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Oracle Beats On Earnings, Ups Buyback: Tech ETFs In Focus

After the closing bell yesterday, tech bellwether Oracle (NYSE: ORCL ) reported mixed third-quarter fiscal 2016 results. The company beat the Zacks Consensus Estimate for earnings but missed on revenues due to negative currency translations and persistent weakness in traditional software sales. Additionally, Oracle boosted its share buyback program by $10 billion (see: all the Technology ETFs here ). Oracle Q3 Earnings in Focus Earnings per share came in at 59 cents (accounting for stock-based compensation), a penny ahead of the Zacks Consensus Estimate. Revenues declined 3.4% year over year to $9.01 billion and were below our $9.17 billion estimate. While the company’s long process of shifting to the Web-based cloud computing business is paying off, it is unlikely to make up for the decline in the software business. Additionally, a strong dollar is continuously posing challenges to the company’s performance. Excluding the impact of unfavorable currency rates, revenues would have grown 1%. Cloud software platform sales climbed 57% from the year-ago quarter and accounted for 6% of the total revenue. Notably, Oracle is selling more cloud software platforms than any other company in the world, providing it an edge over the software ace Salesforce.com Inc. (NYSE: CRM ). For the fiscal fourth quarter, the world’s largest database software maker expects revenues to be down 2% to up 1% in constant currency and earnings per share between 82 cents and 85 cents. The lower end of the earnings guidance is well above the Zacks Consensus Estimate of 78 cents, reflecting some optimism in the company’s future growth. Currency headwind is expected to impact 2% growth in revenues and dilute earnings per share by a couple of cents. Impressed by solid cloud computing growth and an earnings beat, the Board of Directors of Oracle authorized additional repurchase of as much as $10 billion of stock under its existing buyback program. As per Bloomberg, it is the first expansion of the repurchase plan since September 2014 (read: Face-Off: Dividend Growth & Buyback ETF ). As a result, Oracle shares climbed as much as 5.4% in after-hours trading. Smooth trading is expected to continue in the days ahead given that the stock has a Zacks Rank #3 (Hold) and a solid Industry Rank in the top 27%, suggesting room for upside. Given this, ETFs with the highest allocation to this software giant will be in focus in the days ahead. Investors should closely monitor the movement in these funds and avoid these if the stock drags them down: iShares North American Tech-Software ETF (NYSEARCA: IGV ) This ETF provides exposure to the software segment of the broader U.S. technology space by tracking the S&P North American Technology-Software Index. The fund holds a basket of 58 securities with Oracle taking the top spot at 9.3% of total assets. It is quite popular with AUM of $639.1 million while volume is moderate as it exchanges nearly 201,000 shares a day. The product charges 48 bps in annual fees and has lost 6.3% so far this year. IGV has a Zacks ETF Rank of 1 or ‘Strong’ rating with a High risk outlook. First Trust ISE Cloud Computing Index ETF (NASDAQ: SKYY ) This fund provides exposure to cloud computing securities by tracking the ISE Cloud Computing Index. Holding about 34 stocks in the basket, Oracle takes the fifth spot at 4.2% of assets. Software firms dominate this ETF, accounting for 37.5% share while Internet software services (16.7%) and communication equipment (13.5%) round off to the next two sectors. The product has been able to manage $531.3 million in its asset base while sees good volume of about 102,000 shares a day. It has 0.60% in expense ratio and has a Zacks ETF Rank of 2 or ‘Buy’ rating with a High risk outlook. First Trust NASDAQ Technology Dividend Index ETF (NASDAQ: TDIV ) This fund provides exposure to the dividend payers within the technology sector by tracking the Nasdaq Technology Dividend Index. The product has amassed about $482.9 million in its asset base while trades in volume of around 83,000 shares per day. The ETF charges 50 bps in annual fees. In total, the fund holds about 96 securities in its basket. Of these firms, ORCL takes the seventh position, making up roughly 4.0% of the assets. In terms of industrial exposure, the fund is widely spread out across semiconductor and semiconductor equipment, diversified telecommunication services, technology hardware, storage & peripherals, and software. The fund has added 3.2% so far this year. PureFunds ISE Big Data ETF ( BDAT ) This product targets the niche corner – the big data and analytics industry – in the broad technology space. The fund follows the ISE Big Data Index, holding 32 securities in its basket. Of these, ORCL takes the sixth spot with 4% allocation. The U.S. firms dominate the portfolio with 81% share while Germany, Israel, Canada, and China make up for a decent exposure. The fund has accumulated $1 million in its asset base so far and charges a bit higher fee of 0.75%. Average daily volume is paltry at nearly 1,000 shares and BDAT is down 13.8% in the year-to-date timeframe. Link to the original post on Zacks.com

