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4 ETFs Surge To Top Rank Ahead Of Q1 Earnings

Though the stock market has made an impressive comeback from the worst nightmare it saw at the start of the year, volatility and uncertainty continue to dominate. This is especially true, given the expected Q1 corporate earnings decline for the fourth consecutive quarter. Amid this sluggishness, many investors still want to bet on a slowly improving U.S. economy, which is backed by a healing job market and rising consumer confidence. The rebound in the oil price from its 12-year low, the Fed’s dovish comments and the resultant weakness in dollar, added to the optimism, raising the appeal for riskier assets. For these investors, we delved into the Zacks ETF Rank to find the best picks. The system takes into account factors such as industry outlook and expert surveys; and then applies ETF-specific factors (like expense ratios and bid/ask spreads) to spot the best funds in each and every corner of the space. Using this system, we have picked a handful of ETFs that earned a Zacks ETF Rank #1 (Strong Buy) in the latest ratings update and could thus outperform (see: Our Zacks ETF Rank Guide ). Since earnings growth is expected to be negative for 11 of the 16 Zacks sectors, we have focused on four low-risk, broad ETFs rather than specific sectors. Each of these funds has seen its rank surge to the top hierarchy from #3 (Hold) and could be great picks this earnings season. Vanguard Mid-Cap Value ETF (NYSEARCA: VOE ) Investors seeking to participate in the growing economy, but wary of soft earnings, should consider mid-cap stocks in the basket form. This is because mid- caps are arguably safer options allowing both growth and stability simultaneously in a portfolio. These middle-of-road securities have the potential to move higher in turbulent times when compared to large and small caps. Further, honing in on value securities in this capitalization level ensures safety to investors. Value investing includes stocks with strong fundamentals – earnings, dividends, book value and cash flow – that trade below their intrinsic value and are undervalued by the market. In particular, VOE seems an exciting pick heading into the earnings season. The fund tracks the CRSP US Mid Cap Value Index, charging investors just 9 bps in annual fees. It holds 208 stocks, which are well spread across each component as none of these holds more than 1.3% share. Financials takes the top spot with one-fourth share while consumer goods, industrials, consumer services and utilities round off to the next four spots with a double-digit allocation each. It is one of the popular and liquid ETFs in the mid-cap space with AUM of $4.5 billion and average daily volume of 302,000 shares. The ETF has added 0.2% in the year-to-date time period. WisdomTree MidCap Dividend Fund (NYSEARCA: DON ) Dividend-focused ETFs have been riding high this year on investors’ drive for income amid heightened uncertainty in the stock market. This is because dividend-paying securities are the major sources of consistent income when returns from the equity market are at risk. Dividend-focused products offer safety in the form of payouts and stability in the form of mature companies that are less immune to the large swings in stock prices. Further, longer-than-expected interest rates have made this corner a hot investment area. As a result, DON seems an interesting choice for the coming months. This ETF provides exposure to the mid-cap segment of the U.S. dividend paying stocks by tracking the WisdomTree MidCap Dividend Index. The fund has been able to manage assets of $1.6 million and trades in a moderate volume of 80,000 shares a day on average. Expense ratio came in at 0.38%. Holding 402 stocks in its basket, the product is widely diversified across each component with each holding less than 1.8% of assets. From a sector look too, the fund is pretty well spread out with financials, consumer discretionary, utilities and industrials taking the double-digit exposure each. DON returned 11.1% so far this year. Schwab Fundamental U.S. Small Company Index ETF (NYSEARCA: FNDA ) Small-cap ETFs have lagged the broad market for the most part of this year due to endless worries stemming from the China turmoil and an oil price collapse. This trend seems to be reversing lately given the spate of upbeat economic data, an impressive rebound in oil prices, and of course, the spring fervor. The pint sized stocks generally outperform when the American economy is leading the way. Given this, investors should recycle their portfolio into the small-cap space to obtain a nice play and FNDA could be an excellent pick (see: all the Small Caps ETFs here ). This fund provides a complement to market-cap indexing and active management by following an innovative indexing approach using fundamental measures of company size by tracking the Russell Fundamental U.S. Small Company Index. In total, the fund holds a large basket of 884 securities with none accounting for more than 0.29%. Financials and industrials take the top two spots at 22.5% and 20.6%, respectively, closely followed by consumer discretionary (16.7%) and information technology (13.5%). FNDA is less liquid and less popular in the small-cap space with AUM of $688.3 million and average daily volume of 178,000 shares. Expense ratio came in at 0.32%. The ETF is up 0.8% in the year-to-date time frame. First Trust Small Cap Value AlphaDEX Fund (NASDAQ: FYT ) As small caps are risky options which could lead to extreme volatility stemming from huge gains and losses in a very short period of time, value stocks could provide some stability in the portfolio. This is because value stocks often overreact to both positive and negative news, resulting in share price movement that does not reflect the company’s true long-term fundamentals. This creates buying opportunities in such stocks at depressed prices. There is also potential for capital appreciation when the stock finally reflects its true market price. As a result, investors could focus on FYT for the coming months. This fund follows the NASDAQ AlphaDEX Small Cap Value Index, which uses the AlphaDEX methodology to select stocks from the NASDAQ US 700 Small Cap Value Index and ranks them on both growth and value factors. The approach results in a basket of 262 securities with none holding more than 0.74% of assets. Financials, industrials, consumer discretionary and information technology are the top four sectors accounting for a double-digit exposure each. FYT is often overlooked by investors as depicted by its lower level of AUM of $44.8 million and average daily volume of under 20,000 shares. It charges 70 bps in fees per year and has gained 0.5% in the year-to-date period. Original Post

