Tag Archives: china
3 Sector Funds To Gain On Oil Slump
The slump in oil prices has now continued for over a year. There was relief this year in March when crude prices moved up seemed a blip, as they are back near $40 mark now. Last Friday, prices of WTI crude oil declined 2.2% to $40.45 per barrel on Friday. WTI crude oil also registered its eighth straight weekly loss, its longest weekly losing streak since 1986. Additionally, the Brent crude oil declined 2.6% to $45.46 per barrel. Oil prices took a beating after Baker Hughes Incorporated (NYSE: BHI ) reported that oil rig counts increased to 674 as of Aug 21. On Monday, price of WTI crude oil tanked 5.8% to $38.24 per barrel. The price of WTI crude oil finished below $39 a barrel for the first time since Feb 2009. Additionally, the Brent crude oil declined 6.5% to $42.69 per barrel. The price of Brent crude oil fell below the $43 mark for the first time since Mar 2009. However, certain sectors seem to enjoy a blessing in disguise amidst the oil market rout. These sectors benefit from the oil slide in certain ways. While auto and transportation are direct beneficiaries, sectors such as retail, consumer discretionary and consumer staples also gain from low oil prices. Thus, to buy certain favorably ranked stocks from these sectors will be a prudent move. Recent Oil Slide WTI crude oil prices plunged around 21% in July, witnessing its biggest monthly decline since Oct 2008. Meanwhile, the price of Brent crude oil is close to going below the $40 level now. Both the crude prices are trading at multi-month low levels. Very recently, the weakening Chinese economy and the weekly rig count report showing another increase in the number of drilling rigs operating in the U.S were responsible for the ugly slip. Recently released economic data indicated that China, the second biggest economy of the world, is suffering from a sluggish growth environment. This has curbed the demand for oil by a significant proportion. Some analysts opine that China’s economic activity may fall below 7% in the third quarter. This will hamper oil demand from the world’s second-largest consumer. In the US, news that oil producers increased their rig count for five straight weeks shocked an already over-supplied market. The demand and supply imbalance is striking and with little hope of a steady rebound. Until China recovers and producers put a lid on volumes, crude is fated to fall. And if market predictions hold any truth, there is hardly any reason for investors in this space to rejoice. Auto & Transportation: Direct Beneficiaries Recently released auto sales data indicates the benefits from the low oil price environment. U.S. auto sales came ahead of expectations in July, fueled by demand for light trucks and sport-utility vehicles rather than fuel-efficient cars. The seasonally adjusted annual sales rate (SAAR) climbed 3.2% from June to 17.6 million in July, its second highest tally in a decade. Meanwhile, domestic vehicle sales rose 5.2% to an annualized rate of 14.2 million in July, which exceeded the consensus estimate of 13.5 million. Meanwhile, the Dow Jones Transportation Average (DJT) has gained while oil prices slumped. Airlines industry, included in this sector, is a major gainer from this situation. In the second quarter, the aviation industry is said to have amassed record quarterly profit of more than $5 billion. Plunge in fuel prices coupled with strategic investments to bring in more passengers on board have buoyed profit margins. Fund to Buy Fidelity Select Automotive Portfolio (MUTF: FSAVX ) invests a majority of its assets in companies that manufacture, market and sell automobiles, trucks, specialty vehicles, parts, tires, and related services. The non-diversified fund invests in both US and non-US companies, primarily in common stocks. Fidelity Select Automotive Portfolio carries a Zacks Mutual Fund Rank #1 (Strong Buy) . FSAVX’s 3 and 5 year annualized returns are 18.2% and 13%. The expense ratio of 0.85% is lower compared to category average of 1.46%. Retail: Indirect Beneficiary Along with strong labor market conditions, decline in oil prices has played an important role in increasing consumer spending in recent times. According to the “advance estimate” released by the U.S. Department of Commerce, Real Personal Consumption Expenditure rose 2.9% during the second quarter, higher than the first quarter’s growth rate of 1.8%. Funds to Buy Putnam Global Consumer Fund (MUTF: PGCOX ) invests in mid to large companies that are involved in the manufacture, sale or distribution of consumer staples and consumer discretionary products and services. Putnam Global Consumer A currently carries a Zacks Mutual Fund Rank #1. PGCOX boasts year-to-date return of 4.4% and has returned nearly 4.9% over the past 1 year. The 3 and 5 year annualized returns are 13.9% and 14.5%. The expense ratio of 1.29% is however higher compared to category average of 1.27%. Rydex Retailing Fund (MUTF: RYRIX ) seeks growth of capital. RYRIX invests almost all its assets in equities of US-traded retail companies. Apart from investing in small to mid-cap retailing companies, RYRIX may also buy ADRs to get exposure to foreign retailers. RYRIX may also invest in derivatives and US government securities. RYRIX currently carries a Zacks Mutual Fund Rank #2 (Buy) . RYRIX’s 3 and 5 year annualized gains stand at 14.7% and 18.5%. The annual expense ratio of 1.33% is lower than category average of 1.46% Link to the original article on Zacks.com
