corp (NASDAQ: MSFT ) 4.89% JD.com Inc ADR (NASDAQ: JD ) 4.86% Liberty Global PLC Class C (NASDAQ: LBTYA ) 4.67% Priceline Group Inc (NASDAQ: PCLN ) 4.25% NXP Semiconductors NV (NASDAQ: NXPI ) 4.15% Comments PRGTX has an outstanding record and is a great way to add technology exposure to a portfolio. Since 2005, it has had only one losing year in 2008. But it held up relatively well compared to the competition losing 44.02% versus a 45.33% loss for its category peers. The fund generally pays out year-end distributions in mid-December. Last year, it paid out $3.29 a share on 12/16/2014 ($1.27 long-term capital gain, $2.02 short-term capital gain), and it will likely pay out large distributions again this year. If you purchase PRGTX in an IRA account, there is no problem, but if you buy it in a taxable account it may pay to wait until after the distributions are paid out for 2015. These are the relevant dates: Declaration/Record Date December 15, 2015 Ex-Dividend Date December 16, 2015 Payment Date December 17, 2015

The iShares MSCI Netherlands ETF: A Dutch Treat?

The fund heavily weights Netherlands’ premier global companies. The fund has a consistent positive total returns over its 19 year existence. The main drag on the fund might be due to the strong US Dollar and weak Euro. There’s nothing like getting away to a warm place in the dead of winter. Oh, the idea of heading south to the Caribbean to escape the slush, ice and snarled traffic. Perhaps, Aruba, Curaçao or Sint Maarten? On the other hand, you might get a puzzled look from your co-workers while they’re bundling up for their wintery trek home by announcing that you’re off to the Netherlands for holiday. The fact is you’re actually being quite accurate! Those aforementioned mentioned timeless, carefree, warm, sunny islands are actually autonomously governed members of the Kingdom of Netherlands . The country in northern Europe which might have first come to mind, Netherlands, is actually a forth constituent member of the Kingdom of Netherlands . The Kingdom’s reach doesn’t end there, either! Three other Caribbean islands Bonaire, Sint Eustatius and Saba are special municipalities and its citizens actually have voting rights in Dutch and European election! There’re two details that often confuse people: what’s the difference between Netherlands and Holland ; and who are the people of Netherlands? First, Holland is located in the central region of Netherlands. Second, the people of Netherlands are Dutch ! To put this in perspective, the beautiful cities of Amsterdam, Rotterdam, the Hague, Delft, Leiden and Haarlem are located in Holland, which is in Netherlands. Lastly, Netherlands is governed by a constitutional monarchy, with a bicameral parliament. The monarchy isn’t just a formality, either! King Willem-Alexander actively mediates in Dutch parliamentary politics. At this point there’s a good chance that Netherlands suddenly seems like an interesting place. You might even be asking yourself whether it’s a worthwhile investment. If that is indeed the case, there’s a way you can invest your ‘dollars’ in Netherlands through the BlackRock’s (NYSE: BLK ) iShares MSCI Netherlands ETF (NYSEARCA: EWN ) . According to BlackRock … The iShares (NYSE: MSCI ) Netherlands ETF seeks to track the investment results of a broad-based index composed of Dutch equities. .. The underlying index is Morgan Stanley Capital International’s ( MSCI ) Netherlands Investible Market Index . According to MSCI this index … is designed to measure the performance of the large, mid and small cap segments of the Netherlands market. With 47 constituents, the index covers approximately 99% of the free float-adjusted market capitalization in Netherlands… Although the complete list of holdings and weightings are proprietary information, does indicate the index sector allocation and it is charted below for comparison with the fund’s sector allocation. Data from MSCI The fund’s sector allocations are demonstrated in the pie chart below, and seem to emulate the index quite closely. Data from iShares This fund, like many of the iShares focused funds, has been long established having been incepted in 1996. The fund’s net assets total $169,880,091.00 in US Dollars. It should be noted here that Netherlands is a member of the European Union as well as a Eurozone member; hence the currency of Netherlands is the Euro. This is an important point. Without getting too sidetracked, it suffices to say that it’s likely that the US Dollar will strengthen against the Euro within the next few quarters. This means that the values of individual holdings will decline in dollar terms, even if the individual companies are doing well. This shouldn’t put off the long term investor, but its good practice to be aware of the currency risks, at least in the near term. The fund has 6.8 million shares outstanding, is marginable and has a reasonably good 20 day average