Tag Archives: energy

Weekly ETF Asset Round-Up: Equity Tops, Bonds Lag

Last week, the U.S. economy injected a fresh lease of life into the market, which has lately been troubled by Chinese hard landing fears, stretched equity valuations, oil price worries and some downbeat global economic data. The bulls have once again taken the center stage mainly because of an oil-rebound, though uncertainty is prevalent. Let’s take a look at the ETF asset flow of last week to understand the changing perception of investors. Improvement in the U.S. job scenario, inflation, manufacturing, construction spending, and housing and consumer spending data along with a spike in oil prices resulted in huge money inflows into the U.S. equity funds last week as per etf.com (as of March 3, 2016). Asset Gainers As a result, the SPDR S&P 500 Trust ETF (NYSEARCA: SPY ) , an ETF that resembles the S&P 500 index, saw inflows of nearly $1.76 billion last week. This took the fund’s asset base to around $176.7 billion. The return of risk-appetite was also validated by asset gains in the junk bond ETF space. The space has long been downtrodden. This was because that this segment has huge exposure in the energy market and includes debt issued when oil prices were at lofty levels. Oil prices slid in early 2016, putting energy companies on the verge of default and pressure on junk bonds. However, recent risk-on sentiments in the market and an oil price recovery pushed investors to pour more than $1.16 billion and $1.13 billion in the SPDR Barclays High Yield Bond ETF (NYSEARCA: JNK ) and the iShares iBoxx $ High Yield Corporate Bond ETF (NYSEARCA: HYG ) last week. Investors’ interest in risky assets may be back, but probably not in a full-fledged way. As much as $1.31 billion asset inflows into the gold bullion ETF, the SPDR Gold Trust ETF (NYSEARCA: GLD ) , revealed this. Gold demand has been surging lately on a safety bid. Investors’ continued interest in the yellow metal tells us that not only is volatility still present, the recent rally may also lose momentum any time soon. Inflation-protected bond ETF the iShares TIPS Bond ETF (NYSEARCA: TIP ) also gathered about $529 million in assets as the U.S. inflation outlook brightened on a relatively subdued U.S. dollar and recuperating energy prices. Asset Losers The fixed income world saw outflows with the iShares Short Treasury Bond ETF (NYSEARCA: SHV ) topping the losers’ list, having shed about $1.22 billion in assets. Just as the U.S. economy started delivering upbeat data, talks over rate hikes were back on the table. This will surely hamper investors’ interest in short-term Treasury bond ETFs as further Fed hikes would have the worst impact on the short-end of the yield curve. Another short-term bond ETF, the iShares 1-3 Year Treasury Bond ETF (NYSEARCA: SHY ) , saw a $330.9 million reduction in assets. Ultra short-term investment grade bond ETFs including the PIMCO Enhanced Short Maturity Strategy ETF (NYSEARCA: MINT ) and the SPDR SSgA Ultra Short Term Bond ETF (NYSEARCA: ULST ) also lost $422.4 million and $179.7 million in assets, respectively, last week. Apart from short-term bond ETFs, intermediate bonds products like the iShares 3-7 Year Treasury Bond ETF (NYSEARCA: IEI ) and the SPDR Barclays Intermediate Term Treasury ETF (NYSEARCA: ITE ) saw assets worth $374.8 million and $230.6 million, respectively, gushing out of the funds. Original Post

