Tag Archives: apple

Best And Worst Q4’15: Mid Cap Growth ETFs, Mutual Funds And Key Holdings

Summary The Mid Cap Growth style ranks ninth in Q4’15. Based on an aggregation of ratings of 10 ETFs and 343 mutual funds. RFG is our top-rated Mid Cap Growth style ETF and CCPIX is our top-rated Mid Cap Growth style mutual fund. The Mid Cap Growth style ranks ninth out of the twelve fund styles as detailed in our Q4’15 Style Ratings for ETFs and Mutual Funds report. Last quarter , the Mid Cap Growth style ranked eighth. It gets our Dangerous rating, which is based on an aggregation of ratings of 10 ETFs and 343 mutual funds in the Mid Cap Growth style. See a recap of our Q3’15 Style Ratings here. Figure 1 ranks from best to worst all ten Mid Cap Growth ETFs and Figure 2 shows the five best and worst-rated Mid Cap Growth mutual funds. Not all Mid Cap Growth style ETFs and mutual funds are created the same. The number of holdings varies widely from 23 to 573. This variation creates drastically different investment implications and, therefore, ratings. Investors seeking exposure to the Mid Cap Growth style should buy one of the Attractive-or-better rated ETFs or mutual funds from Figures 1 and 2. Figure 1: ETFs with the Best & Worst Ratings – Top 5 (click to enlarge) * Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity. Sources: New Constructs, LLC and company filings Figure 2: Mutual Funds with the Best & Worst Ratings – Top 5 (click to enlarge) * Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity. Sources: New Constructs, LLC and company filings The Virtus Equity Trust Mid-Cap Core (VIMCX, VMCCX) and the Professionally Managed Portfolios Villere Equity Fund (MUTF: VLEQX ) are excluded from Figure 2 because their total net assets are below $100 million and do not meet our liquidity minimums. The Guggenheim S&P MidCap 400 Pure Growth ETF (NYSEARCA: RFG ) is the top-rated Mid Cap Growth ETF and the Calvert World Values Capital Accumulation Fund (MUTF: CCPIX ) is the top-rated Mid Cap Growth mutual fund. RFG earns an Attractive rating and CCPIX earns a Very Attractive rating. The Ark Industrial Innovation ETF (NYSEARCA: ARKQ ) is the worst-rated Mid Cap Growth ETF and the Tocqueville Opportunity Fund (MUTF: TOPPX ) is the worst-rated Mid Cap Growth mutual fund. ARKQ earns a Neutral rating and TOPPX earns a Very Dangerous rating. Lear Corporation (NYSE: LEA ) is one of our favorite stocks held by Mid Cap Growth ETFs and mutual funds and earns an Attractive rating. Since going public in 2010, Lear has grown after-tax profits ( NOPAT ) by 7% compounded annually. The company has maintained NOPAT margins ~5% and currently earns a top quintile return on invested capital ( ROIC ) of 17%. Such strong fundamentals have propelled Lear shares over 20% higher this year, but shares still remain undervalued. At its current price of $125/share, LEA has a price to economic book value ( PEBV ) ratio of 1.1. This ratio implies the market expects Lear to only grow NOPAT by 10% for the remainder of its corporate life. If Lear can grow NOPAT by just 8% compounded annually for the next decade , the stock is worth $174/share today – a 39% upside. CoStar Group Inc. (NASDAQ: CSGP ) is one of our least favorite stocks held by Mid Cap Growth ETFs and mutual funds and earns a Dangerous rating. Despite reporting positive and increasing net income over the past five years, CoStar’s economic earnings have fallen from -$3 million in 2010 to -$131 million on a TTM basis. The company’s ROIC has fallen from 9% to a bottom quintile 1% over this same timeframe. CSGP is up ~3% year-to-date and is currently overvalued given its deteriorating business operations. To justify its current price of $204/share, CoStar must grow profits by 20% compounded annually for the next 19 years. With such lofty expectations baked into the stock price investors would be wise to avoid CSGP. Figures 3 and 4 show the rating landscape of all Mid Cap Growth ETFs and mutual funds. Figure 3: Separating the Best ETFs From the Worst ETFs (click to enlarge) Sources: New Constructs, LLC and company filings Figure 4: Separating the Best Mutual Funds From the Worst Funds (click to enlarge) Sources: New Constructs, LLC and company filings D isclosure: David Trainer and Blaine Skaggs receive no compensation to write about any specific stock, style, or theme.

