Tag Archives: apple

Consumer Confidence Rebounds: 2 Top-Ranked ETFs To Buy

Consumer Confidence Index – an important indicator of consumer sentiment – increased in the final month of 2015, rebounding strongly after its November decline. The Conference Board reported that the index rose to 96.5 from November’s upwardly revised reading of 92.6. It was also higher than the consensus estimate of 93.5. Meanwhile, consumers remained optimistic about the present economic environment and also confident of the economic scenario over the next six months. The Present Situation Index improved to 115.3 this month from last month’s level of 110.9. Also, the Expectations Index increased from November’s 80.4 to 83.9 in December. The survey showed that the share of consumers who believe that the current business conditions are “good” increased significantly to 27.3% in December from last month’s share of 25%. Also, the share of consumers who believe that there are “plentiful” job opportunities gained to 24.1% from 21%. Consumers who think that the job market will remain favorable also rose from 12% to 12.9%. Lynn Franco, Director of Economic Indicators at The Conference Board said: “As 2015 draws to a close, consumers’ assessment of the current state of the economy remains positive, particularly their assessment of the job market. Looking ahead to 2016, consumers are expecting little change in both business conditions and the labor market… but the optimists continue to outweigh the pessimists.” Favorable Economic Scenario Though the U.S. economy expanded at a slower pace of 2% in the third quarter compared with the 3.9% growth rate witnessed in the second, the economy remained steady for most part of the year whereas other major economies struggled with sluggish growth conditions. A gradual increase in consumer spending, which contributes nearly 75% to economic activity, along with healthy labor and housing market conditions boosted the U.S. economy through the year. Meanwhile, the lift-off that came this month after nearly a decade underlined the Fed’s, “confidence in the economy,” as cited by Fed Chair Janet Yellen herself. The Fed also indicated that “solid” consumer spending, a rebound in the housing market and strong business fixed investment played an important role in the decision (read: Top ETF Stories of 2015 ). 2 Consumer ETFs to Buy Consumer discretionary is considered to be one of the key sectors that attract a major portion of consumer spending, which is believed to increase at a gradual pace given the rise in confidence. Moreover, the slump in oil prices and strong labor market conditions will play an important role in boosting spending at least in the near term. The positives have been reflected in this year’s holiday season, with an e-commerce bonanza and a surge in last-minute shopping cheering the retailers. It has been reported that overall U.S. holiday retail sales (excluding autos and gas) climbed 7.9% year over year between Black Friday and Christmas Eve (read: Consumer ETFs & Stocks Riding High on Holiday Spirit ) Also, when the major benchmarks were grappling with manifold concerns, the consumer discretionary sector succeeded in posting healthy gains this year. As of Dec 30, 2015, the broader consumer discretionary sector – the Consumer Discretionary Select Sector SPDR ETF (NYSEARCA: XLY ) – gained 9.4% in the year-to-date frame. In this scenario, we have highlighted two Zacks Rank #1 (Strong Buy) retail ETFs that are poised to gain from this favorable environment and investing in them may prove to be profitable in the near term. Market Vectors Retail ETF (NYSEARCA: RTH ) This fund tracks the Market Vectors US Listed Retail 25 Index and holds about 26 stocks in its basket. It is a large cap centric fund and is heavily concentrated in the top 10 holdings with 65.6% of assets – the top shares going to Wal-Mart (NYSE: WMT ), Home Depot (NYSE: HD ) and Amazon.com (NASDAQ: AMZN ). Sector wise, specialty retail occupies the top position with around 29% share with Internet & catalog retail occupying the next spot. The fund has amassed $159.7 million in its asset base while average daily volume is moderate at 65,153 shares. The product has an expense ratio of 0.35% with a Medium risk outlook. RTH returned 6.2% and 9.6% in the past three-month period and in the year-to-date frame, respectively. Vanguard Consumer Discretionary ETF (NYSEARCA: VCR ) This product tracks the S&P Retail Select Industry Index, holding 385 securities in its basket. The fund charges only 12 bps in fees. It is also heavily concentrated in the top 10 holdings with 40.7% of assets. Large cap stocks dominate more than half of the portfolio while the rest have been split between the other two market cap levels. Sector wise, specialty retail takes the top spot at 19% share while Internet & catalog retail and restaurants occupy the next two positions. XRT currently has $2 billion of AUM and average daily volume of nearly 175,000 shares. The fund has a Medium risk outlook. VCR returned 4.3% and 5.7% in the past three-month period and in the year-to-date frame, respectively. Link to the original article on Zacks.com

