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Buy 4 Retail Funds As A Warm Up To The Black Friday Spree

Last Friday, the markets buoyed up on earnings results from certain retail primes. The Consumer Discretionary Select Sector SPDR ETF (NYSEARCA: XLY ) jumped 1.2% and was the biggest gainer among the S&P 500 components. Apart from positive results, the retail sector also has the upcoming holiday season to draw investor focus. The positives should boost retailers, translating into gains for the sector’s mutual funds as well. So, picking favorably ranked retail mutual funds will be prudent as these promise investors rich rewards this holiday season. Earnings Numbers Including releases before the opening bell on Nov. 18, 33 of the 43 retailers in the S&P 500 index have reported results. Total earnings for these retailers gained 4.4% year on year on 5.2% higher revenues. Of these companies, 57.6% beat EPS estimates and 42.4% surpassed on revenues. However, there were some robust results that came in afterward, which gave a boost to the growth numbers. Last Friday, Abercrombie & Fitch Co.’s (NYSE: ANF ) stock soared 25% after reporting quarterly adjusted earnings of 48 cents per share, significantly ahead of the Zacks Consensus Estimate of 19 cents. Moreover, earnings increased 14.3% year over year. Ross Stores Inc. (NASDAQ: ROST ) also reported better-than-anticipated top and bottom lines for the third quarter of fiscal 2015 and retained its outlook for the fourth quarter. Its shares jumped 10%. Foot Locker, Inc.’s (NYSE: FL ) shares gained 5.7% after its adjusted earnings of $1.00 per share came ahead of the Zacks Consensus Estimate of 94 cents, and jumped 20% year over year. Separately, Nike, Inc. (NYSE: NKE ) added 5.5% following its announcement of a new share repurchase program worth $12 billion, along with a hike in its dividend and a two-for-one stock split. Nike jumped to a 52-week high. Also, its weekly gain of 8.9% was the best since the week ended Sept. 26, 2014. In fact, the positive results were not a one-day event as it followed great earnings news from behemoths like Amazon.com (NASDAQ: AMZN ), Home Depot (NYSE: HD ), McDonald’s (NYSE: MCD ), BJ’s Restaurants (NASDAQ: BJRI ) and eBay Inc. (NASDAQ: EBAY ). These retail top performers have historically performed well and their stock prices have been on the rise. Upward estimate revisions based on their positive outlook should also translate into stocks moving up as the holiday season heats up. Holiday Season to be Positive Tomorrow is Thanksgiving Day. And after the turkey and prayers, America will loosen its purse strings for the year’s busiest shopping day on Black Friday. So we are on the verge of this year’s mega shopping spree, and thanks to a rebounding economy, a falling unemployment rate and improved consumer sentiment, sales should see a rise. Several factors indicate that there will be an uptrend in holiday sales this year. According to the National Retail Federation, holiday sales, excluding gasoline, restaurants and cars, will increase 3.7% on a year-over-year basis. A yearly increase of 3.7% is substantially higher than the average increase of 2.5% recorded over the last 10 years. Data compiled by eMarketer suggests a 5.7% jump in holiday sales (November and December) to $885.7 billion against 3.2% growth projected earlier. Retail e-commerce holiday season sales are anticipated to increase 13.9%, and represent approximately 9% of total sales this season (or $79.4 billion), up from 8.3% last year. Moreover, the increase in seasonal hiring by retailers, the slump in fuel prices and record wage growth are all in favor of consumers. These factors are likely to result in a strong holiday shopping season. A significant improvement in the labor market situation and lower fuel costs have increased disposable incomes. Another major factor encouraging spending this holiday season is the continued slump in fuel prices. The ability and willingness to spend should lead to jingling cash registers this time. Separately, retailers are efficiently allocating their capital toward a multi-channel growth strategy focused on improving merchandise offerings, and developing IT infrastructure to enhance web and mobile experiences of customers among others. Retail Mutual Funds in Focus Below we present 4 mutual funds from the retail sector that should be on investors’ radar now. They carry either a Zacks Mutual Fund Rank #1 (Strong Buy) or Zacks Mutual Fund Rank #2 (Buy) . 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. Putnam Global Consumer Fund A (MUTF: PGCOX ) invests in mid to large companies that are involved in the manufacture, sale or distribution of consumer staples and consumer discretionary products and services. PGCOX uses the “blend” strategy to invest in common stocks of companies. PGCOX currently carries a Zacks Mutual Fund Rank #1. PGCOX has gained, respectively, 6% and 7% in the year-to-date and 1-year periods. The 3- and 5-year annualized returns are 14.9% and 11.1%, respectively. Annual expense ratio of 1.26% is, however, higher than the category average of 1.21%. Fidelity Advisor Consumer Discretionary Fund A (MUTF: FCNAX ) seeks growth of capital. The fund invests mostly in securities issued by firms that are involved in manufacture and distribution of consumer discretionary products and services. The fund uses fundamental analysis and also looks into economic and market conditions for investment decisions. FCNAX currently carries a Zacks Mutual Fund Rank #1. The fund has gained 7% and 11.3%, respectively, over year-to-date and 1-year periods. The 3- and 5-year annualized returns are 18.6% and 15.1%, respectively. Annual expense ratio of 1.14% is lower than the category average of 1.41%. Rydex Retailing Fund A (MUTF: RYRTX ) invests most of its assets in retailers that are traded in the US and also in derivatives. RYRTX invests significantly in small to mid-sized retail companies. RYRTX currently carries a Zacks Mutual Fund Rank #2. RYRTX has lost 0.1% year to date, but is up 3.5% over the last 1-year period. The 3- and 5-year annualized returns are 14.2% and 14%, respectively. Annual expense ratio of 1.58% is, however, higher than the category average of 1.41%. Fidelity Select Retailing Portfolio (MUTF: FSRPX ) seeks growth of capital. FSRPX invests a large chunk of its assets in securities of retailing companies that are traded within the domestic boundary. These firms are involved in merchandising finished goods and services to consumers. FSRPX currently carries a Zacks Mutual Fund Rank #1. FSRPX has gained, respectively, 20.3% and 26.4% in the year-to-date and 1-year periods. The 3- and 5-year annualized returns are 25.1% and 21.3%, respectively. Annual expense ratio of 0.81% is higher than the category average of 1.41%. Original Post

