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Top And Flop Zones Of Q1 And Their ETFs

The start of 2016 was the worst ever for the broader financial market, thanks to the twin attacks of the China meltdown and the oil price crash that sparked off fresh fears of a global slowdown. Additionally, a strong dollar, geopolitical tensions in the Middle East, weak corporate earnings, uncertain timing of the next interest rates hike, weakness in many developed and developing economies, and concerns over the health of the global banks added to the chaos. A slew of worries sent the major U.S. bourses into correction territory from the recent peaks, with the S&P 500 and Dow Jones plunging more than 14% (as of February 11). However, the stocks staged a nice comeback in the back half of the first quarter, recouping all the losses made in the quarter. Both the S&P 500 and Dow Jones are now in the green, having logged 1% and 1.7% gains, respectively, from a year-to-date look. This is largely thanks to extra easing policies in Europe and Japan, stabilization in the Chinese economy, and receding fears of recession in U.S. Further, the rebound in oil price from its 12-year low and the Fed’s dovish comments infused a fresh lease of life in the stock markets. All these have increased the appeal for riskier assets lately, leading to a bullish trend in stocks, though bouts of volatility are still showing up. That being said, most corners of ETF investing have performed exceptionally well, while a few areas are lagging. Below, we have highlighted the best and worst zones of Q1 and their ETFs in detail. Best Zones Metal Mining ETFs Global uncertainty and financial market instability have brought back the lure for metals across the globe, boosting their demand. Acting as leveraged plays on underlying metal prices, metal miners tend to experience huge gains compared to their bullion cousins in a rising metal market. While all the ETFs in the mining space have enjoyed smooth trading, the PureFunds ISE Junior Silver ETF (NYSEARCA: SILJ ) is the biggest winner, having surged about 71% in value. This product provides a true small cap play on the silver mining space by tracking the ISE Junior Silver (Small Cap Miners/Explorers) Index. In total, the fund holds about 24 securities in its basket, with the largest allocation going to the top three firms – First Majestic Silver Corp. (NYSE: AG ), MAG Silver Corp. (NYSEMKT: MVG ) and Pan American Silver (NASDAQ: PAAS ). These firms combine to make for 40.3% of the fund’s assets. Canadian firms take the lion’s share at 82%, while the U.S., Peru and the United Kingdom take the remainder. The fund has managed assets worth $9.2 million and trades in a paltry volume of less than 18,000 shares a day. It charges 69 bps in annual fees. Natural Resource ETFs The natural resource segment gained immense strength in the first quarter, with robust performances in its chemical business as well as the metals & mining, and steel industries. A growing automotive market, a solid residential construction market and increasing production are boosting growth. Further, the impressive rebound of oil price from the 12-year lows hit in mid-February raised the appeal for these products. All these combinations have given a huge boost to the new ETF – the SPDR S&P North American Natural Resources ETF (NYSEARCA: NANR ) – that has accumulated $744.2 million in AUM in just three months of its debut, while surging 17% in the first quarter. Volume is solid, with the fund exchanging 490,000 shares in hand on average. The ETF offers a well-balanced exposure to the basket of natural resources companies in the energy, materials, and agriculture industries. It tracks the S&P BMI North American Natural Resources Index, charging investors 35 bps in fees and expenses. Holding 60 securities in its basket, it is highly concentrated on the top two firms – Chevron (NYSE: CVX ) and Exxon Mobil (NYSE: XOM ) – with over 9% share each. Other firms hold less than 6.2% of assets. Materials make for half of the portfolio, closely followed by 45% in energy and the rest in consumer staples. Gold ETFs After posting the third annual loss in 2015, gold is heading for its biggest quarterly gain in nearly 30 years , having risen more than 15% in the first quarter. This is especially thanks to global growth concerns, the Fed’s cautious stance on rate hikes, and the adoption of negative interest rates by most countries that resulted in risk-off trade, increasing the safe-haven appeal across the board. In particular, the PowerShares DB Gold ETF (NYSEARCA: DGL ) has been leading