Indexing Pioneer Vanguard Skeptical Of Smart Beta

Vanguard revolutionized investing with its low-cost, passive indexing products. But after the TMT (tech, media, and telecom) blowup of 2000-2002, when cap-weighted indexes became overstuffed with overvalued dot-coms, critics began maligning cap-weighted index funds as “dumb beta.” The alternative, in their view, was to weight stocks according to factors other than market cap – so-called “smart beta.” Smart-beta strategies have been hailed as the “new paradigm” in passive, index-based investing. But Vanguard, the indexing pioneer, disagrees: The firm’s Don Bennyhoff, Fran Kinniry, Todd Schlanger, and Paul Chin – authors of an August 2015 white paper titled ” An Evaluation of smart beta and other rules-based active strategies ” – insist that smart-beta strategies are in fact active strategies, and that market cap is still the best basis to weight the components of an index. How Active is Smart Beta? In Vanguard’s view, smart-beta strategies should be considered “rules-based active strategies,” by definition , since their security-selection and -weighting methodologies can produce “meaningful security-level deviations” – i.e., “tracking error” – versus a broad cap-weighted index. In the August 2015 white paper, Mr. Bennyhoff and his co-authors looked at the “active share” of smart beta ETFs and index funds. “Active share” is a measure of how much an index’s holdings deviate from a cap-weighted baseline, which in this case was the Russell 3000 – an index of the 3000 largest U.S. stocks, including the mid-to large-cap Russell 1000 and the small-cap Russell 2000: Source: Vanguard. All data as of December 31, 2014. In general, the more stocks in the index or portfolio, the less the “active share.” Smart-beta ETFs and funds had “active share” that ranged from a bit less than 30% to roughly 60%, generally much more than cap-weighted indexes, but less than “traditional, actively managed equity funds.” Smart-beta strategies also had less “active share” than ETFs focused on specific risk factors like value, momentum, and size – and its exposure to these factors that provides much of smart beta’s appeal, in Vanguard’s analysis. Which Factors and When? Vanguard admits that the performance of alternatively weighted indexes has been “compelling” over time. For instance, the alternative FTSE RAFI Developed Index returned an annualized 7.2% from 2000 through 2014, with a Sharpe ratio of 0.42. The cap-weighted FTSE Developed Index, by contrast, returned just 4.2% per year with a Sharpe ratio of 0.26. This relationship holds for most regions, too. But particular risk factors fall into and out of favor, and as a result, the performance of smart-beta strategies – relative to the broad market – has deviated substantially over time. Should investors only concern themselves with certain factors, such as dividends, cash flow, book value, sales, and volatility? Or should they consider all factors, which are too numerous to list? Vanguard says market cap-weighting captures all of these factors through the market-pricing mechanism – a compelling argument. Taking the Gloves Off Near the end of the white paper, Bennyhoff et al. take off their gloves: Smart beta doesn’t represent a “new paradigm” of indexing nor a “smarter” way to invest. The strategies’ excess returns can partly – in some cases largely – be attributed to “time-varying factor exposures,” which make smart-beta strategies effectively active and not passive. “We found little evidence that such smart-beta strategies have been able to capture any security-level mispricings in a systematic and meaningful way,” the authors wrote. An index of securities is supposed to represent “the risk-and-reward attributes of a market” or segment thereof. In Vanguard’s view, market-cap-weighting isn’t broken, and therefore isn’t in need of fixing. For more information, download a pdf copy of the white paper . Jason Seagraves contributed to this article.

AlphaCentric Converts Hedge Fund Into New Managed Futures Mutual Fund

Managed futures funds provide investors with exposure to commodities, currencies, stocks, and bonds by investing in a range of securities, including futures, forwards, swaps and ETFs. Due to the trend following, long/short nature of their investment strategies, these funds have very low correlation to traditional asset classes. As markets continue to be volatile and correlations between asset classes continue to increase, managed future funds are gaining more and more interest. In fact, this category of funds has been the most popular single-strategy category of liquid alternative funds over the past year, pulling in $8.5 billion of assets over the twelve month period ending November 30, 2015, according to data from Morningstar. New AlphaCentric Fund While managed futures funds were available exclusively to high-net worth individuals and institutions in the past, today there more than 50 managed futures funds available as ’40 Act mutual funds, and on December 18, AlphaCentric and Integrated Managed Futures Corp (“IMFC”) added another to the growing roster: the AlphaCentric/IMFC Managed Futures Strategy Fund (MUTF: IMXAX ). Sub-advised by IMFC, the new fund differentiates itself from its peers by pursuing its investment objective of capital appreciation through IMFC’s proprietary investment program, which attempts to identify investment opportunities with limited downside and potentially large rewards. This investment program removes subjectivity and human emotion from the day-to-day decision-making process. The fund’s assets are allocated across asset classes using IMFC’s multi-factor models, which consider momentum, yield, value, relative buying power of different currencies, commodity cost of production and supply/demand statistics, price-to-earnings and -book ratios, the difference in yield between issuers or financial instruments, and more. The fund also maintains large cash positions as part of its investment strategy. Fund Details The AlphaCentric/IMFC Managed Futures Strategy Fund is available in three classes: A ( IMXAX ), C (MUTF: IMXCX ), and I (MUTF: IMXIX ). The Class I shares have been created through the conversion of a hedge fund (the Attain IMFC Macro Fund LLC) and will take on the performance track record of that fund dating back to March 10, 2014. The investment management fee for all shares of the fund is 1.75%, and the respective net-expense ratios are 2.24%, 2.99%, and 1.99%. The minimum initial investment for all three share classes is $2,500. Integrated Managed Futures Corp. will serve as the sub-advisor to the fund. Roland Austrup, Robert Koloshuk, and John Lukovich are listed in the fund’s prospectus as its portfolio managers. For more information, view a copy of the fund’s prospectus . Jason Seagraves contributed to this article.