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4 ETFs Surge To Top Rank Ahead Of Q1 Earnings

Though the stock market has made an impressive comeback from the worst nightmare it saw at the start of the year, volatility and uncertainty continue to dominate. This is especially true, given the expected Q1 corporate earnings decline for the fourth consecutive quarter. Amid this sluggishness, many investors still want to bet on a slowly improving U.S. economy, which is backed by a healing job market and rising consumer confidence. The rebound in the oil price from its 12-year low, the Fed’s dovish comments and the resultant weakness in dollar, added to the optimism, raising the appeal for riskier assets. For these investors, we delved into the Zacks ETF Rank to find the best picks. The system takes into account factors such as industry outlook and expert surveys; and then applies ETF-specific factors (like expense ratios and bid/ask spreads) to spot the best funds in each and every corner of the space. Using this system, we have picked a handful of ETFs that earned a Zacks ETF Rank #1 (Strong Buy) in the latest ratings update and could thus outperform (see: Our Zacks ETF Rank Guide ). Since earnings growth is expected to be negative for 11 of the 16 Zacks sectors, we have focused on four low-risk, broad ETFs rather than specific sectors. Each of these funds has seen its rank surge to the top hierarchy from #3 (Hold) and could be great picks this earnings season. Vanguard Mid-Cap Value ETF (NYSEARCA: VOE ) Investors seeking to participate in the growing economy, but wary of soft earnings, should consider mid-cap stocks in the basket form. This is because mid- caps are arguably safer options allowing both growth and stability simultaneously in a portfolio. These middle-of-road securities have the potential to move higher in turbulent times when compared to large and small caps. Further, honing in on value securities in this capitalization level ensures safety to investors. Value investing includes stocks with strong fundamentals – earnings, dividends, book value and cash flow – that trade below their intrinsic value and are undervalued by the market. In particular, VOE seems an exciting pick heading into the earnings season. The fund tracks the CRSP US Mid Cap Value Index, charging investors just 9 bps in annual fees. It holds 208 stocks, which are well spread across each component as none of these holds more than 1.3% share. Financials takes the top spot with one-fourth share while consumer goods, industrials, consumer services and utilities round off to the next four spots with a double-digit allocation each. It is one of the popular and liquid ETFs in the mid-cap space with AUM of $4.5 billion and average daily volume of 302,000 shares. The ETF has added 0.2% in the year-to-date time period. WisdomTree MidCap Dividend Fund (NYSEARCA: DON ) Dividend-focused ETFs have been riding high this year on investors’ drive for income amid heightened uncertainty in the stock market. This is because dividend-paying securities are the major sources of consistent income when returns from the equity market are at risk. Dividend-focused products offer safety in the form of payouts and stability in the form of mature companies that are less immune to the large swings in stock prices. Further, longer-than-expected interest rates have made this corner a hot investment area. As a result, DON seems an interesting choice for the coming months. This ETF provides exposure to the mid-cap segment of the U.S. dividend paying stocks by tracking the WisdomTree MidCap Dividend Index. The fund has been able to manage assets of $1.6 million and trades in a moderate volume of 80,000 shares a day on average. Expense ratio came in at 0.38%. Holding 402 stocks in its basket, the product is widely diversified across each component with each holding less than 1.8% of assets. From a sector look too, the fund is pretty well spread out with financials, consumer discretionary, utilities and industrials taking the double-digit exposure each. DON returned 11.1% so far this year. Schwab Fundamental U.S. Small Company Index ETF (NYSEARCA: FNDA ) Small-cap ETFs have lagged the broad market for the most part of this year due to endless worries stemming from the China turmoil and an oil price collapse. This trend seems to be reversing lately given the spate of upbeat economic data, an impressive rebound in oil prices, and of course, the spring fervor. The pint sized stocks generally outperform when the American economy is leading the way. Given this, investors should recycle their portfolio into the small-cap space to obtain a nice play and FNDA could be an excellent pick (see: all the Small Caps ETFs here ). This fund provides a complement to market-cap indexing and active management by following an innovative indexing approach using fundamental measures of company size by tracking the Russell Fundamental U.S. Small Company Index. In total, the fund holds a large basket of 884 securities with none accounting for more than 0.29%. Financials and industrials take the top two spots at 22.5% and 20.6%, respectively, closely followed by consumer discretionary (16.7%) and information technology (13.5%). FNDA is less liquid and less popular in the small-cap space with AUM of $688.3 million and average daily volume of 178,000 shares. Expense ratio came in at 0.32%. The ETF is up 0.8% in the year-to-date time frame. First Trust Small Cap Value AlphaDEX Fund (NASDAQ: FYT ) As small caps are risky options which could lead to extreme volatility stemming from huge gains and losses in a very short period of time, value stocks could provide some stability in the portfolio. This is because value stocks often overreact to both positive and negative news, resulting in share price movement that does not reflect the company’s true long-term fundamentals. This creates buying opportunities in such stocks at depressed prices. There is also potential for capital appreciation when the stock finally reflects its true market price. As a result, investors could focus on FYT for the coming months. This fund follows the NASDAQ AlphaDEX Small Cap Value Index, which uses the AlphaDEX methodology to select stocks from the NASDAQ US 700 Small Cap Value Index and ranks them on both growth and value factors. The approach results in a basket of 262 securities with none holding more than 0.74% of assets. Financials, industrials, consumer discretionary and information technology are the top four sectors accounting for a double-digit exposure each. FYT is often overlooked by investors as depicted by its lower level of AUM of $44.8 million and average daily volume of under 20,000 shares. It charges 70 bps in fees per year and has gained 0.5% in the year-to-date period. Original Post