in this corner of the ETF world, gaining nearly 15.6%. The fund seeks to track the DBIQ Optimum Yield Gold Index Excess Return, which consists of futures contracts on gold, plus the interest income from the fund’s holdings of US Treasury securities. It has amassed $218.2 million in its asset base, while it trades in moderate volume of 64,000 shares, thereby resulting in additional cost in the form of a wide bid/ask spread beyond the expense ratio of 0.78%. The product has a Zacks ETF Rank of 3 or “Hold” rating with a Medium risk outlook. Worst Zones Biotechnology ETFs Being a high-growth and high-beta sector, biotechnology has been hit hard by the global market rout seen in January and early February. Further, sector-specific issues, including increased regulatory scrutiny over high drug prices, political uncertainty surrounding healthcare reform, soft enrollment in public health insurance exchanges, and continued deceleration in earnings growth intensified the woes. While all the ETFs in this space saw terrible trading, the BioShares Biotechnology Clinical Trials ETF (NASDAQ: BBC ) stole the show, plunging over 36% in the first quarter. The ETF provides exposure to the companies that have a primary product in Phase I, II, or III of FDA trials by tracking the LifeSci Biotechnology Clinical Trials Index. Holding 90 small cap stocks in its basket, the fund is widely spread out, as each firm holds no more than 2.23% share. BBC has accumulated $27.6 million in its asset base and charges fees of 85 bps per year. It trades in a light volume of 11,000 shares a day and has a Zacks ETF Rank of 3. Natural Gas ETFs Natural gas price has been on a wild swing since the start of the year, dropping in early March to levels not seen in 18 years on expanding supply and falling global demand. A mild winter in the U.S. and EU also dented the demand from heating for natural gas. As a result, the ETFs tracking natural gas futures have been hit, with the iPath DJ-UBS Natural Gas Total Return Sub-Index ETN (NYSEARCA: GAZ ) shedding 30.5%. The note delivers returns through an unleveraged investment in the natural gas futures contract plus the rate of interest on specified T-Bills. It follows the Bloomberg Natural Gas Subindex Total Return Index. The product is unpopular and illiquid, with AUM of $5.1 million and average daily volume of 53,000 shares. Its expense ratio came in at 0.75%. Solar ETFs Solar stocks have also been victims of investors’ shift from the high-beta space and vicious oil trading given investors’ misconception that oil price and solar market fundamentals are directly related to each other. Even the encouraging industry trends, including higher panel installations, the historic Paris climate deal, the U.S. tax credit extension, and Obama’s ‘Climate Action Plan failed to revive growth in the sector. As such, the Guggenheim Solar ETF (NYSEARCA: TAN ), which offers exposure to the global solar industry, tumbled about 26%. The product follows the MAC Global Solar Energy Index and holds 29 securities in its basket, with the largest allocation going to the top three firms, which combined to make up for 21.9% share. American firms dominate the fund’s portfolio at nearly 55.9%, followed by China (17.9%) and Hong Kong (15.0%). The product has amassed $224 million in its asset base and trades in good volume of around 184,000 shares a day. It charges investors 70 bps in fees per year. Original Post

Investing Begins At The World Economic Forum

Going back to my very first article in Seeking Alpha, I have said that alpha-level results may stem from, “big, developing, scientific, socio-economic, and political patterns and trends that have yet to be reflected in the price of related equities.” I call this approach, “strategic investing”. Such ideas can arise anytime, anywhere. However, if an investor had only one place to look for them, they could do no better than the World Economic Forum. The World Economic Forum was established in 1971 by German engineer, economist and visionary Klaus Schwab . It is a non-partisan, public-private, non-profit foundation, “committed to improving the state of the world”. The Forum serves its mission by bringing together top leaders – policy-makers, corporate executives, entrepreneurs, academics and others – to influence positive change globally, regionally, and across industry. The Forum’s board, executive committee, membership and partners are truly the international Who’s Who. Periodically, the World Economic Forum publishes “Insight Reports” including their “Global Risks 2015” report. By way of background, the Forum