Leveraged Oil And Gas ETNs Dominate Inflows In March

Oil has been making headlines over the past one and a half years owing to huge swings in its prices. Oil prices took a U turn after touching a 12-year low this February. This is especially true as oil broke its near-term trading range and regained momentum, indicating that the worst might be over for the commodity (read: Oil Hits 12-Year Low: Short Energy Stocks with ETFs ). Notably, WTI crude surged near the $39 per barrel mark earlier this month while Brent jumped to more than $41 per barrel. However, prices retreated a bit over the last couple of trading sessions. With this, both WTI and Brent are up more than 6% since the start of March. Meanwhile, after touching a 17-year low on March 3, natural gas prices have also rallied so far this month. This shift made investors put huge amounts of money in oil and gas ETFs/ETNs that are wonderfully undervalued at current levels. In fact, these ETFs have seen the biggest asset inflows so far this month with the two ultra-popular ETFs – the VelocityShares 3x Long Crude Oil ETN (NYSEARCA: UWTI ) and the VelocityShares 3x Long Natural Gas ETN (NYSEARCA: UGAZ ) – accumulating nearly $9.3 billion and $6.8 billion, respectively, as per ETF.com . Oil Rebound in the Cards? The latest boost in oil price came with improving demand/supply trends. Talks of production freeze from giant oil producers including Russia and Saudi Arabia had been among the rally’s biggest drivers. Meanwhile, disruptions in supply in Iraq and Nigeria have led to a tightening of supply, which albeit is short term (read: Oil ETFs in Focus on Oil Output Freeze Talks ). Signs of decreasing production can also be seen in the U.S. With oil drilling activity falling in the country, output is expected to continue to decline in the coming weeks. However, increasing production in Iran, a strong dollar and weak global economic growth could lead to further swings in oil prices. Given the uncertain backdrop for oil, investors are seeking to make quick profit from the current trend. UWTI with a leveraged factor of 3 times has been in demand this month. This popular leveraged fund targets the energy segment of the commodity market through WTI crude oil futures contracts. It seeks to deliver thrice the returns of the S&P GSCI Crude Oil Index Excess Return and has amassed $10.62 billion in its asset base. The fund charges a higher fee of 1.35% per year and trades in high volume of 7.5 billion shares. UWTI accumulated almost 88% of its AUM in March so far and is up about 16.2% over the same time frame. In the natural gas world, UGAZ with AUM of $7.08 billion tracks the performance of S&P GSCI Natural Gas Index ER with a leveraged factor of 3 times. The fund also charges a high fee of 1.65% per year and trades in volumes of 1.2 billion shares. UGAZ has accumulated almost 96% of its AUM in March and has gained 11.6%. Investors should be careful while investing in leveraged exchange-traded notes (ETN), as these use derivatives instruments to amplify the returns of the underlying index. While this strategy is highly effective in the short term, their long-term performance could vary significantly from the actual performance of the underlying index due to a compounding effect. Link to the original post on Zacks.com

ETF Winners And Losers As Fed Stands Pat

By Max Chen and Tom Lydon With the Federal Reserve keeping short-term interest rates unchanged, rate-sensitive exchange traded funds popped while some trades dependent on higher rates went out of favor, according to industry analyst ETF Trends . The Fed kept short-term rates unchanged at a range of between 0.25% and 0.5%, pointing to ongoing global economic and financial risks. Fed officials also suggested there will only be two more rate hikes this year, according to their projections, down from previous estimates of four hikes as policymakers grow more cautious in the wake of weakening overseas growth and volatility in financial markets. With the Fed holding off on further rate hikes, the PowerShares DB U.S. Dollar Index Bullish Fund (NYSEArca: UUP ) , which tracks the price movement of the U.S. dollar against a basket of currencies, lost momentum and dipped 0.6% Wednesday. A Fed rate hike would have diminished the supply of money floating around the economy and strengthened the greenback, but without the Fed’s support, the USD’s outlook looks less certain. Additionally, the Financial Select Sector SPDR (NYSEArca: XLF ) was down 0.6% Wednesday. Without high rates to support loans, banks will continue to see squeezed margins in a low rate environment. On the other hand, yield-generating assets popped as the Fed maintains lower rates. For instance, on Wednesday, the Vanguard Dividend Appreciation ETF (NYSEArca: VIG ) rose 0.4%, Vanguard REIT ETF (NYSEArca: VNQ ) gained 0.9% and Utilities Select Sector SPDR (NYSEArca: XLU ) increased 1.0%. Dividend-generating assets were among the best performing areas of the market as a prolonged period of low interest rates typically make relatively riskier equities attractive to more conservative fixed-income assets. Additionally, the weakening dollar helped bolster commodity assets, with the broad PowerShares DB Commodity Index Tracking Fund (NYSEArca: DBC ) 1.6% higher on Wednesday. The SPDR Gold Shares (NYSEARCA: GLD ) advanced 1.5%. Gold assets would typically weaken on rate hikes since investors would shift away from non-yield-generating assets like gold, especially on a stronger dollar and lower inflation outlook. The United States Oil Fund (NYSEArca: USO ) , which tracks West Texas Intermediate crude oil futures, also pushed higher, rising 4.9% Wednesday on the weaker dollar. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.