Top-Performing Energy Mutual Funds In Q1 2016

After bleeding heavily from the beginning of 2016 through early February, the energy sector made an impressive comeback to end the first quarter on a positive note, all thanks to a strong spike in oil prices. The sector’s rebound also helped energy mutual funds to end the quarter with moderate gains. According to Morningstar, the mutual fund category – Energy Equity – returned 2.2% during the first quarter, after losing nearly 10.5% in its first two months. Meanwhile, the WTI and Brent crude, which slumped 28.7% and 19.2%, respectively, since the start of 2016 to reach multi-year low levels on February 11, gained 4.3% and 6.4% during the first quarter. This was the best quarterly performance of crude since the second quarter of 2015 that came on the back of a strong rebound from February 11 through the end of the quarter, when WTI and Brent crude surged 46.3% and 31.7%, respectively. Against this backdrop, it will be worth watching the top performers from the energy equity mutual fund category in the first quarter. But before going into the discussion about the mutual funds, let’s find out the factors that impacted the movement of oil prices during the quarter. Behind the Early Slump Oil prices witnessed a massive slump since the start of 2016, following concerns including China-led global growth worries and the unwillingness of major oil producers to reduce production despite the persistent fall in oil prices. A flurry of disappointing economic data out of China – one of the major importers of oil – raised concerns that an already weak demand environment may deteriorate further following the weakness in the Chinese economy. Dismal economic data out of the major economic regions, such as the U.S., the eurozone and Japan, intensified worries regarding weak global demand. Meanwhile, the major oil producers continued to produce at high levels without considering weak global demand and an already oversupplied market. Continued increase in crude inventories also played a major role in the oil slump during the first half of the quarter. Separately, Iran, which witnessed a lift-off in sanctions on its oil export, continued to raise its production, adding to the supply glut. These were the reasons why crude prices touched 12-year low levels in early February, which in turn, dragged the major benchmarks to multi-year lows. A Remarkable Recovery Strong intentions of major oil producers to control the supply glut played a catalyst for the rebound. Ministers and officials of both OPEC and non-OPEC countries said that they will be meeting on April 17 to discuss an oil production freeze in order to boost prices. Continued decline in oil rig counts and a lower-than-expected rise in crude inventories also gave a boost to oil prices during the latter half of the first quarter. Meanwhile, improvements witnessed in the economic environment of the U.S. and China also eased concerns over weak global demand to some extent. Separately, a weaker U.S. dollar also played a significant role in increasing oil prices, as it made crude more attractive for investors trading in currencies other than the U.S. dollar. 3 Top Energy Mutual Funds In this section, we have highlighted three fundamentally strong energy mutual funds that gained the most during the first quarter, banking on a strong rebound in oil prices and the energy sector. These funds either have a Zacks Mutual Fund Rank #1 (Strong Buy) or #2 (Buy). We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund. Besides having impressive first quarter return, these funds also have strong three-month returns. The minimum initial investment is within $5000. Also, these funds also have low expense ratios. Vanguard Energy Fund Inv (MUTF: VGENX ) seeks growth of capital over the long run. It invests the lion’s share of its assets in securities of companies engaged in operations related to the energy sector. The fund primarily invests in common stocks of companies. Currently, VGENX carries a Zacks Mutual Fund Rank #1. The product has first-quarter and three-month returns of 7.8% and 20.3%, respectively. Its annual expense ratio of 0.37% is lower than the category average of 1.51%. BlackRock Natural Resources Trust Fund A (MUTF: MDGRX ) invests the majority of its assets in equity securities of companies having a significant portion of their assets in natural resources. It invests in securities of companies having operations related to sectors including energy, oil and gas. Currently, MDGRX carries a Zacks Mutual Fund Rank #2. The product has first-quarter and three-month returns of 3.9% and 17.7%, respectively. Its annual expense ratio of 1.10% is lower than the category average of 1.51%. Fidelity Select Energy Portfolio No Load (MUTF: FSENX ) seeks capital growth. It invests a large chunk of its assets in common stocks of companies involved in the energy sector, including oil, gas, electricity and solar power. The fund invests in securities of companies throughout the globe. Currently, FSENX carries a Zacks Mutual Fund Rank #1. The product has first-quarter and three-month returns of 3.3% and 15.8%, respectively. Its annual expense ratio of 0.79% is lower than the category average of 1.51%. Original Post

