Tag Archives: feeds

Time To Buy Casino ETF On Value?

The dark clouds of slowdown that were long settled over Macau are finally clearing. Casino operators, who have been suffering from a sluggish business scene in Macau, are again seeing glimmers of hope. Notably, Macau – a Chinese territory – is one of the largest casino gaming destinations in the world. Credit crunch in Mainland China, check on illegal money transfers especially in VIP gaming, constraints on visa and last but not the least, a broad-based slowdown in China wrecked havoc on the casino business in Macau. However, these burning issues have started to cool off. Gaming revenues declined 21.4% year over year in January, but the fall was lesser than what analysts had projected. Year-over-year declines in Macau gaming revenues may decrease further in February to 5%, as per Credit Suisse Group AG. In the last one month, the casino gaming ETF Market Vectors Gaming ETF (NYSEARCA: BJK ) was up 3.3% (as of February 12, 2016). All in all, there was a boost in sentiments in gambling companies. This makes it more important to look at casino earnings this season. Below, we highlight two key casino earnings releases: Q4 at Wynn Resorts On February 11, Wynn Resorts Ltd. (NASDAQ: WYNN ) posted mixed fourth-quarter 2015 results. Adjusted earnings of $1.03 per share decreased 14.2% but beat the Zacks Consensus Estimate of $0.74 by 39.2%. Revenues of $946.9 million missed the consensus mark of $1960 million by 1.4% and slipped 17% year over year, owing to a choppy performance in Macau. Despite the mixed performance, investors were keen on building positions in the stock as founder Steve Wynn pointed out that this January as ‘the best month in a long time’. Investors took this statement as a sign of turnaround in Macau operations, which have long been a pain for Wynn. The company surged more than 15.8% on February 12, 2016 following the earnings report. Notably, Wynn Macau revenues plummeted 27% year over year to $555.7 million in the quarter, owing to lower revenues at the VIP and the mass market segments, while Wynn Resorts’ revenues from Las Vegas operations increased 3.8% year over year to $391.2 million supported by higher non-casino revenues. WYNN has a Zacks Rank #3 with a value style score of ‘B’. The underlying industry of the company is in top 25% segment of the Zacks Universe. Q4 at Las Vegas Sands Las Vegas Sands’ (NYSE: LVS ) fourth-quarter 2015 earnings of $0.62 – announced on Jan. 27 – missed the Zacks Consensus Estimate of $0.64 by 3.1%. Earnings fell approximately 32.6% year over year. The downside reflects a decline in revenues, partially offset by lower expenses. Quarterly net revenue of $2.86 billion missed the Zacks Consensus Estimate of $2.92 billion by 2.1% and declined 16.2% year over year due to soft business in Macau. Since reporting earnings, the stock gained about 6% (as of February 12, 2016). LVS has a Zacks Rank #3 with a value style score of ‘B’. Casino ETF: Time to Buy? The performance at Wynn Resorts has acted as a cornerstone for the entire space as LVS also added over 9% and MGM Resorts International (NYSE: MGM ) advanced about 7% at the close on February 12, 2016. WYNN’s outsized gains gave a big push to the casino gaming ETF which was up 3.4% on February 12, but is down 0.7% since Las Vegas Sands reported its earnings. Moreover, investors should note that casino stocks have been extremely cheap in valuation after undergoing a steep sell-off. Plus, analysts are betting on a turnaround in Macau. Per analysts , the region is changing itself from being mass-centric to being VIP-oriented. Another group of analysts believes that “if the yuan and Chinese economy stabilize there’s money making opportunity in Macau.” In any case, all three companies mentioned above have found a place in the fund with a considerable share. Las Vegas Sands and Sands China – together have about 16% exposure in BJK. Wynn Resorts takes about 3.21% in the fund while MGM has about 6.2% share. The fund holds about 43 stocks in total. The product charges 66 bps in fees and has a Zacks ETF Rank #3. Original Post

Are ETFs Made Up Of CEFs Worth Owning?