volume of over 77,000 shares per trading session. The fund is passively managed and management fees are slight higher than the industry average 0.44%, totaling 0.48%. The present annualized yield is given as 2.47% and the fund is currently trading at a 0.48% premium to NAV. The fund’s P/E ratio is given as 23.64% and a price to book value multiple of 2.14. The total number of holding is 48, which includes a small cash/derivatives holding. A quick overview of the major holdings with some key metrics, in order of sector weightings is presented below, starting with Consumer Staples. Although there are several ways to measure a company’s financial stability, the ‘Quick Ratio’ is included when available. In brief, Investopedia defines the ” Quick Ratio ” as … an indicator of a company’s short-term liquidity… …a company’s ability to meet its short-term obligations with its most liquid assets … … a quick ratio of 1.5 means that a company has $1.50 of liquid assets available to cover each $1 of current liabilities… Ah! Before continuing, please note that you will often see the Dutch word ” Koninklijke” preceding the company name or brand. It’s equivalent to “Royal Dutch”, like in ‘ Royal Dutch Shell ‘ (NYSE: RDS.A ) Consumer Staples 32.0171% Exchange and Symbol Fund Weighting Dividend Yield Payout Ratio Market Capitalization (in USD Billions) Quick Ratio Primary business Unilever UL 19.074% 3.05% 41.40% $131.00 0.47 Personal care, foods, refreshments, home care with 400 brand names. Services over 190 countries globally. On par with other global giants, Nestles (OTC: OTCPK:NSRGF ), Proctor and Gamble (NYSE: PG ) and the like. Heineken OTCQX:HEINY 5.439% 1.49% 33.42% $52.321 0.55 Beer brewing with over 50 brand names and global distribution in 75 countries Koninklijke Ahold OTCQX:AHODF 4.7393% 2.50% 50.53% of EPS $14.54 0.65 Food retail brands and Supermarkets in the USA New England area, Netherlands, and Czech Republic; total stores number, approximately, 3200 Heineken Holdings OTCQX:HKHHF 2.0859 1.62% 33.33% $19.11 0.55 Holding 50.005% of Heineken; the holding company segments and manages the Heineken brands by geographical region. There are in addition, three smaller Consumer Staple holdings accounting for 0.6789% of the fund’s total holdings. They are Corbion ( OTCPK:CSNVY ) , 0.3648% of the fund, providing bio-based food additives, emulsifiers, frozen doughs and vitamin premixes; Koninklijke Wessanen ( OTC:KJWNF ) at 0.2069%, which manufactures and markets organic food products, spreads, honeys, cereals, and dietary solutions; Amsterdam Commodities ( OTC:ACNFF ) at 0.1072%, which trades, transports and distributes agricultural products. All three companies contribute to the fund’s overall dividend. There are 9 financial holdings. The smaller holdings: Wereldhave ( OTC:WRDEF ) at 0.6159%; Eurocommercial Properties (Amsterdam: SIPFC) 0.5529% ; Vastned Retail REIT ( OTC:VSNDF ) 0.231%; NSI ( OTCPK:NIUWF ) 0.1405%, all totaling 1.3998% of the fund’s total holdings, are REITS. Delta Lloyd ( OTCPK:DLLLY ) 0.4364% and Binckbank ( OTC:BINCY ) 0.1274% provide traditional banking services, annuities, manage pension funds and online banking. All of the above contribute to the fund’s overall dividends. The lion’s share of financial holdings, at 19.2501%, is summarized below. Financials 21.3515% Exchange and Symbol Fund Weighting Dividend Yield Payout Ratio Market Capitalization (in USD Billions) Quick Ratio Primary business ING Group ING 14.3798% 2.18% 35.20% $48.335 NA A global player in banking, providing global retail service, investing, insurance as well as commercial service Aegon AEG 2.8773% 4.10% 63.78% $11.42% NA Insurance, pension management, Europe, North, Central and South Americas, U.K.; Expanding into Central and Eastern Europe and Asia NN Group OTC:NNGPF 1.9903% 3.49% NA $9.17 NA Insurance, investment management, annuities, reinsurance. Europe and Asia The fund holds 13 industrials, however, the top four account for over 10% of the fund’s holdings and well over 75% of the total industrial holdings. Industrial 13.6886% Exchange and Symbol Fund Weighting Dividend Yield Payout Ratio Market Capitalization (in USD Billions) Quick Ratio Primary business Koninklijke Philips PHG 6.5413% 3.28% 154.09% $23.81 0.86 Called ‘Philips’ in the US: Imaging systems, diagnostic imaging, x-ray equipment. Consumer lighting, appliances personal care products. Randstad Holdings OTCPK:RANJY 1.9134% 2.39% 56.95% $8.963 NA Staffing service, temporary and permanent, payroll services, outplacement, and workforce solutions. Koninklijke Baskalis Westminster OTC:KKWFF 1.0719% 3.60% 27.42% $5.09 0.37 Dredging and earthmoving, maritime infrastructure; management of oil and gas terminals TNT Express OTCPK:TNTEF 1.0647% 1.04% NA $3.827 1.20 Express carrier for documents, parcels and freight. Offices in 60 countries with a delivery reach in 200 countries globally Four companies comprise the Information