defines a global risk as, “an uncertain event or condition that, if it occurs, can cause significant negative impact for several countries or industries within the next 10 years.” The data for the report come from a survey of World Economic Forum members. In other words, the published findings rely on a Delphi method drawing on diverse opinions of the best and brightest in the world. In the very first graphic of their report, the Forum plots the global risks according to two dimensions, impact versus likelihood. As you can see, the risks that rate the highest across both vectors are: a) Water Crises, b) Interstate [geopolitical] Conflicts, c) Failure of Climate / Change Adaptation, d) Unemployment / Underemployment, e) Fiscal Crises, f) Cyber Attacks, g) Asset Bubbles, h) Terrorist Attacks, i) Profound Social Instability, and j) Food Crises. Click to enlarge This straightforward analysis can begin to inform your decisions about where to invest. Reflecting my belief that challenges represent opportunities more than they do threats, I used the “Global Risks 2015” report to confirm decisions I had made earlier relying on other sources of information. Specifically: In response to developing water crises, I am invested in the two largest and most established water management companies in the world, Suez Environnemental ( OTCPK:SZEVY ) and Veolia Environnemental ( OTCPK:VEOEY ). In addition to being able to muster resources to help increase the supply of fresh water, I believe that third-party companies like these can help government with tough decisions about allocation of this increasingly scarce resource. With respect to adaptation compelled by climate change, I hold shares in companies investing to fight migrating tropical diseases including with vaccines; GlaxoSmithKline (NYSE: GSK ), Merck (NYSE: MRK ), Novartis (NYSE: NVS ), Pfizer (NYSE: PFE ), and Sanofi (NYSE: SNY ). Very recently, I also established a position in a company involved with genetically-modified mosquitoes, Intrexon (NYSE: XON ). Just last week, the BBC reported that the World Health Organization / WHO approved trials involving GM mosquitoes. As to terrorist attacks and to some extent interstate conflicts, a year or so ago anticipating the end of sequestration, I allocated resources to the major military contractors including General Dynamics (NYSE: GD ), Lockheed Martin (NYSE: LMT ), Northrop Grumman (NYSE: NOC ), and Raytheon (NYSE: RTN ). In the field of cyber-security, there are so many players involved that I’m having trouble keeping track of them all. However, my sense is that Accenture (NYSE: ACN ) and IBM (NYSE: IBM ), because of their strong positions operating and supporting the systems of the largest companies in the world, will be among the major contenders in the space and I am invested in both. Security is also central to the protection of the power grid and so I am invested in it through General Electric (NYSE: GE ). Lest I forget, military defense contractors also have a major commercial role to play in cyber-security given their institutional know-how of NIST / FIPS testing. Food deserves a place in everyone’s portfolio. However, as opposed to investing in ‘downstream / end-product’ processors, I prefer to focus ‘upstream’ on companies closer to farmers. For this reason, I am invested in Bunge (NYSE: BG ) and Ingredion (NYSE: INGR ). I also hold shares in DuPont (NYSE: DD ) both because of its agricultural chemical business as well as its position in hybrid seeds through Pioneer. Executives often begin their annual planning retreats with a presentation / discussion of major environmental factors that are likely to affect their organization, clients, and competitors. Such external information is often critical to what they do internally. It should be no different for individual investors – an approach that begins with an outward focus makes a lot more sense than picking investments by first studying numbers, ratios and so forth. But, as I have said before, this is not to say that fundamental and technical analysis are not also foundational to successful investing. Disclosure: I am/we are long SZEVY,VEOEY,GSK,MRK,NVS,PFE,SNY,XON,GD,LMT,NOC,RTN,ACN,IBM,GE,BG,INGR, DD. 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. Additional disclosure: As I do, always consult a competent advisor(s) in making your investment decisions. In addition to challenging your assumptions, they can steer you clear of potholes having to do with thinly-trading stocks, foreign tax withholding on dividends, etc. Editor’s Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.

