Tag Archives: european

Gold Climbs Today, Is There Opportunity In Gold ETFs?

The SPDR Gold Trust ETF (NYSEARCA: GLD ) might follow the age-long market adage of climbing the wall of worry and sliding the slope of hope as fears about a September rate hike rise and fall. The Wall Street Journal reports that gold prices opened higher in European trade today as fears about when the U.S. Federal Reserve is likely to raise interest rates. The WSJ reports that Spot gold prices were up 0.7% at $1,142.11 a troy ounce on the London Spot Market this morning. In fact, the yellow metal has hit a four-day high earlier in the session at $1,144.28 an ounce. Today’s gains continue the positive trend that has had gold climbing towards the symbolic resistance level of $1,150. The yellow metal is starting to look attractive again after the investors hand traders have exhausted themselves in trying to time the market in relation to a September rate hike. Yesterday, spot gold climned 0.04% to $1,134 an ounce in U.S. markets despite views by Fed vice president Fischer that a September rate hike is probable because it makes sense. Analysts see uptrend in sight for GLD Analysts are optimistic about the prospects of the bullion and GLD going forward as the market enters September. The market seems to think raising of interest rates this month would be a decisive action that will lead gold to a bottom and remove much of the volatility. In contrast, if the Fed doesn’t raise rates this month, the market will be at peace at least until talks about a rate hike begins again in December. Analysts at UBS say: Gold has been closely tracking changes in Fed policy expectations of late and we expect this influence on price action to continue up ahead… The link is likely going to become more acute in the next two weeks as the September FOMC [Federal Open Market Committee] meeting draws near. Analysts at Barclays are also positive about the prospects of gold. They said, “Further support from U.S. rate expectations should… be limited, as the market is already pricing in a low probability of a September hike. Howie Lee, an investment analyst at Phillip Futures believes that the market should see less volatility in gold prices going forward. In his words, “We still stand by our view that gold is likely to trade above $1,100 in the near-term and that the momentum right now is for gold to rally more than to fall.” Is there an opportunity in gold ETFs? Gold and GLD seems to be on track to have a pleasant run this week as the precious metal continues to trade above a more than five-year closing low of $1,084 that was reached on August 5 the China’s economy took a hit . Saxo Bank, in a research note that was released yesterday observed that last week’s short positions in the bullion were cut by 22% in contrast to a four-fold increase of 845,000 in long ounces. Link to the original article on Learn Bonds

Tracking The Sequoia Fund – Q2 2015 Update

Summary For the second quarter of 2015, the fund was up 1.96% versus 0.28% for the S&P 500. Top 10 holdings (65.5% of the fund): Valeant Pharmaceuticals, Berkshire Hathaway, TJX Companies, O’Reilly Automotive, Fastenal, MasterCard, Precision Castparts, Mohawk Industries, IDEXX Laboratories, and Google. During the second quarter, the fund cut its position in Qinetiq Group and Novozymes A/S and trimmed its third largest holding, TJX Companies. Since its inception on 7/15/1970, an investment in the Sequoia Fund (MUTF: SEQUX ) has returned 14.61% annually versus 10.88% for the S&P 500. The fund is noted for its long-term value investing style, portfolio concentration, and outperforming in down years. For more background on the fund, you can check out my original article here . The fund noted in the second quarter that it doesn’t know which way the market is going and trying to predict its direction is futile. The fund continues to look for market-leading companies that earn high returns on capital, boast strong balance sheets and self-fund their growth. The fund also likes to invest alongside motivated, ethical management teams. With over 15% of the fund in cash, the fund has plenty dry