Technology allocation. The topmost are most significant ASML (AMSL) and Gemalto ( GTOFF) accounting for 9.8634% of the fund and over 90% of the IT holdings. The smaller holdings are ASM International, (ASMIY) at 0.5154%, a manufacturer of wafer processing equipment and BE Semiconductor ( OTC:BESVF ) at 0.1657%, a manufacturer of semiconductor back-end and packaging equipment. All four holdings pay dividends. Information Technology 10.5445% Exchange and Symbol Fund Weighting Dividend Yield Payout Ratio Market Capitalization (in USD Billions) Quick Ratio Primary business ASML Holdings ASML 8.5177% 0.79% 21.65% $41.945 1.77 Semiconductor lithography systems for integrated device manufacturing, flash and DRAM memory. Gemalto GTOFF 1.3457% 0.69% 19.53% of EPS $4.897 1.20 Digital security: mobile, machine to machine, transactions There are three significant holdings for the Consumer Discretionary and two smaller holdings. The smaller holdings are TomTom (TOMAF) , the well-known navigation equipment manufacturer, at 0.2914% and Accell Group ( OTCPK:ACGPF ) at 0.1167% of the fund, manufactures exercise equipment, particularly bicycles and bicycle components. Consumer Discretionary Exchange and Symbol Fund Weighting Dividend Yield Payout Ratio Market Capitalization (in USD Billions) Quick Ratio Primary business Relx RELX 4.5121% 2.62% 65.37% $17.592 NA Information Solutions for science, medical and technical for professionals and students Wolters Kluwer OTCPK:WTKWY 2.7013% 1.68% 48.17% $8.73 0.69 Information software and services legal, business, accounting, medical and healthcare Altice (classes A and B) OTC:ALLVF 2.1537% 0.00% 0.00% $15.92 0.56 Media provider and services, cable TV, broadband internet, telephony Only four companies comprise the Materials Sector holdings, the two most significant are Akzo ( OTCQX:AKZOF ) and Koninklijke DSM ( OTC:KDSKF ) . The two smaller holdings are OCI ( OTCQX:OCINY ) 0.5894% which seems to be as much an industrial by way of its infrastructure construction and project management as well as manufacturing materials, particularly fertilizers. It is a subsidiary of Orascom Construction (Cairo: OCIC) . The second is Koninklijke Ten Cate ( OTC:KNKCF ) 0.1908% manufactures advanced textiles and composite materials. Materials 7.71% Exchange and Symbol Fund Weighting Dividend Yield Payout Ratio Market Capitalization (in USD Billions) Quick Ratio Primary business Akzo Nobel AKZOF 4.4598% 2.24% 36.27% $14.74 0.90 Paints, coatings, specialty chemicals, marine coatings, metal coatings, vehicle finishes. Also food additives, detergents, cosmetics. Koninklijke DSM KDSKF 2.47% 3.32% 366% of EPS $8.21 0.97 Nutrition, vitamins and nutrients, carotenoids. Also performance materials plastics, resins, polymer materials There’s only one telecom holding, Koninklijke KPN (OTC: OTC:KKPNF ) at 2.9527%. KPN has a $12.61 billion market cap and pays a 3.51% dividend. The company is pretty much a broad based telecom service provider whose primary business is integrated information and communication technology for mobile, residential and business. The least weighted sector is in energy with three holdings each has a weighting of less than one percent. Energy 1.7472% Exchange and Symbol Fund Weighting Dividend Yield Payout Ratio Market Capitalization (in USD Billions) Quick Ratio Primary business Vopak VOPLY 0.7454% 2.29% 43.5% of EPS $4.57 NA Storage of oil products, liquid chemicals, bio-fuels and vegetable oils as well as shipping terminal to terminal. SBMO OTCPK:SBFFF 0.6601% 0.00% 0.00% $2.52 2.02 Offshore energy, floating production and mooring systems, terminals and service Fugro OTCPK:FURGF 0.3417% 0.00% 0.00% $1.37% 1.49 Geotechnical Interpretation services providing information of the Earth’s surface and subsurface. Geosciences and Surveys for the oil and gas industry The fund has a respectable track record, with a consistent distribution as well as positive annual returns since inception, the only exception to that is the -1.59% negative return over the past 52 weeks. Since inception the fund has a total return of 4.98%; over the past ten years, 4.74%; five years, 4.98% and three years, 9.98%. Hence, the fund has a pretty consistent positive return, over different time frames, over the life of the fund, with the exception of the past year. (click to enlarge) The fund has several real global heavy-weight champs with distribution in the world’s best performing economies, like the USA, the U.K. and Germany. Further, the fund is smartly structured to top-weight these premier companies. Hence, it’s not unreasonable to assume that the poor performance over the past year may be currency related , particularly when it comes to US Dollar strength combined with Euro weakness. Should the US Fed raise its benchmark rate, or the ECB weaken the Euro in the coming months this might present an excellent buying opportunity for the investor with a long term outlook.