Top And Flop ETFs Of November

Finally, the U.S. stock market has entered into its strong stretch. Historically, the three months from November through January are the most successful in the stock markets. A consensus carried out from 1950 to 2013 has revealed that November has ended up offering positive returns in 43 years and negative returns in 22 years, with an average return of 1.37%, as per moneychimp.com . November stands second in terms of monthly returns over the past two decades. However, this year, the market looked more like the down-years due to a host of concerns, with rising rate worries being at the helm. Global growth has been in jeopardy and commodities falling fast. Among the top ETFs, investors saw U.S. ETFs advance slightly with SPY adding 0.3%, DIA gaining 0.12% and QQQ moving higher by about 0.25% in the month (as of November 27, 2015). Let’s take a look at the three best and worst performing ETFs of the month. Top Performers KraneShares CSI China Five Year Plan ETF (NYSEARCA: KFYP ) – Up 14.7% China was the beneficiary of compelling valuation. After a bloodbath in August following the currency devaluation and several offhand economic data, China started to recoup losses from October with its A-Shares ETFs turning out as chartbusters in November. Plenty of monetary easing policies, changes in demographic policy and hopes for further easing (as the economy is still reeling under pressure) helped KFYP to add over 14% in the month. BioShares Biotechnology Clinical Trials Fund (NASDAQ: BBC ) – Up 13% The biotech space was hit hard in September on drug pricing concerns. However, the sell-off made this piping hot corner affordable. A whirlwind of mergers and acquisitions, plenty of drug launches, FDA approvals for the highly awaited drugs, ever-increasing demand in the emerging markets and surging health care spending made this sector the star performer of November. Needless to say, the operating fundamentals of the health care space are stronger than many other sectors. Other biotech and pharma ETFs that stole the show in the month were SPDR S&P Pharmaceuticals ETF (NYSEARCA: XPH ), Loncar Cancer Immunotherapy ETF (NASDAQ: CNCR ) and ALPS Medical Breakthroughs ETF (NYSEARCA: SBIO ) which advanced about 9.6%, 9.2% and 7%, respectively. Deutsche X-trackers Japan JPX-Nikkei 400 Hedged Equity ETF (NYSEARCA: JPNH ) – Up 12% Japan may have entered into a technical recession in Q3, but that did not turn off investors’ enthusiasm toward Japanese investing. An ongoing QE measure and hopes of further monetary support which can fight weakening growth and boost consumer prices were behind the optimism in the Japanese stocks. Another Japanese ETF that soared (about 10.7%) in the month was WisdomTree Japan Hedged Health Care Fund (NYSEARCA: DXJH ). Barclays Inverse US Treasury Aggregate ETN (NASDAQ: TAPR ) – Up 8.2% As the Fed gave cues of a rate hike, the inverse U.S. Treasury ETF which follows a unique strategy to hedge against or benefit from the rising U.S. dollar interest rates by tracking the Barclays Inverse US Treasury Futures Aggregate Index, gained over 8%. Worst Performers Metals were slaughtered in the month. The double whammy of flagging global growth suppressing demand and the strength of the greenback in the wake of the U.S. policy tightening have weighed heavily on metal ETFs. ETFS Physical Palladium Shares (NYSEARCA: PALL ) – down 19.1% This product looks to reflect the price of palladium. This precious metal has a number of uses in society including jewelry and dentistry, though the key use is in the auto sector with catalytic converters to control emissions. As a result, following the Volkswagen scandal, demand for the metal declined. While a higher greenback dampened the metal price, the rise in U.S. interest rates would make auto loans pricier, which in turn might curb auto sales in the country. E-TRACS UBS Bloomberg CMCITR Long Platinum ETN (NYSEARCA: PTM ) – down 18.4% This is a sub-index of the UBS Bloomberg Constant Maturity Commodity Index & measures the collateralized returns from a basket of platinum futures contracts which is designed to be representative of the entire liquid forward curve of the platinum contracts. In addition to usage in jewelry, platinum is widely used in auto-catalysts to control emissions and so its decline is self-explanatory. Global X Copper Miners ETF (NYSEARCA: COPX ) – down 18.9% Copper prices slipped to a six-year low on growth concerns. A weak Chinese economy remains a concern for the fund for long. China matters the most for this metal as the country is the world’s biggest consumer of this industrial metal, making up roughly 40% of global copper demand. This headwind shattered the copper mining ETFs in November. Notably, mining ETFs generally trade as a leveraged play on the underlying metal and thus see a higher jump. iPath Dow Jones-UBS Nickel ETN (NYSEARCA: JJN ) – down 16.6% Nickel prices plummeted to a nine-year low. Solid exports from Malaysia are resulting in a supply glut and soft demand for stainless steel in Europe has wrecked havoc on nickel ETFs. Original Post