powder for when opportunities arise. Valeant Pharmaceuticals (NYSE: VRX ) continues to be the largest position in the fund by far, accounting for nearly 29% of the fund. If you’re interested in learning Sequoia’s thought process for owning the stock, check out the investor day presentation from May, you can find the link here . Valeant continues to keep busy on the acquisition front and recently acquired the “female Viagra,” a new FDA approved drug called Addyi. Here’s the fund activity for the second quarter of 2015. New Stakes: None Stake Disposals: Qinetiq Group ( OTCPK:QNTQY ) is a British multinational defense technology company. The fund acquired 23 million shares back in 2010 for a roughly 1% stake in the portfolio. The ADR traded between $6 and $8 at the time. The fund maintained its position through 2013. During the fourth quarter of 2014, the fund sold over 43% of its position. Prices ranged from $11.50 to $14.75. In the annual report, the fund noted how it has been disappointed in the results of its European companies, including Qinetiq. The selling continued in the first quarter of 2015. The fund sold 27% of its position, just over 3.5 million shares. Prices ranged from $11 to $12.50. The job was finished in the second quarter of 2015 as the fund disposed of its remaining 9.4 million shares while prices traded between $11.25 and $15.00. Novozymes A/S ( OTCPK:NVZMY ) produces and sells industrial enzymes, microorganisms, and biopolymers worldwide. The fund bought just over 2 million shares in the second quarter of 2012 when prices ranges from $25.50 to $29.50. The fund likes Novozymes for its industrial enzymes, animal nutrition, and corn ethanol enzymes businesses. It estimates the company has a dominant market share in industrial enzymes and a 60% market share in corn ethanol enzymes. It also likes that there are high barriers of entry for these businesses due to the time, expertise, and resources needed to produce its products and operate efficiently. In the first quarter of 2015, the fund sold 221k shares, or 10.7% of its position, when prices ranged from $40 to $50. The fund sold its remaining stake in the second quarter of 2015. Prices ranged from $45.50 to $49.50. Stake Increases: None Stake Decreases: Rolls Royce ( OTCPK:RYCEY ) designs, develops, manufactures, and services integrated power systems worldwide. The company is known for its expertise in making engines for wide-body jets. The fund has been in Rolls Royce since 2007. It built up the position to over 12 million shares by the end of 2008. Since then it’s held, save very minor selling. Despite continuing to hold, the fund is very concerned over the position. While it admires its jet engine business, it questions the board of directors’ recent decisions to diversify into marine engine and power generation businesses. It’s also concerned the company is abandoning its Total Care service contract selling model which was very successful under the former CEO. As for the current CEO, John Rishton, the fund says, “… in our meetings with him, has shown minimal awareness of the returns on capital his acquisitions have generated.” The fund was selling in the second quarter, trimming the position by 437k shares when prices traded between $13.75 and $16.00. The stock is now trading below $12. Perrigo Company (NYSE: PRGO ) is a developer and manufacturer of over-the-counter consumer goods and pharmaceutical products. The fund picked up just over a half million shares in the third quarter of 2010. The stock traded between $55 and $66.50. In April of this year Mylan N.V. (NASDAQ: MYL ) made an unsolicited $29 billion bid for Perrigo. At the same time, Teva (NYSE: TEVA ) made a $40 billion offer for Mylan. That eventually fell through. Mylan has since upped its bid for Perrigo to $33 billion and then again to nearly $36 billion. Mylan shareholders recently approved the transaction and the company will be taking the deal directly to Perrigo shareholders. We’ll see what happens. The fund trimmed its Perrigo position by about 13% during the second quarter. Prices traded between $183 and $215 after Mylan’s original