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Invest In These ETFs To Capitalize On Cash Strength

With the broader market going off the deep end and the S&P 500 plunging to 2014 levels last week, the hunt for value is widespread right now. Market watchers and participants are trying out different valuation indicators and running screeners to land up on trustworthy stocks. Many are also taking the ETF route to minimize stock-specific risks. After all, playing down risks is probably the sole motto of investors right now, in whatever way possible. Usually, most investors focus on fundamental indicators such as the price-to-earnings ratio (P/E), price-to-book (P/B) and the PEG ratio to select companies with strong fundamentals. But they often ignore cash flow measures. As we know that cash cushion is always needed in a rough market, one can easily take a look at the indicators related to cash flows to measure the performance of a company. While this tool can be greatly exercised in case of stocks, investors can apply this for the basket approach too. This can be done by investing in ETFs rich with companies having low price-to-cash flow (P/CF) ratios. Below we highlight a few ETFs with such cash characteristics so that investors can find some safe shelters in this turbulent market. iShares U.S. Financial Services ETF (NYSEARCA: IYG ) The financial sector is presently in a good shape, thanks to loan growth amid low interest rates, stepped-up investment banking activities to reflect the increased corporate actions and cost containment. Plus, if the Fed enacts further rate hikes this year, the sector would get some of the much-needed additional support and shore up its net interest margin too. Apart from these positives, IYG boasts a few banking stalwarts like Citigroup (NYSE: C ), Bank of America (NYSE: BAC ) and Goldman Sachs (NYSE: GS ). Each of these banks boasts a price-to-cash flow of under one. As a result, the fund can be considered as a safe destination in this downtime. However, this Zacks Rank #3 (Hold) ETF lost about 1% in the in the last five trading sessions (as of January 22, 2016). U.S. Global Jets ETF (NYSEARCA: JETS ) The airline industry is a huge beneficiary of cheap oil. Fuel accounts for a large portion of airlines’ operating expenses and thus a drastic decline in fuel prices is a blessing for this airline ETF. Otherwise, development in the airline industry is rampant these days. Busy traffic on improving travel and business demand, restructuring indicatives and limited capacity growth are some of the important tailwinds. The first and fourth holdings of the fund, American Airlines Group (NASDAQ: AAL ) and United Continental Holdings (NYSE: UAL ), form about one-fourth of the basket and also carry low P/CF ratios of 2.77 and 3 times, respectively. The fund was up 4.3% in the last five trading sessions (as of January 22, 2016). iShares PHLX SOX Semiconductor Sector Index ETF (NASDAQ: SOXX ) Since the second half of 2015 marked the rebound of tech stocks, semiconductors also hold promise. The semiconductor market will be propelled by smartphones and automotive in the coming days. Moreover, some analysts believe that the PC market is set for a rebound. Semiconductor companies like Qualcomm (NASDAQ: QCOM ), Nvidia (NASDAQ: NVDA ) and Applied Materials (NASDAQ: AMAT ) have considerable exposure in SOXX. These stocks also have P/CF ratios in the range 3-4 times. SOXX has a Zacks ETF Rank #1 (Strong Buy) and added 2.9% in the last five trading sessions. TrimTabs International Free-Cash-Flow ETF (NYSEARCA: FCFI ) While this fund does not directly deal with stocks with low P/CF ratios, it has an indirect approach to the same objective. The fund looks to track 163 international companies with the highest free cash flow yields in 10 international markets, namely Canada, Germany, United Kingdom, Hong Kong, Japan, France, Switzerland, the Netherlands, South Korea, and Australia. Launched in June 2015, the fund has amassed about $12.7 million so far. Adecco S.A. ( OTCPK:AHEXY ), RELX NV ( OTC:RDLSF ) and ABB LTD (NYSE: ABB ) are the top three companies of the basket. The 30-day SEC yield of the fund (as of December 31, 2015) is 2.13% annually. However, the fund gained 2.1% in the last five trading days (as of January 22, 2016). Cambria Shareholder Yield ETF (NYSEARCA: SYLD ) With an asset base of $138.1 million, the fund is based on the research that free cash flow is a key predictor of a company’s strength. This product invests in companies that show strong characteristics in returning free cash flow to their shareholders by way of cash dividends, share repurchases, or by reducing their leverage. The fund advanced about 1% in the last five trading sessions (as of January 22, 2016). Original post