ETFs For Quick Profits From The Oil Rebound

Oil has been showing immense strength in recent weeks with prices bouncing from their recent lows. In fact, the price of oil jumped over 9% last week, with U.S. crude currently hovering above $36 per barrel and Brent oil trading above $39 per barrel at the time of writing. With this, U.S. crude prices are up nearly 33% and Brent oil is up 27% from their 12-year lows hit in mid-February. Inside The Surge The impressive gains came on the back of improving demand/supply dynamics, which are rebuilding investors’ lost confidence in the rebalancing of the oil market. First, talks over a deal by major oil producers to freeze oil output at the January level infused an air of optimism. Second, output from the Organization of the Petroleum Exporting Countries (OPEC) dropped by 79,000 barrels per day last month while U.S. production slipped by 25,000 barrels per day for the week ending February 26. The positive weekly data from oil services firm Baker Hughes (NYSE: BHI ), which showed that the number of rigs fell to the lowest level since December 2009, also supported the rally in oil price as it reflects that U.S. output will continue to decline in the coming weeks. Finally, the International Energy Agency (IEA) projects a sharp decline in oil production to 4.1 million barrels a day over the 2015 through 2021 period from 11 million barrels a day during 2009-2015. This is because a slew of capital spending cuts last year and another round of major cuts this year will continue to curb oil production and reduce global supply, and thereby lead to higher oil prices. On the demand front, the global outlook is looking bright. Abating fears of a recession in the U.S. following the recent encouraging data, and renewed optimism of growth in China, Europe and Japan could drive oil demand in the coming months. Given the fresh round of optimism and signs that the oil market may begin to tighten, many investors have turned bullish on the energy sector and are seeking to tap this opportunity. How to Play? For them, a leveraged play on energy could be an excellent idea as these could lead to huge gains in a very short time frame when compared to the simple products. Below, we have highlighted five leveraged energy ETFs that could be excellent picks for investors seeking to make large profits from the energy space in a short span: Direxion Daily Energy Bull 3x Shares ETF (NYSEARCA: ERX ) This fund creates a triple (3x or 300%) leveraged long position in the Energy Select Sector Index while charging 95 bps in fees a year. It is a popular and liquid option in the energy leveraged space with AUM of $545.2 million and average trading volume of 4.2 million shares. The ETF gained 20.1% over the past one week. ProShares Ultra Oil & Gas ETF (NYSEARCA: DIG ) This ETF seeks to deliver twice (2x or 200%) the daily performance of the Dow Jones U.S. Oil & Gas Index. It has been able to manage $151.4 million in its asset base with trades in a good volume of more than 302,000 shares per day on average. The product was up 12.9% in the same time frame. Direxion Daily S&P Oil & Gas Exploration & Production Bull 3x Shares ETF (NYSEARCA: GUSH ) This fund offers triple exposure to the daily performance of the S&P Oil & Gas Exploration & Production Select Industry Index. It has accumulated $47.7 million in its asset base since its inception in late May 2015. Average daily volume is solid at around 913,000 shares while expense ratio is 0.95%. The product gained 57.7% over the past five trading sessions. ProShares Ultra Oil & Gas Exploration & Production ETF (NYSEARCA: UOP ) This product also tracks the S&P Oil & Gas Exploration & Production Select Industry Index, but offers twice the returns of the daily performance with the same expense ratio as that of GUSH. It has AUM of just $0.8 million and trades in a paltry volume of 2,000 shares. UOP was up over 28% in the same time frame. Direxion Daily Natural Gas Related Bull 3x Shares ETF (NYSEARCA: GASL ) This product seeks to deliver thrice the daily performance of the ISE Revere Natural Gas Index, which derives a substantial portion of its revenues from the exploration and production of natural gas. The fund has amassed $55.1 million in AUM and trades in heavy average daily volume of 2.2 million shares. Expense ratio comes in at 0.95%. The fund delivered whopping returns of 88.6% in the past five trading sessions. Bottom Line As a caveat, investors should note that these products are extremely volatile and suitable only for short-term traders. Additionally, the daily rebalancing – when combined with leverage – may make these products deviate significantly from the expected long-term performance figures. Still, for ETF investors who are bullish on the energy sector for the near term, either of the above products can be an interesting choice. Clearly, a near-term long could be intriguing for those with high-risk tolerance, and a belief that the “trend is the friend” in this corner of the investing world. Original Post

