Tag Archives: earnings-center

Why Do Fundamentals Matter?

With a booming market, everyone forgets fundamentals. Someone, the other day, told me that “You don’t need profits to pay bills” when talking about Amazon. If that’s not a sign of euphoria and not understanding how wealth is built, I don’t know what is. The reason fundamentals matter in the long run is that wealth is built on cash flow, profit, and overall returns. Yes, a company can profit but if you’re paying too much for that profit, it’s going to hurt you in the long run because there will be a time when your investment is out of style and everyone will revert back to fundamentals. It happens in every bear market. People flee the exciting fast growing stocks that aren’t doing as well financially to go to companies that generate cash flow and build their balance sheet. Not only in stocks. Real estate as well. The last 15 years have been a boom in real estate, even after a big bust. Real estate is driven by income. I randomly pulled 28 markets that I could think of in this country and looked at their median income growth and their real estate value growth since 1990. The direct correlation from one city to another wasn’t exactly there, but when you looked at all 28 cities as a whole, they were very much in line. Median income growth was 2.32% per year on average and the average real estate growth was 2.6% per year. Not exact, but close. During the recent 15 years of booms in major markets (that were also in my 28 city analysis), we were seeing 15-20% growth per year even though income wasn’t growing NEARLY as much. Then we saw a massive drop in prices and another rebound, so everyone assumes that the past problems were past problems. We shall see. The bottom line is that everything reverts to the mean. We are never exactly fairly valued. We are either overvalued or undervalued in every investment asset. You are either a buyer or seller of assets. It’s that simple. I choose to wait until asset prices get to the point where they are undervalued enough to make me feel that above-average returns will be experienced based on historical averages. Does it require A TON of patience? Absolutely. Is it frustrating at times? 100%. To hear the so-called “experts” tell me that I’m missing it and I don’t understand and “This time is different” has become annoying. But I stick to fundamentals. And at the end of the day, they win out. Fundamentals are the only true way to measure value. You have to find out what truly defines the price of an asset and buy when the asset is selling for below that fundamental point. Is it just one thing? No. But is it a ton of complicated points? Absolutely not. There are a few things that matter when looking at investments and it is the job of a true investor to understand what those are and where they have stood historically (not just over 25 years but over 60+ years). Share this article with a colleague

5 Buy-Ranked Mid-Cap Value Mutual Funds

Value stocks are stocks that tend to trade at a price that is lower than its fundamentals (i.e. earnings, book value, Debt-Equity). It is common for some investors to invest in value funds for the income or yield. However, not all value funds are comprised solely of companies that primarily use their earnings to pay dividends. Investors interested in choosing value funds for yield, should be sure to check the mutual fund yield. The mutual fund yield is the dividend payments divided by the value of the mutual fund’s shares. Meanwhile, mid-cap funds are ideal investment options for investors looking for high return potential that comes with lower risk than small-cap funds. Mid-cap funds are not very susceptible to volatility in broader markets, making it an ideal bet given that the macroeconomic conditions have generally offered a roller-coaster ride in recent years. Below we will share with you 5 buy ranked mid-cap value mutual funds . Each has earned either a Zacks Mutual Fund Rank #1 (Strong Buy) or a Zacks Mutual Fund Rank #2 (Buy) as we expect these mutual funds to outperform their peers in the future. Goldman Sachs Mid Cap Value A (MUTF: GCMAX ) maintains a diversified portfolio by investing in equity securities of companies having market capitalizations similar to those included in the Russell Midcap Value Index. GCMAX primarily focuses on acquiring securities of domestic companies. However, GCMAX may also invest in securities of non-US firms including those located in emerging nations. The Goldman Sachs Mid Cap Value A fund has a three-year annualized return of 16.1%. GCMAX has an expense ratio of 1.14% as compared to category average of 1.21%. Sterling Capital Mid Value A (MUTF: OVEAX ) seeks capital appreciation over the long run. OVEAX invests a lion’s share of its assets in equity securities of undervalued mid cap companies. According to the advisors, a company with market capitalization within $1 billion to $30 billion is defined as a mid cap company. OVEAX predominantly invests in common stocks of both domestic and foreign firms that are traded in the US. The Sterling Capital Mid Value A fund has a three-year annualized return of 18.4%. Timothy P. Beyer is the fund manager and has managed OVEAX since 1997. Heartland Select Value (MUTF: HRSVX ) generally invests in common stocks of companies that are believed to be undervalued compared to their intrinsic value. HRSVX is expected to maintain a portfolio of 40 to 60 securities. HRSVX seeks to achieve capital growth over the long run. The Heartland Select Value fund has a three-year annualized return of 15%. As of March 2015, HRSVX held 46 issues with 4.3% of its assets invested in Quest Diagnostics Inc. Perkins Mid Cap Value D (MUTF: JNMCX ) seeks long-term capital growth. JNMCX invests a large chunk of its assets in ‘value’ stocks of companies having market capitalizations within the range of the Russell Midcap Value Index. JNMCX focuses on investing in common stocks of companies. JNMCX may also invest not more than one-fifth of its assets in companies other than mid cap firms. The Perkins Mid Cap Value D fund has a three-year annualized return of 12.3%. JNMCX has an expense ratio of 0.65% as compared to category average of 1.21%. Vanguard Capital Value Investor (MUTF: VCVLX ) invests in companies that are believed to be trading at a lower value when compared to their potential earnings, asset values and dividends. VCVLX may maintain a concentrated portfolio of stocks that may or may not pay dividend. The Vanguard Capital Value Investor fund has a three-year annualized return of 18.7%. As of March 2015, VCVLX held 147 issues with 2.96% of its assets invested in Pioneer Natural Resources Co. Original Post

Global And Short-Term Treasury: 2 ETFs To Watch On Outsized Volume

In the last trading session, the U.S. stocks ended their five-day losing stretch on strong earnings reports and stabilization in the Chinese market. Among the top ETFs, investors saw the SPDR S&P 500 Trust ETF (NYSEARCA: SPY ) gain 1.2%, the SPDR Dow Jones Industrial Average ETF (NYSEARCA: DIA ) move higher by 1.1% and the PowerShares QQQ Trust ETF (NASDAQ: QQQ ) gain 0.9% on the day. Two more specialized ETFs are worth noting as both saw trading volume that was far outside of normal. In fact, both these funds experienced volume levels that were more than double their average for the most recent trading session. This could make these ETFs ones to watch out for in the days ahead to see if this trend of extra-interest continues: iShares MSCI ACWI (All Country World Index) Index ETF (NASDAQ: ACWI ) : Volume 4.9 times average This global ETF was in focus yesterday as about 5.6 million shares moved hands compared to an average of roughly 1.2 million shares. We also saw some price movement as ACWI gained 1.2% in the past session. The movement can largely be blamed on lower oil prices, uncertain economic growth worldwide, and a possible interest rate hike, which can have a huge impact on global stocks like the ones we find in this ETF portfolio. For the past one-month period, ACWI was down nearly 2.2%. The fund currently has a Zacks ETF Rank #3 (Hold). S chwab Short-Term U.S. Treasury ETF (NYSEARCA: SCHO ) : Volume 4.0 times average This short-term treasury ETF was under the microscope yesterday as more than 693,000 shares moved hands. This compares to an average trading day of around 181,000 shares and came as SCHO lost 0.4% in the session. The big move was largely the result of the uncertainty over the Fed’s interest rate outlook ahead of its meeting. SCHO added 0.2% in the past month and currently has a Zacks ETF Rank #3. Link to the original article on Zacks.com Share this article with a colleague