offer. TJX Companies (NYSE: TJX ) is a discount apparel and home furnishing retailer operating under the T.J.Maxx, Marshalls and HomeGoods brands. The fund has been in TJX since 2000, when it held nearly 7.9 million shares. The position was built up to over 15 million shares by the end of 2002. The fund steadily decreased its position between 2003 and 2007, and by 2008, it was down to 4.9 million shares. The fund added significantly in 2011, increased the position size from 5.1 million to 10.2 million shares. Prices ranged from $21.50 to $32.69 in 2011. The fund still holds 10.2 million shares and the position makes up 7.88% of the portfolio. Three quarters ago, the fund sold approximately 400k shares, or 4% of the position. It sold another 1% of its position last quarter. And the selling accelerated in the second quarter as the fund sold over 3.1 million shares at prices between $64 and $70. TJX is still a top three holding for the fund, but its percentage of the portfolio has gone from 8% to 5%. Kept Steady: Omnicom (NYSE: OMC ) , Precision Castparts (NYSE: PCP ), Compagnie Financiere Richemont SA ( OTCPK:CFRUY ) , Constellation Software ( OTCPK:CNSWF ), O’Reilly Automotive (NASDAQ: ORLY ) , Jacobs Engineering (NYSE: JEC ) , Canadian Natural Resources (NYSE: CNQ ) , Sirona Dental Systems (NASDAQ: SIRO ) , Berkshire Hathaway (NYSE: BRK.A ) (NYSE: BRK.B ) , Danaher (NYSE: DHR ) , EMCOR Group (NYSE: EME ) , Trimble Navigation (NASDAQ: TRMB ) , Mohawk Industries (NYSE: MHK ) , Expeditors International (NASDAQ: EXPD ) , Valeant Pharmaceuticals (VRX) , West Pharmaceuticals (NYSE: WST ) , Zoetis (NYSE: ZTS ) , Fastenal Company (NASDAQ: FAST ) , Praxair (NYSE: PX ) , IMI plc ( OTCQX:IMIAY ) , MasterCard (NYSE: MA ) , Brown & Brown (NYSE: BRO ) , Google (NASDAQ: GOOGL ) (NASDAQ: GOOG ) , Goldman Sachs (NYSE: GS ) , International Business Machines (NYSE: IBM ) , Waters Corporation (NYSE: WAT ) , Admiral Group ( OTCPK:AMIGY ) , Hiscox Ltd. ( OTC:HCXLY ), Verisk Analytics (NASDAQ: VRSK ) , Costco Wholesale (NASDAQ: COST ) , Tiffany & Co. (NYSE: TIF ) , Wal-Mart (NYSE: WMT ) , Croda International ( OTCPK:COIHY ) , Cabela’s (NYSE: CAB ), and IDEXX Laboratories (NASDAQ: IDXX ) saw no changes from the first quarter of 2015 to second quarter of 2015. Here’s a snapshot of the activity from the first quarter of 2015 to the second quarter of 2015: (click to enlarge) 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. Disclosure: I am/we are long GOOGL, OMC, FAST, WMT. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Head-To-Head: S&P 500 ETFs Vs. Dow ETFs

Fears of a hard landing in China slaughtered the global markets last week. China itself saw all its gigantic gains recorded this year going down the drains, and logged the largest one-day plunge since 2007 on August 24 daring all government-backed measures to contain the slide. Back-to-back shockers from China, be it currency devaluation or a six-and-half-year low manufacturing data for August spurred this panic-induced sell-off. The benchmark Shanghai Composite Index dropped 8.5% on Monday. Though China sought to restrain the rout by allowing the pension funds to invest about $97 billion in the market, there was hardly any relief in store. Also, lack of precision by the Fed on the policy tightening timeline roiled the market momentum. The fright among investors was so acute that other global markets followed the footsteps of China. The otherwise steadier U.S. stocks hurtled down, European markets crashed and the Asian stocks fell to a three-year low. Meanwhile, commodities plunged to a 16-year low level while the infamous oil touched a fresh six-and-a-half year low of below $40/ barrel. Emerging markets raised panic alarms leading to an exorbitant exodus in capital. Thanks to this massacre, the U.S. stocks futures logged their largest weekly decline since 2011 in the week ended August 21 and are expected to remain southbound until this jittery market calms down. All major U.S. indices remained in deep red and went into the correction zone , per analysts. The S&P 500 index is lost 12.5% from its May high on a broad-based global slowdown. Dow