Just Energy Group Q2 Earnings Review – No Slowdown In Sight

Summary Shares have appreciated substantially since July. Total revenue grew 18%, with the more profitable consumer segment growing 20%. The U.K. operation and the solar program will pave the way for future growth. After a poor performance in 2014 and trading flat in H1 2015, Just Energy (NYSE: JE ) is finally back on track. Since my last analysis on the company in July, shares have appreciated by 30% from $5.23 to $6.82 today. Let’s see how the company performed in Q2 (year end is in March). The company continued to deliver top-line growth. Increasing sales by a whopping 18% quarter on quarter from C$918 million to C$1.1 billion. This doesn’t surprise me one bit. With the exception of FY 2012, the company has always delivered consistent growth from year to year. (see below). Many consumers are aware of Just Energy’s incessant marketing, and the financials reflect that. Sales can be broken down into consumer sales and commercial sales. Quarter on quarter, consumer sales have grown by 20% and commercial sales by 16%. The growth from consumer sales are much more valuable because traditionally commercial customers simply paid less. In Q2, gross margin for the consumer division was 22%. In contrast, the commercial division only yielded 9%. After deducting various operating expenses, the consumer division is more than twice as profitable as the commercial division (C$27 million of operating profit vs. C$10 million of operating profit). We can also examine growth from by looking at how much money the company charges its customers, which would reflect more of an “organic growth” as opposed to revenue generated by acquiring new customers. For the consumer segment, margin per customer rose 24% from C$176/RCE in Q2 2015 to C$219/RCE in Q2 2016. Evidently, the company should be able to achieve sales growth even if customer acquisition slows. Despite these great results, the company still reported a loss. The main culprit is derivative losses. During the quarter, the company made a fair value adjustment of C$117 million due to declining commodity prices (i.e. the company would have to purchase commodities at higher prices than the market if contracts are settled now). These losses will eventually go away as the contracts expire (i.e. not recurring). Outlook I believe that the future is bright for Just Energy. The company is still rather small in the U.K. and has plenty of run way to expand. Just two quarters ago, U.K. contributed 202,000 RCEs. In Q3, this number has grown 36% to 275,000 RCEs. In addition, the company is also exploring non-traditional initiatives such as the partnership with Clean Power Finance to enter the residential solar market, which is all the rage right now. While the exact impact on the bottom line is not clear yet as results are still preliminary, I believe that this program will be a smash hit. Because the company is marketing to existing customers, I believe that the adoption rate should be fairly high. This means that the solar program should be able to generate incremental profit without the company spending too much money (as opposed to a new customer acquisition).