Will China Pull Copper ETFs Down?

Last week, copper prices witnessed the biggest weekly decline since January on oversupply concerns in China and sluggish demand growth. After a stressful stretch in 2015 due to softness in China’s manufacturing sector, global growth worries, a stronger U.S. dollar and surplus supplies, the red metal had shown a recovery in 2016. But the trend took a U-turn once concerns related to oversupply in China surfaced. While there are many factors influencing the price of copper, events in China are major contributors, as the country is the world’s biggest consumer of this industrial metal, making up roughly 40% of global copper demand. However, per the latest LME data, China’s shipments to Singapore jumped 4,800 tonnes, boosting exports and leading to worries about domestic oversupply in China. As per state-backed research firm Antaike , China could be holding more than 1 million tonnes of refined copper stocks at present, including bonded stocks, exchange stocks and metal held by traders and smelters. Historically, the strongest period of demand for copper from China is in the second quarter, as production of cables and wires is the highest during this period. However, sectors that import copper, including construction and manufacturing, have been hit hard. Thus, if China resorts to exporting copper instead of importing, it could send a major shockwave to red metal prices across the globe. Meanwhile, most of the other developed and developing economies are also experiencing sluggish growth, which in turn, is weighing on the global demand for copper and dampening its appeal. Oversupply concerns in China could intensify the global supply glut and drive copper prices further down. This brings our attention to copper ETFs – the iPath DJ-UBS Copper Total Return Sub-Index ETN (NYSEARCA: JJC ), the United States Copper Index ETF (NYSEARCA: CPER ) and the iPath Pure Beta Copper ETN (NYSEARCA: CUPM ). These funds have a Zacks ETF Rank of 3 or “Hold” rating (see all the Industrial Metals ETFs here ). iPath DJ-UBS Copper Total Return Sub-Index ETN The ETN tracks the Bloomberg Copper Subindex Total Return, which seeks to deliver returns through an unleveraged investment in the futures contracts on copper. The index currently consists of one futures contract on the commodity of copper (currently, the Copper High Grade futures contract traded on the COMEX). The product charges investors 75 bps a year in fees and has a lower level of AUM of $29.6 million. It trades in paltry volume of about 26,000 shares a day, on average. The ETN shed nearly 4.4% in the last week (as of April 8, 2016). United States Copper Index ETF The fund seeks to track the performance of the SummerHaven Copper Index Total Return, plus interest income from CPER’s holdings. The index provides investors with exposure to a portfolio of copper futures contracts. The product has amassed $2.8 million in its asset base, while it sees paltry volume of about 2,000 shares a day. Its expense ratio came in at 0.65%. The ETF has lost 3.8% in the last week. iPath Pure Beta Copper ETN This note seeks to match the performance of the Barclays Copper Pure Beta Total Return Index. This can roll into one of a number of futures contracts with varying expiration dates, as selected, using the Barclays Pure Beta Series 2 Methodology, lowering the effect of contango. The note has amassed $1.8 million in its asset base and trades in a meager volume of about 250 shares a day. The expense ratio came in at 0.75%. CUPM is gained 0.5% in the last week. Original Post