Jones Industrial Average plummeted about 14.6% (as of August 25) since it hit a high in May thanks mainly to a free fall in oil prices and now both have entered the correction mode. However, Dow was a relatively worse performer than the S&P 500. Momentum Gain However, to contain this slide, China slashed the one-year lending rate by 25 bps to 2.75%, the deposit rate by 25 bps to 1.75% and the reserve ratio by 50 bps to 18%. This, along with a bargain hunt, showered the much-needed gains on Wall Street. As a result, both S&P and Dow advanced close to 4% and captured the highest single-day gain in about four years. Below we highlight four S&P and Dow-based ETFs and analyze their performance and outlook. S&P 500 ETF SPDR S&P 500 ETF (NYSEARCA: SPY ) SPY seeks to track the S&P 500 Index before fees and expenses. The performance of the S&P 500 Index is considered a mirror image of the U.S. equities, as the index represents stocks of the 500 most-valued companies in the U.S. The $171.5 billion SPY has proportionate exposure in almost all sectors with maximum emphasis on Information Technology (20.0%). The sectors like Financials (16.8%), Health Care (15.5%), Consumer Discretionary (12.8%) and Industrials (10.0%) also make up double-digit allocation. The fund is highly liquid trading with over 115 million shares daily. It charges 9 bps in fees. The fund has very low company-concentration risk with no firm accounting for more than 3.6%. SPY is down about 5.3% this year and lost 6% in the last five trading sessions (as of August 26, 2015). The fund has a Zacks ETF Rank #3 (Hold). iShares Core S&P 500 (NYSEARCA: IVV ) This fund also looks to track the S&P 500 index and has AUM of around $68.5 billion. The fund is well spread out across sectors and security. IT, Financials, Health Care and Consumer Discretionary have double-digit exposure in the fund. The product is also devoid of company-specific concentration risks. The fund trades in volume of about 4.1 million shares a day while charges 7 bps in fees and expenses. The ETF lost about 5.7% in the last five trading sessions and 5.3% so far this year. The fund has a Zacks ETF Rank #3. DOW ETFs SPDR Dow Jones Industrial Average ETF (NYSEARCA: DIA ) DIA seeks to match the performance of the Dow Jones Industrial Average Index. The index is price weighted and measures the performance of 30 large cap stocks traded in the U.S. markets. Industrials, Financials, IT, Consumer Discretionary and Health Care all hold double-digit exposure in the fund. However, it is subject to company-specific concentration risks as it invests more than half of its portfolio in the top 10 holdings. This $11.1 billion-fund trades in large volumes of over 5 million shares daily and charges 17 bps in fees. It has lost over 8% so far this year and 6.1% in the last five trading sessions (as of August 26, 2015). The fund has a Zacks ETF Rank #3 with a Medium risk outlook. iShares Dow Jones U.S. ETF (NYSEARCA: IYY ) This $935 million-ETF also tracks the Dow Jones U.S. total market index. This fund has a proportionate exposure in almost all sectors with maximum emphasis on IT (19.0%), Financials (18.1%), Health Care (14.8%), Consumer Discretionary (13.4%), and Industrials (11.0%). Unlike DIA, this 1,255 stocks – fund invests less than 15% share in the top 10 holdings. Probably this is why the fund lost less than DIA. IYY charges 20 basis points as fees and shed 5.9% in the last five trading sessions and over 5.3% so far this year. Outlook Overall, the market may be a little uncertain, but such a sharp sell-off will open up the doors for future gains in the U.S. All four products went into an oversold territory indicating a turnaround. Moreover, latest rate cuts by China should also provide some boost to these equity indices. However, investors should also not that the current prices of the aforementioned ETFs are below their short- and long-term moving averages hinting at further bearishness. So, edgy investors might stay on the sidelines as of now and especially exercise caution when it comes to the Dow ETFs as this spectrum appears more volatile than the S&P 500. Original Post