5 Outperforming CEFs That Are Insulated From Market Corrections

Summary The 2015 market correction caused a 10% drop across the market, but some CEFs were unaffected. Investing in market-neutral CEFs can help you protect your portfolio in the event of an event. I present a list of the 5 most profitable CEFs that are also uncorrelated to the general market. The previous market correction was a three-day selloff that led us to a market that trended sideways for two months. In total, the market lost 10% of its value before climbing back to its original place: (click to enlarge) Knowing not to freak out and to hold onto your investments is good, but having investments that are uncorrelated to the general market in the first place is better. This article is a follow-up to two other articles on investments uncorrelated to the S&P 500. The first article was on investment categories; the second on index funds. This article will be on CEFs, as per a reader request: (click to enlarge) Correlation In my previous article, I used a five-year lookback period. But if we are to really consider these investments uncorrelated to the market, they should not fall when the market does. Hence, the following comment: For this purpose, in this article, I will only be looking at the most recent market correction as my lookback duration. Thus, the correlation calculation will be from August to November, 2015. Whenever we look at the correlation of two investment instruments, we must use the log of those investments. In this way, we find the correlation of returns, not simply price movement. The result will tell us whether two investments are likely to give the same returns over our lookback period. I wrote some R code to screen CEFs according to the following criteria: Trading above $5 (therefore not a penny stock). Has a correlation of less than 0.3 (in magnitude) to the SPDR S&P500 Select ETF (NYSEARCA: SPY ). I then arranged those CEFs in order of greatest return over the past year. I chose the top five CEFs in this list to present to you. Because the top five actually had 3 municipal bond CEFs, I went down the list to add 2 more CEFs outside of this category. The Winners Nuveen Long/Short Commodity TR (NYSEMKT: CTF ) This CEF is a portfolio of long and short futures contracts. CTF purposefully plays a flat game, not taking too many long or short positions. Though it would have been nice to see CTF short energy, making their shareholders lots of cash over the past couple years, CTF has avoided such high-volatility trades. Though CTF’s Nav growth is rather slow, dipping into negative territory, this CEF is trading at a decent discount: -4.36%. The yield is currently 7.54%. Whether CTF can maintain these payouts at its current Nav growth is questionable. The discount is disappearing, however. The discount bottomed out at over -20% in 2014 and has recently bounced back. Thus, if you’re interested in getting in on this high-yield CEF, you should consider doing it soon. Remarkably, CTF is the only CEF in the top five that is not a bond-based fund. Correlation with market-correction phase SPY: 0.27 Babson Capital Corporate Invs (NYSE: MCI ) Here, the focus is on non-investment grade corporate debt. The equities involved are conversion rights, preferred shares, and warrants. Because of the inclusion of conversion rights, the debt here is convertible, which can lead to a dilution of shares. Nevertheless, the yield is high, at 6.80%. However, the surge in price has caused MCI to outgrow its Nav. The Nav sits at a stable 14.70, while the CEF trades at over $17. This CEF is selling at a 10.82% premium. If you buy this CEF, you will be overpaying for the portfolio. But for a long-term investment, MCI seems to provide noteworthy returns. Correlation with market-correction phase SPY: 0.19 Municipal Bond CEFs EV NJ Municipal Bond (NYSEMKT: EMJ ) Blackrock VA Municipal Bond (NYSEMKT: BHV ) Blackrock Muniyield Arizona (NYSEMKT: MZA ) These CEFs offer generous distribution rates of around 5.00. Both BHV and MZA trade at a premium, while EMJ trades at a slight discount. That discount is soon to be gone, as it has been shrinking over the past year. Buying a municipal bond fund can especially benefit you via tax exemptions if you live in a state with high taxes, as these bonds are tax-free investments in most cases. However, realize that EMJ will cause you to pay capital gains taxes on your investment, as it is currently trading at a discount. All of these regions – New Jersey, Virginia, and Arizona – are, to my knowledge, in good shape. But you should perform due diligence and ensure that the local governments aren’t facing problems of paying their debts. Residents in states with high taxes, such as New York, New Jersey, and California, should consider these CEFs. EMJ’s correlation with market-correction phase SPY: -0.09 BHV’s correlation with market-correction phase SPY: 0.25 MZA’s correlation with market-correction phase SPY: -0.11 Doubleline Opportunistic Credit (NYSE: DBL ) With a yield of 8.22, it’s no surprise that DBL isn’t trading at a discount. DBL has almost consistently been trading at a premium. But there have been dips into the discount region. An investor looking for a good deal might keep an eye on DBL and buy at one of these rare discounts. Just remember that a drop in the premium/discount will also typically drop the yield toward the sector’s average. In addition, as time goes on and rates increase, credit-based CEFs such as DBL will likely take a hit. You should also consider leverage here, as rates will likely be rising in the future. Higher leverage implies higher borrowing fees for the fund. DBL might be a good short-term hold, but you should consider dropping it for non-credit CEFs with less leverage before rates rise. Correlation with market-correction phase SPY: 0.02 Strategic Global Income (NYSE: SGL ) Speaking of leverage, here’s a non-leveraged CEF. Previously trading at one hell of a discount, SGL is now trading at “only” a -4.12% discount. This offers the highest discount of all the market-neutral CEFs we looked at today, with a yield of 9.42%. As the name suggests, SGL invests in global bonds. Its holdings branch from Argentina to Russia. These bonds are diversified, with both sovereign paper and corporate notes in the mix. Although a portfolio of such a wide geographical array of holdings is more likely than a focused portfolio to encounter a holding that cannot repay its debt, the fact that SGL is diversified should minimize such problems. The risk is there, but the reward is higher, I believe. This fund doesn’t have many downsides other than the exposure to iffy countries (the average credit rating of SGL’s holdings is still A) and the fact that SGL is taxable. Correlation with market-correction phase SPY: 0.11 Conclusion Overall, we have a wide selection of market-neutral CEFs that can help us generate stable income even during a market correction or crash. Of the five we looked at, I would recommend SGL most to investors in low-tax states, while recommending the municipal bond CEFs to investors in high-tax states. But no matter your choice, rest assured that these CEFs will be least affected by another market correction. Obviously, I simply don’t have the time to cover every industry. While reading this article, you probably thought of at least one investment that should have gone in my “Winners” section. Let me know about it in the comments section below. Request a Statistical Study If you would like for me to run a statistical study on a specific aspect of a specific stock, commodity, or market, just request so in the comments section below. Alternatively, send me a message or email.