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6 ETFs To Play In Q1

The year 2016 unfolded amid a myriad of woes and huge uncertainty. The woes stemmed mainly from the developed foreign economies due to growth issues and uncertainties in the homeland emanating from the speculation over the speed and quantum of the Fed rate hike throughout 2016. The Fed enacted a meager hike at the tail end of 2015 and as of now, the investing world is expecting four more hikes in 2016, if everything goes well. However, things could change any point of time along with global or domestic market occurrences (read: ETF Tactics for a Rate-Proof Portfolio ). The broader global indices were mostly in red in 2015 snapping the bull market trend seen in earlier years. Now, all eyes will be on how the year 2016 fares on the bourses. Let’s not move too further ahead and instead focus on the prospective ETF winners of the first quarter of 2016. To do this, we have relied on both seasonality of the asset class and the earnings performance of the equity sectors. iShares U.S. Financials ETF (NYSEARCA: IYF ) The operating environment for financial companies is presently benign thanks to the Fed liftoff. In a rising rate environment, financial companies’ net interest margin should also rise. In any case, U.S. banks are in a better shape right now (read: Guide to the 7 Most Popular Financial ETFs ). Finance is expected to be a growth driver in the fourth-quarter 2015 earnings season which is already underway. The sector is expected to score the second-best earnings growth of 6.8%. Finally, as per Equity Clock, the financial sector, especially the banks, enjoy seasonality in the first quarter of every year. iShares Transportation Average ETF (NYSEARCA: IYT ) Equity Clock also reveals that the first quarter is beneficial for airlines and railroads with seasonality kicking in from the end of January and extending till early May. Plus, stepped-up economic activities and cheap fuel are still there to drive up transportation stocks. The transportation sector is expected to report 12.1% growth in earnings on just a 1% decline in revenues. One way to play this trend is with IYT. The ETF tracks the Dow Jones Transportation Average Index, giving investors exposure to a small basket of close to 25 securities. Utilities Select Sector SPDR ETF (NYSEARCA: XLU ) Gas utilities are normally in demand in the cold-stricken first quarter. Though utilities are likely to be on the downside following the Fed liftoff, but no material hike in the long-term interest rates since then made the sector a winner last one month compared with several glamorous and in-vogue sector ETFs like the Consumer Discretionary Select Sector SPDR ETF (NYSEARCA: XLY ) and the Technology Select Sector SPDR ETF (NYSEARCA: XLK ) . The fund added 0.3% in the last one month (as of December 31, 2015) while XLY and XLK were down over 4.2% and 3.4%, respectively, during the same timeframe. Market Vectors Retail ETF (NYSEARCA: RTH ) According to Equity Clock , seasonal strength for the consumer discretionary sector stretches from October 17 to April 12. The sector is expected to post earnings growth of 2.4% in Q4, much better than the consumer discretionary sector’s expected earnings decline of 4.8%. Its sales expectation is also steady at 6.4% for Q4, again better than 1.4% growth expected from the consumer discretionary space. More jobs and cheaper fuel should help these sectors to grow. PowerShares DB USD Bull ETF (NYSEARCA: UUP ) The greenback is yet another asset which enjoys the tailwind of seasonality in the first quarter, per analysts. In any case, this U.S. dollar ETF lost over 1.2% in the last one month (as of December 31, 2015) giving the product a leeway for rally. The key logic behind the ascent as per Investopedia is that investors must have repatriated money at the yearend, resulting in a weaker dollar and then again bet on the dollar in the New Year. Also, in 2016, the U.S. dollar should have one more reason – U.S. policy tightening – to celebrate. iShares Russell 2000 ETF (NYSEARCA: IWM ) Small-cap stocks are the barometer of domestic economic health. So, when the U.S. economy shifted gear in December and experienced policy normalization, most eyes moved to small-cap stocks in order to cash in on the U.S. economic growth momentum. Plus, Russell 2000 has a history of rallying in January and February, as per Equity Clock. In any case, if dollar gains strength, investors will definitely bet on small-cap stocks as larger caps are more vulnerable to the dollar strength. Link to the original article on Zacks.com