6 Quality Dividend ETFs For Safety And Income

Though U.S. stocks logged in the first weekly gains in a month after a tumultuous ride buoyed up by an incredible rebound in oil price and hopes of additional stimulus in Europe and Japan, a long list of worries kept the stock market returns at risk. This is especially true given the weak international fundamentals, especially in China and its global repercussions that could put a pause on the slowly recovering U.S. economy. Additionally, bleak oil demand/supply trends, weak Q4 corporate earnings, and uncertain timing of the next rate hike are making investors cautious. Notably, corporate profits seem to be in recession with fourth-quarter earnings expected to decline 6.6% as per the Zacks Earnings Trends . This would mark the third consecutive quarter of decline in earnings. Accounting for the weekly gain, the major benchmarks were down 6.5% or more from a year-to-date look and are still in the correction territory having lost more than 10% from their 52-week high price. As per BMO Capital, “the S&P 500 is currently on pace to record its worst monthly decline since January 2009 and 11th worst month during the post war era.” This sluggish backdrop has rekindled investors’ faith in products that provide stability and safety in a rocky market. Nothing seems a better strategy than picking quality dividend stocks in this sort of an environment. Why Quality Dividend? Quality dividend stocks offer safety and stability in a choppy stock market as they ensure regular income to investors in the form of dividends. At the same time, they also have the potential for capital appreciation when the market is on an upswing. Investors should note that these stocks are mature companies, which are less volatile to the large swings in the stock prices, and therefore are well protected than others in a tumbling market, which we have seen several times this year. In a nutshell, quality dividend stocks have a long track of profitability, history of raising dividend year over year with prospects of further increases, good liquidity, and some value characteristics. As a result, a basket of quality dividend stocks offer dividend growth opportunities when compared to other products in the space but might not necessarily have the highest yields. These products provide a nice combination of dividend growth and capital appreciation opportunity and are mainly suitable for the risk-averse, long-term investors. For them, we have highlighted some ETFs that could be excellent choices irrespective of the stock market directions. FlexShares Quality Dividend Index ETF (NYSEARCA: QDF ) This fund uses a proprietary model that includes factors like profitability, solid management and reliable cash flow. Then, the firms are selected based on expected dividend payments, resulting in a basket of 185 securities. The product is widely diversified across components with none of the securities holding more than 3.6% of assets. Further, it is well spread out across sectors with financials taking the top spot at 17.5% followed by information technology (16.8%), consumer discretionary (14.3%) and healthcare (11.9%). The fund has amassed $672.4 million in its asset base and trades in a moderate volume of nearly 71,000 shares. It charges 37 bps in fees per year and pays a dividend yield of 3.24% annually. The fund is down 6.2% in the year-to-date time frame. Schwab U.S. Dividend Equity ETF (NYSEARCA: SCHD ) With an AUM of $2.9 billion, this product offers exposure to the 111 high dividend-yielding U.S. companies that have a record of consistent dividend payments supported by fundamental strength based on financial ratios and ample liquidity. This can be easily done by tracking the Dow Jones U.S. Dividend 100 Index. The fund is well spread across single security with none holding more than 4.8% of assets. However, it is slightly tilted toward the consumer staples sector with 23% share while information technology, industrials, healthcare and energy rounded off the top five. The fund trades in solid volume of more than 667,000 shares a day and is one of the low-cost choices in the dividend space, charging 7 bps in fees per year. The ETF has shed about 5.1% so far this year and yields 3.13% in annual dividends. WisdomTree LargeCap Dividend ETF (NYSEARCA: DLN ) This ETF tracks the WisdomTree LargeCap Dividend Index, which is dividend weighted annually to reflect the proportional share of cash dividend that each company is expected to pay in the coming year. The fund has been able to manage assets of $1.6 billion and trades in good volume of 105,000 shares a day on average. Expense ratio came in at 0.28%. Holding 298 stocks in its basket, the product is widely diversified across each component as none of these hold more than 3.5% of assets. Sector-wise, it also has spread-out exposure with none of the sector making up for more than 15.4% share. The fund has an annual dividend yield of 2.96% and has lost 5.5% so far this year. ProShares S&P 500 Dividend Aristocrats ETF (NYSEARCA: NOBL ) This product provides exposure to 51 companies that raised dividend payments annually for at least 25 years by tracking the S&P 500 Dividend Aristocrats. It is widely diversified across various securities as each account for less than 3% share. From a sector look, more than one-fourth of the portfolio is dominated by consumer staples, followed by healthcare (15.2%), industrials (14.9%), consumer discretionary (12.1%), and financials (11.6%). The fund has an impressive level of AUM of $984.1 million and has an annual dividend yield of 2.13%. Expense ratio is 0.35% while average daily volume is good at 177,000 shares. NOBL has lost 5.3% so far this year. WisdomTree U.S. Dividend Growth ETF (NASDAQ: DGRW ) This fund tracks the WisdomTree U.S. Quality Dividend Growth Index and offers diversified exposure to U.S. dividend-paying stocks with both growth and quality characteristics like long-term earnings growth expectations, and three-year historical averages for return on equity and return on assets. It has gathered $594.5 million in its asset base and trades in good volume of nearly 171,000 shares per day. The ETF charges 28 bps in fees per year from investors and holds 296 securities in its basket, with each holding less than 4.3% share. From a sector look, it provides double-digit allocation to consumer discretionary, information technology, industrials, consumer staples, and healthcare. The fund has lost 5.9% in the year-to-date time frame. First Trust NASDAQ Rising Dividend Achievers ETF (NASDAQ: RDVY ) This fund provides exposure to 50 U.S. stocks with a history of rising dividends and that are expected to continue doing so in the future. In addition, it also screens for stocks with rising earnings per share and cash-to-debt ratio greater than 50%. This can be done by tracking the NASDAQ Rising Dividend Achievers Index. All the securities are well spread out with each accounting for less than 2.2% of total assets. However, the product has a certain tilt toward financials with 27.6% share, closely followed by information technology (23.6%). The ETF has accumulated $36.2 million in its asset base and sees a paltry volume of 20,000 shares a day on average. Expense ratio came in at 0.50%. The fund has shed 8.5% so far this year. Original post