3 Safe-Haven ETFs To Watch On Market Correction
The global investing world, especially the risky assets, went into a tailspin recently on a host of factors including lack of transparency in the Fed tightening timeline, the rout in the Chinese economy and its repercussions in its stock market, the yuan devaluation earlier this month, an impending snap election in Greece, slowdown in the Japanese economy and an acute plunge in oil prices. In short, concerns over global growth are widespread, causing a correction in the global stock markets. The U.S. stock-index futures recorded the deepest weekly decline in about four years past week. The tumult was triggered off on August 11 when China devalued its currency yuan and eventually spread into almost all asset classes. Since then, the global market correction ate away over $5 trillion of equity value, per Bloomberg. Commodity prices dived to a 16-year low, and credit risk in Asia rose to the highest level since March 2014. Given these woes, risk-averse investors are treading cautiously as most are dumping stocks and junk bonds in favor of safe haven assets to protect their portfolio from capital erosion. Below we have highlighted three safe haven ETFs that investors can consider adding to their portfolio in the current volatility. These products are likely to gain should the turmoil worsen and volatility in the market continue to escalate. Treasury Bonds iShares 20+ Year Treasury Bond ETF (NYSEARCA: TLT ) Though U.S. treasuries were out of favor a few days back due to worries over Fed tightening, heightened global uncertainty brought this safe asset into the limelight. Dimming prospects of the sooner-than-expected Fed rate hike, global growth worries and severely low oil price which put a lid on global inflation led treasury valuation to soar. Yields on the U.S. benchmark 10-year notes slipped to 2.05% on August 21 from this year’s 2.50% high recorded on June 10 while yields on the U.S. benchmark 20-year notes plunged to 2.44% from the high of 2.98% on June 26. The ultra-popular long-term Treasury ETF – TLT – tracks the Barclays Capital U.S. 20+ Year Treasury Bond Index and has AUM of $4.92 billion. Expense ratio comes in at 0.15%. Holding 29 securities in its basket, the fund focuses on the top credit rating bonds with average maturity of 26.82 years and effective duration of 17.35 years. TLT was up 1.9% last week and 5.7% in the last one-month frame (as of August 21, 2015). The fund has a Zacks ETF Rank #3 (Hold). Apart from TLT, investors can also consider the 25+ Year Zero Coupon U.S. Treasury Index ETF (NYSEARCA: ZROZ ) and the Vanguard Extended Duration Treasury ETF (NYSEARCA: EDV ) . These two ETFs were up 2% and 2.9% in the last one week (as of August 21, 2015). In the last one-month frame, each of these two ETFs gained over 9.4%. Gold SPDR Gold Trust ETF (NYSEARCA: GLD ) Gold is often viewed as a safe haven asset to protect against financial risks, and has performed well lately (despite deteriorating fundamentals) on heightened market volatility. The metal logged the largest weekly gains (as of August 21, 2015) since January. Funds tracking the yellow metal, such as GLD, can be a good choice for investors seeking safety. GLD tracks the price of gold bullion measured in U.S. dollars. The fund is the most popular and liquid bet in its space with an asset base of $25.1 billion and an average trading volume of about six million shares a day. The fund charges 40 basis points as fees and gained more than 4% in the past one week and 6% in the last one-month frame (as of August 21, 2015). Apart from GLD, investors can also consider the iShares Gold Trust ETF (NYSEARCA: IAU ) , another popular choice in this space that returned almost similar to GLD last week. Both GLD and IAU have a Zacks ETF Rank #3 (Hold). Currency CurrencyShares Japanese Yen Trust ETF (NYSEARCA: FXY ) The Japanese currency, yen, is often considered a classic safe haven asset. Yen surged to a six-week high on August 21, 2015 as China-led worries wrecked havoc on the global equity and commodity markets. Also, reduced expectations of a September Fed rate hike dampened the dollar to some extent and boosted yen. The sentiment regarding risk-aversion was so strong that yen gained despite the ultra-loose monetary policy in Japan. Investors can target this currency via FXY, which measures the value of the yen against the price of the greenback. This $106 million-fund charges 40 basis points as fees. FXY was up 1.11% on August 21 and added 1.7% in the past week as of the same date. FXY has a Zacks ETF Rank #4 (Sell) as easy Japanese monetary policy will not favor the currency for long. In fact, the fund lost about 0.1% after hours. Link to the original post on Zacks.com