What Does 2016 Hold In Store For Pharma ETFs

The pharma sector has been in the middle of a controversy, with questions being raised about the high prices of drugs. Democratic presidential frontrunner Hillary Clinton’s “price gouging” tweet triggered a slide in healthcare stocks in September. While there have always been concerns regarding the pricing and affordability of prescription drugs, the issue is back in focus following a 5000% price hike implemented by Turing Pharmaceuticals for Daraprim (pyrimethamine) that was approved by the FDA way back in 1953. (Read: 16 Bold ETF Predictions for 2016 ) Other companies like Valeant (NYSE: VRX ) are also under review for significantly hiking the prices of acquired drugs. Irrespective of who wins the presidential race, drug pricing will remain a topic of discussion among policymakers, the media and the general public. Meanwhile, mergers, acquisitions and deals continue to take center stage in the pharma sector. While 2014 turned out to be one of the most active years in the pharma sector where mergers and acquisitions (M&As) and licensing agreements are concerned, the trend continued this year as well. Small bolt-on acquisitions, in-licensing activities and collaborations for the development of pipeline candidates will also continue especially in therapeutic areas like central nervous system disorders, diabetes and immunology/inflammation. The hepatitis C virus market is also attracting a lot of attention. (Read: Top Sectors of 2016 and Their Leading ETFs ) Another lucrative area is immuno-oncology as these therapies have the potential to change the treatment paradigm for cancer — they basically use the natural capability of the patient’s own immune system to fight the cancer. Major players in this field include Bristol-Myers (NYSE: BMY ), AstraZeneca (NYSE: AZN ), Merck (NYSE: MRK ) and Roche. Deals targeting immuno-oncology are being inked by companies like Pfizer (NYSE: PFE ), Merck KGaA ( OTCPK:MKGAY ), Bristol-Myers, AstraZeneca and Incyte (NASDAQ: INCY ). Another trend being witnessed is the divestment of non-core business segments. Companies like Pfizer, UCB ( OTCPK:UCBJY ), Novartis (NYSE: NVS ), Glaxo (NYSE: GSK ) and AstraZeneca have all been a part of this trend. The monetization of non-core assets allows these companies to focus on their areas of expertise. Restructuring activities are also gaining momentum as large pharma companies are looking to cut costs and streamline their operations. Most of these companies are re-evaluating their pipelines and discontinuing programs which do not have a favorable risk-benefit profile. Swapping of businesses is another activity that could pick pace in 2016. Biosimilars are also a focus area. Pfizer’s acquisition of Hospira gives it a strong position in the biosimilars market. Companies like Merck and Novartis are involved in the development of biosimilars as well – in fact, Novartis’ Sandoz was the first company to launch a biosimilar in the U.S. New products are steadily gaining traction and contributing significantly to sales and so far in 2015, the FDA has approved 43 new molecular entities (NMEs) and biological products. Some of the important new product approvals this year include Vertex’s cystic fibrosis treatment, Orkambi, Pfizer’s cancer treatment, Ibrance, Novartis’ psoriasis treatment, Cosentyx, PCSK9 inhibitors – Amgen’s (NASDAQ: AMGN ) Repatha and Sanofi (NYSE: SNY )/Regeneron’s (NASDAQ: REGN ) Praluent, Roche’s advanced melanoma treatment, Cotellic and Gilead’s (NASDAQ: GILD ) Genvoya (HIV). Pharma ETFs in Focus Highlighted below are some pharma ETFs – ETFs present a low-cost and convenient way to get a diversified exposure to the sector. PowerShares Dynamic Pharmaceuticals Portfolio ETF (NYSEARCA: PJP ) PJP, launched in Jun 2005 by Invesco PowerShares, tracks the Dynamic Pharmaceuticals Intellidex Index. The fund covers health care stocks. The top 3 holdings include Bristol-Myers Squibb (5.22%), Eli Lilly & Co. (NYSE: LLY ) (5.16%) and Johnson & Johnson (NYSE: JNJ ) (5.13%). The total assets of the fund as of Dec 15, 2015 were $1,691.5 million representing 23 holdings. The fund’s expense ratio is 0.56% while dividend yield is 0.47%. The trading volume is roughly 135,985 shares per day. SPDR S&P Pharmaceuticals ETF (NYSEARCA: XPH ) XPH, launched in Jun 2006, tracks the S&P Pharmaceuticals Select Industry Index. This ETF primarily covers pharma stocks (99.39%) with the top 3 holdings being Intra-Cellular Therapies, Inc. ( OTCQB:ITCI ) (4.84%), Nektar Therapeutics (NASDAQ: NKTR ) (3.69%), and Bristol-Myers Squibb (3.44%). Total assets as of Dec 15, 2015 were $695.6 million representing 41 holdings. The fund’s expense ratio is 0.35% and dividend yield is 0.71%. The trading volume is roughly 65,529 shares per day. iShares U.S. Pharmaceuticals ETF (NYSEARCA: IHE ) IHE, launched in May 2006, seeks investment results that correspond generally to the price and yield performance of the Dow Jones U.S. Select Pharmaceuticals Index. The fund mainly consists of pharma companies (87%). Biotech companies account for about 10.6% of the fund. The top 3 holdings of this fund are Johnson & Johnson (10.79%), Pfizer (8.70%) and Bristol-Myers Squibb (7.84%). The total assets of the fund as of Dec 16, 2015 were $890.45 million representing 43 holdings. The fund’s expense ratio is 0.45% with the dividend yield being 0.89%. The trading volume is roughly 28,951 shares per day. Market Vectors Pharmaceutical ETF (NYSEARCA: PPH ) PPH was launched in Dec 2011 and tracks the Market Vectors U.S. Listed Pharmaceutical 25 Index. The top 3 holdings of this fund are large-cap pharma companies – Johnson & Johnson (7.97%), Novartis (7.02%) and Bristol-Myers Squibb (5.55%). The total assets as of Dec 16, 2015 were $335.9 million representing 26 holdings. While the expense ratio is 0.35%, dividend yield is 2.04%. The trading volume is roughly 72,694 shares per day. Conclusion While EU austerity measures, negative currency impact and pricing pressure remain headwinds, the pharma industry is out of the worst of its genericization phase. Many companies, which had faced generic headwinds in the last couple of years, should continue to see a sustained improvement in results this year. Cost-cutting, downsizing, emerging markets and new products should support growth. Increased pipeline visibility and appropriate utilization of cash should increase confidence in the sector. Link to the original article on Zacks.com