While we are huge proponents of leveraging low cost and liquid ETFs for virtually every asset class ; ETFs that invest in closed-end funds (CEFS) are a different story altogether. The two funds that have garnered the most investor attention in this space are the PowerShares Closed End Fund Composite ETF (NYSEARCA: PCEF ) and the Yieldshares High Income ETF (NYSEARCA: YYY ) . Both contain a seemingly diverse array of underlying asset classes, sectors, and strategies. While both funds’ actual management expense ratio of 0.50% sounds reasonable, the issue is that you’re also paying for active management and leverage borrowing costs on an individual fund level. While that isn’t an immediate red flag, the largest issue I see with ETFs that purely invest in CEFs is that the index construction methodology doesn’t take into account the fundamental propensities of the underlying holdings. For example, these funds may have overlapping strategies spread across multiple managers, which also have varying fundamental views on portfolio strategy . Envision it this way, one manager may love a specific sector of the fixed-income market, such as emerging market bonds, another manager avoids them like the plague. So while one manager may be proven right, the other is wrong, and whatever benefit you would have received is sorely cancelled out. What’s worse is that you continue to pay both managers a fee regardless. When you sum up all the instances where that scenario happens in each individual CEF, all of the exotic portfolio management themes and talent is quickly stripped away. Meaning, your returns are doomed to plod along with the index and ultimately the mean average of the entire asset class. It’s a classic case of over-diversification. Oddly enough, that fact alone is the primary marketing tactic to attract investors to these funds; you remove individual fund risk. However, if an investor simply wants index returns from a complicated asset class they may not fully understand, CEFs are the last place I would suggest they invest in. There are multiple layers of complex derivatives, hedging, and active management strategies in play. On top of individual fund corporate actions, premium and discount analysis, and earnings reports. Lastly, probably the most dangerous element to CEF investing flies under the radar: leverage. Instead, it is my opinion that investors should equip themselves with basic knowledge on evaluating the attractiveness of a group of closed-end funds, and build a cohesive portfolio made of equities and fixed-income. They will have inherent diversification at the fund level, and probably build a better knowledge of how CEFs work in the process. They also stand the chance for better performance and paying lower fees overall. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Are Fund Awards Only Showtime For Mutual Funds?

By Detlef Glow Not only the film industry has glamorous events such as the Academy Awards (better known as the “Oscars”) and the “Golden Globe Awards,” where juries select and reward the best movies from their point of view. The mutual fund industry also celebrates its best performing funds with fund awards ceremonies at the beginning of the year. As with movies, these fund awards are determined by a jury (a qualitative screening) or with a quantitative screening on a global basis by the likes of Morningstar and Thomson Reuters Lipper, who use a similar quantitative methodology for their awards all around the world. Or the funds are selected by local players, who award funds only in a single country or region according to their definition of the best funds. Are awards useful tools for fund selection? Fund awards reward the past performance achieved by a portfolio manager. Since past performance is the only way to evaluate the achievement potential of a fund manager, fund awards-like fund ratings-can be used as a tool to support a quantitative fund selection process. Opposite to fund ratings, where normally a group of funds gets the highest score, there is only one winner in each peer group for a fund award. In this regard, one can assume that an award can be used as guidance for fund selectors. But this is only true if the methodology on which the award is calculated suits the expectations and requirements of the investor, especially with regard to risk-adjusted returns. It is key for investors who want to use awards as tools in their fund selection process to know the methodology and/or selection process employed in the determination of the award winners. Unfortunately, the majority of funds are not able to maintain their top position for the succeeding year. Even though some observers see this as a big disadvantage of fund awards, it is the nature of the beast; not all investment approaches such as value or growth work well in any given market environment. But, unlike for movies, there are funds/fund managers that are able to win the categories year after year, and these might be the funds an investor should examine more closely. Fund flows as an indicator of future performance Another issue that can’t be neglected is the impact of high inflows and outflows on a mutual fund. As shown in the study “The Kiss of Death” by Matthew R. Morey , a good rating can have a massive impact on the flows into a fund, which can at some point have negative impacts on its performance. Even though the author analyzed only the impacts from one rating and the negative effects do not apply to every fund, investors need to monitor the flows of all funds in their portfolio regularly, so they can act appropriately if a fund becomes too small or too large. Summary Fund awards, like fund ratings, are an additional tool that can be used by investors to support their fund selection process, as long as the criteria used to nominate the award winners suit the needs of the investors. It can be concluded that fund awards ceremonies, which are typically held over the first quarter of any year, are not only a show event where the employees of the mutual funds industry enjoy a glamorous evening and the organizers do their marketing bit; the funds also get a lot media attention at these ceremonies. But a fund award can’t replace a full fund analysis process; investors still need to invest a lot of work in their fund selection process even if they may use awards as guidance. At the end of the day, as it is for the movies, not everybody likes all the winners; everyone is looking for different funds that may be the winners the next year. The views expressed are the views of the author, not necessarily those of Thomson Reuters