3 Best-Ranked Small-Cap Growth Funds

Risky investors who prefer capital appreciation over dividend payouts may consider investing in small-cap growth mutual funds. Growth funds focus on realizing an appreciable amount of capital growth by investing in stocks projected to rise in value over the long term. Meanwhile, small cap funds are good choices for investors seeking diversification across different sectors and companies. Small cap funds generally invest in companies having market cap less than $2 billion. The companies, smaller in size, offer growth potential and their market capitalization may increase subsequently. Less international exposure make small-cap funds less vulnerable to the stronger U.S. dollar. Though small-cap stocks are believed to provide greater returns, they are also expected to be more volatile than large and mid cap companies. Also, growth funds may experience more fluctuations than other fund classes. Below we share with you 3 top-rated, small-cap growth mutual funds. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) and is expected to outperform its peers in the future. To view the Zacks Rank and past performance of all small-cap growth mutual funds, investors can click here to see the complete list of small-cap growth funds . Fidelity Advisor Small Cap Growth A (MUTF: FCAGX ) invests the lion’s share of its assets in common stocks of small cap growth companies. FCAGX invests in securities issued throughout the globe. FCAGX considers factors including financial strength and economic condition for investing in a company. The Fidelity Advisor Small Cap Growth A fund has a three-year annualized return of 10.3%. FCAGX has an expense ratio of 1.20% as compared to the category average of 1.33%. RidgeWorth Small Cap Growth Stock I (MUTF: SSCTX ) seeks growth of capital over the long run. SSCTX invests a large chunk of its assets in securities of small cap companies that are traded in the U.S. SSCTX invests in companies having market capitalizations within the range of in the Russell 2000 Growth Index. SSCTX may also invest in American Depositary Receipts. The RidgeWorth Small Cap Growth Stock I fund has a three-year annualized return of 4.7%. As of December 2015, SSCTX held 91 issues with 2.87% of its assets invested in Heartland Payment Systems Inc. BlackRock Small Cap Growth Equity Investor A (MUTF: CSGEX ) invests the major portion of its assets in equity securities of domestic companies having small size market capitalization. According to CSGEX advisors, companies with a market cap similar to those included in the Russell 2000 Index are considered small cap firms. CSGEX may also participate in IPO markets. The BlackRock Small Cap Growth Equity Investor A fund has a three-year annualized return of 5.8%. Travis Cooke is the fund manager of CSGEX since 2013. To view the Zacks Rank and past performance of all small-cap growth mutual funds, investors can click here to see the complete list of funds .