5 Very Successful ETF Launches Of 2015

The year 2015 turned out to be a momentous one for the ETF industry with assets comfortably crossing the $2 trillion mark. About 287 ETFs have been launched so far this year (with nine more days to go) compared with about 180 ETF initiations in 2014, 150 in 2013 and 168 rollouts in 2012. All these have tallied to 1,839 ETFs so far. Not only this, a considerable number of ETFs are in the pipeline, pointing to growing investor interest for exchange-traded products in this market. The credit goes mainly to a wide range of innovative and fresh-themed products in the space, which hold investors’ attention despite the peaks and troughs of the market. Among the new products, active funds, smart-beta ETFs, high yield options and hedged international products were appreciated by investors. Below are five ETFs launched in 2015 that scooped up assets within a short time span on the market, and look to be big winners for their issuers down the road: SPDR DoubleLine Total Return Tactical ETF (NYSEARCA: TOTL ) Making its debut in late February in association with bond master Jeffrey Gundlach’s DoubleLine Capital, this SPDR actively managed bond ETF has amassed about $1.73 billion, which is a tall order for any player in the ETF industry (read: 2 New ETFs with Big Potential ). Retail investors seem to revere the name of the fixed income veteran Jeff Gundlach whose team manages the ETF. TOTL looks to maximize total return, while emphasizing income by investing in a global portfolio of fixed income securities of various maturities and ratings, though only 10% of the portfolio goes to the international arena. The fund puts about 58% of assets in mortgage-backed securities followed by about 9% invested in treasuries and 8.4% in emerging markets. The fund charges 55 bps in fees and is down 2.5% since inception (as of December 22, 2015). SPDR S&P North American Natural Resources ETF (NYSEARCA: NANR ) This ETF has scooped up about $662.6 million in assets within just a few days of its launch this month itself. The fund looks to track the performance of publicly traded large- and mid-cap US and Canadian companies in the natural resources and commodities businesses including energy, materials or agriculture. This 59-stock fund charges 35 bps in fees. Though the fund is revolving around some presently beaten-down areas of the investing world, investors might have been placing their money to cash in on the undervalued status over the long run. iShares Exponential Tech ETF (NYSEARCA: XT ) This ETF has attracted almost $640.5 million in assets since its inception in March. It looks to track the Morningstar Exponential Technologies Index that considers developed and emerging market companies which create or use exponential technologies, per the prospectus . Exponential technologies replace outdated technologies, foray into underpenetrated markets and have the ability to influence the economy (read: Why Is This New ETF Growing So Fast? ). Big data and analytics, nanotechnology, medicine and neuroscience, networks and computer systems are some the areas under exponential technologies that the fund uses. The product charges 47 basis points in annual expenses, which is quite rational given its niche theme. However, the fund is down 4.2% so far this year (as of December 22, 2015). Goldman Sachs Active-Beta Emerging Market ETF (NYSEARCA: GEM ) The fund looks to deliver exposure to emerging market equities and picks stocks based on four attributes of performance, namely good value, strong momentum, high quality and low volatility. Given the potential turmoil in the emerging market bloc due to the Fed lift-off, political issues in some countries and slumping commodities, the active beta approach drew investors’ attention. The 434-stock fund has amassed about $570 million so far and charges 45 bps in fees. The fund has heavy focus on the financial sector with about 25.6% followed by Information Technology (18.7%), Consumer Staples (14.1%) and Consumer Discretionary (10.8%). SPDR Russell 1000 Momentum Focus ETF (NYSEARCA: ONEO ) This new ETF has amassed about $335.1 million in assets in less than a month. The fund looks to track the performance of a segment of large-capitalization U.S. equity securities demonstrating a combination of core factors with a focus factor comprising high momentum characteristics. This 918-stock ETF is heavy on Consumer Discretionary (20.05%) followed by Financial Services (16.84%) and Producer Durables (16.37%). The fund charges 20 bps in fees. Link to the original article on Zacks.com