Utility ETFs For Portfolio Stability And Income

At the tail end of the earnings season, the retail and utility sectors are the only ones with a number of companies yet to report results. As per Earnings Trend report, earnings of all the utility companies that have reported so far are down 5% year-over-year for the fourth quarter of 2015, with 21.4% of the companies beating the Zacks Consensus Estimate. Meanwhile, revenues are down nearly 13.3% for the quarter, with none of them surpassing the Zacks Consensus Estimate. The utility sector failed to impress in its fourth-quarter results with earnings and revenue miss from some of the major players in the space, including Duke Energy Corporation (NYSE: DUK ) and Dominion Resources Inc. (NYSE: D ). Although some companies like NextEra Energy (NYSE: NEE ) managed to beat on earnings, revenues came short of expectations. However, the slowdown in U.S. economic growth, Chinese market turbulence and plunging oil prices along with other factors resulted in a bearish environment, which led to demand for securities from sectors that provide a safer option. Thus, the utility sector, which is considered to be one of the safer options when the market is exhibiting a high level of volatility, managed to remain in the green over the last one month despite lackluster results. Below we have highlighted the quarterly results of the aforementioned utility companies in detail. Duke Energy Duke Energy reported adjusted earnings of 87 cents per share for the quarter that fell short of the Zacks Consensus Estimate of 94 cents by 7.4%. However, quarterly earnings increased by a penny year over year on the back of higher retail pricing and wholesale margins in the regulated business. Total revenue was $5,351 million, lagging the Zacks Consensus Estimate of $5,709 million by 6.3%. The company has provided 2016 earnings guidance in the range of $4.50 to $4.70 per share. Shares of the company declined 1.4% (as of February 19, 2016) since its earnings release. NextEra Energy NextEra Energy’s quarterly adjusted earnings of $1.17 per share beat the Zacks Consensus Estimate of $1.11 by 5.4%. Earnings climbed 13.6% year over year on the back of higher revenues from Florida Power & Light Company. However, revenues of $4,069 million missed the Zacks Consensus Estimate by 2.6% and decreased 12.8% from the year-ago level. NextEra reiterated its earnings guidance of $5.85-$6.35 for 2016. Shares of the company went up 7.5% since its earnings release (as of February 19, 2016). Dominion Resources Dominion Resources’ quarterly earnings of 70 cents per share lagged the Zacks Consensus Estimate of 87 cents by 19.5%. Earnings decreased 16.7% from 84 cents per share in the prior-year quarter due to mild weather conditions in its service territories, absence of a farm-out transaction and the impact of bonus depreciation. The company’s operating revenues of $2,556 million also missed the Zacks Consensus Estimate of $4,092 million by 37.5% and declined about 13.1% year over year. Dominion expects to earn 90 cents to $1.05 per share for the first-quarter 2016 compared with 99 cents per share in the year-ago period. The company expects earnings for 2016 in the range of $3.60 to $4.00 per share. Shares of the company fell 3.8% since its earnings release (as of February 19, 2016). ETFs in Focus Mixed results notwithstanding, many utility stocks managed to hold up gains over the past one month, sending the related ETFs higher. This has put the spotlight on utility ETFs. Below we discuss four of these ETFs having a sizeable exposure to the above stocks, holding Zacks ETF Rank #3 (Hold) with a Medium risk outlook. Utilities Select Sector SPDR (NYSEARCA: XLU ) XLU is one of the most popular products in the space with nearly $7.6 billion in AUM and average daily volume of roughly 14 million shares. The fund tracks the Utilities Select Sector Index and holds 31 stocks with NextEra Energy, Duke Energy and Dominion Resources among the top five spots with a combined exposure of nearly one-fourth of its total assets. Sector-wise, Electric Utilities (57.82%) dominates the fund followed by Multi-Utilities (38.85%). The fund charges 14 bps in investor fees per year. The ETF has posted gains of 7.3% in the past month. Vanguard Utilities ETF (NYSEARCA: VPU ) This ETF tracks the MSCI US Investable Market Utilities 25/50 Index. The fund holds 82 stocks in its basket. Duke Energy, NextEra Energy and Dominion Resources occupy the top four positions in the fund with a combined exposure of a little more than 20%. More than half of the fund’s assets are invested in Electric Utilities followed by Multi-Utilities (33.8%). The fund has amassed almost $2 billion in its asset base and trades in a moderate volume of 175,000 shares per day. The fund has a low expense ratio of 0.10%. The ETF has surged 7.6% in the last one-month period. iShares Dow Jones US Utilities (NYSEARCA: IDU ) The fund follows the Dow Jones U.S. Utilities Sector Index and holds 59 stocks in its basket. Duke Energy, NextEra Energy and Dominion Resources are placed among the top five stocks in the fund, together accounting for a share of more than 21% of total assets. On a sectoral basis, Electric Utilities (53.28%) and Multi-Utilities (34.51%) hold the top two positions in the fund. The fund manages an asset base of around $764 million and exchanges about 199,000 shares per day. It is a bit expensive with 44 bps in annual fees. IDU was up 7.5% in the last one-month period. Fidelity MSCI Utilities ETF (NYSEARCA: FUTY ) This ETF tracks the MSCI USA IMI Utilities Index. The fund holds 83 stocks in its basket. Duke Energy, NextEra Energy and Dominion Resources are among the top four in the fund with a combined exposure of a little more than 20%. More than half of the fund’s assets are invested in Electric Utilities followed by Multi-Utilities (33.8%). The fund has amassed almost $231 million in its asset base and trades in a moderate volume of 140,000 shares per day. The fund has an expense ratio of 0.12%. FUTY was up 7.5% in the last one-month period. Original Post