Global Manufacturing Picks Up: ETFs To Watch

The month of March will be remembered for the revival in the manufacturing sector in the world’s two largest economies – the U.S. and China. While a stronger dollar and huge capex cuts by energy companies to fight back the plunge in oil prices hurt the U.S. manufacturing sector, soft demand in the wake of global growth worries can be held responsible for the overall global slowdown. However, things took a turn in March as signs of stabilization showed up. Let’s delve deeper into the data. Finally Chinese Manufacturing in Positive If we talk of manufacturing slowdown, China comes first to mind. But after posting sluggish factory output data since July 2015, the economy posted growth in March. China’s official manufacturing purchasing managers’ index (PMI) came in at 50.2 for March , which beat Reuters’ forecast of 49.3 and February’s reading of 49.0. Any reading at or above 50 suggests expansion in activity. While this official data considers larger companies, another index, namely Caixin Manufacturing PMI, considers smaller or medium-sized companies. Investors should note that the Caixin Manufacturing PMI for March also rose to 49.7 from 48.0 in February, “marking the first increase from the previous month in a year.” Improving Trend in the U.S. A five-month long losing streak also bucked the trend in the U.S. in March. The ISM manufacturing data expanded to 51.8 in March from 49.5 in February buoyed by new orders and increased output. The data came above the Wall Street Journal’s expectation of 50.5. Out of the 18 manufacturing industries, 12 reported expansion in March. What Cooks Up in the Euro Area? Coming to the Eurozone, the Markit Eurozone Manufacturing PMI came in at 51.6 in March 2016, surpassing a preliminary reading of 51.4 and 51.2 recorded in February. The reading also bettered the forecast of 51.4 . All is not well across the globe. But noticeable improvement in the big three gives us reasons to look at the below-mentioned international industrial ETFs. Global – iShares Global Industrials ETF (NYSEARCA: EXI ) The fund looks to track the S&P Global 1200 Industrials Sector Index. The $16.2 million ETF is heavy on the U.S. which takes about 53% of the basket. General Electric (NYSE: GE ) (8.62%), 3M Co. (NYSE: MMM ) (2.93%) and Siemens AG ( OTCPK:SIEGY ) (2.56%) are the top three stocks of the fund. The fund charges 48 bps in fees. It added 0.5% in the last one month (as of April 5, 2016). China – Global X China Industrial ETF (NYSEARCA: CHII ) The Global X China Industrial ETF seeks to provide investment results of the Solactive China Industrials Index. The $3.6 million fund charges 65 bps in fees. This fund is heavy on building and construction (34.4%) and machinery and equipment (31.6%) industries. The fund has exposure to about 40 stocks. CHII added 2.9% in the last one month (as of April 5, 2016). U.S. – Industrial Select Sector SPDR ETF (NYSEARCA: XLI ) This product tracks the Industrial Select Sector Index. General Electric occupies the top spot with an 11.7% allocation, while 3M, Honeywell (NYSE: HON ) and Boeing (NYSE: BA ) have a combined exposure of over 10% in the fund. XLI has garnered $6.65 billion in assets and trades in heavy volume of 13.8 million shares per day. It has a low expense ratio of 0.14%. The fund has the highest exposure to aerospace and defense (25.3%), followed by industrial conglomerates (21.6%). The product gained 2.4% in the last one month (as of April 5, 2016). Original Post

Time To Worry About CORN ETF?

Anemic growth in the global economy and lingering concerns over macro uncertainty have dragged down overall agricultural consumption so far this year, hurting corn export sales. A cut in Chinese corn imports brought its share of troubles. And the most important deterrent – a strong U.S. dollar – is making exports expensive. This is bad news since corn is one of the most important U.S. crops and is the most important agricultural product in many states. And overall, the nation enjoys the status of the world’s largest exporter of the staple. The future of the staple doesn’t look very bright given expanding stockpiles and increasing planting given that the corn market is already oversupplied. Per the Agriculture Department report released last week, U.S. farmers are expected to sow 93.6 million acres of corn this year compared with 88 million last year, representing an increase of about 6%. The agency’s report also revealed that corn stockpiles totaling 7.81 billion bushels on March 1 were at the highest level in the past 30 years. Stockpiles were up from 7.75 billion bushels on the same date last year. With corn prices sinking to a nearly three-month low, investor focus is expected to be on the only ETF in the market that targets this important commodity, Teucrium Corn ETF (NYSEARCA: CORN ) . CORN has been down more than 4.1% so far this year (as of April 5, 2016), underperforming the broad agricultural commodity fund PowerShares DB Agriculture ETF (NYSEARCA: DBA ), which was down 2.2% and the equity-based fund SPDR S&P 500 Trust ETF (NYSEARCA: SPY ), which returned over 1.7%. Corn ETF in Detail The fund provides investors a direct exposure to corn. The fund looks to reduce backwardation and contango. The fund looks to reduce contango by spreading out exposure across the curve, as opposed to just rolling over from front month to front month. The fund will be using the second-to-expire contract (35%), the third-to-expire contract (30%), and the December contract that is following the third-to-expire contract (35%). The product is expensive as it charges 2.92% in fees per year, which is steep compared with the average expense ratio prevailing in agricultural commodities ETFs. It trades in moderate volumes of nearly 30,000 shares on an average daily basis that increases the trading cost in the form of a somewhat wide bid/ask spread. The fund has so far attracted $57.2 million in assets. CORN has fallen almost 20% in the last one year. As such, CORN currently carries a Zacks ETF Rank of 4 or “Sell”, indicating that the fund might face significant bearishness in the months ahead. So, for the time being, if investors are looking to play this commodity market, a look to other segments might be necessary. Original post