Time To Ride The Coattails Of Bulldog Investors Activist Stake In RIT?

Summary On January 15, 2015, Bulldog Investors initiated a 6.01% active stake in the LMP Real Estate Income Fund. Sent a letter to LMP Real Estate Income shareholders highlighting management’s “dirty tricks” in fighting off Bulldog. On September 18, 2015 they increased their position to 16.33% (up from 15.32%). The gap between current prices and NAV equals 5.16%. On January 15, 2015, Bulldog Investors initiated a 6.01% active stake in the LMP Real Estate Income Fund (NYSE: RIT ). They state that the closed-end fund has traded at a double digit discount to NAV for over a year. As a result, shareholders should be given the opportunity to realize value at NAV through a self-tender offer, open-ending or liquidation. Bulldog Investors is a hedge fund known for its value-driven investment strategy, its activist investment campaigns and focus on closed-end mutual funds. They were recently recognized as one of the top investors in the world of activism. Phillip Goldstein (Bulldog Investors) has been very active against closed-end fund trading at discounts to NAV in the past. And they’ve had great success. Many of these closed-end funds are issued and the stock price falls well below the NAV of the actual holdings of the fund. Many of these funds issue dividends or distributions, similar to RIT’s distribution rate of 5.65%. Bulldog will simply buy at a significant discount to NAV and pressure management to close the gap. They will go into these closed-end funds that have significant discounts to NAV and push for management to close the gap between current price and NAV or liquidate the fund. In the interim, they collect a nice dividend or distribution. In the case of RIT, Bulldog asserts that the “persistent” discount is a problem that needs to be fixed immediately. And the management of RIT has had ample opportunity and time to fix the discount between current prices and NAV. Bulldog goes on to say that there is an inherent conflict of interest when they say: Legg Mason is clearly conflicted. A self-tender offer for RIT will result in Legg Mason receiving lower management fees while shareholders that tender will receive a higher price for their shares than they could get by selling them in the market. That is why Legg Mason has budgeted more than $100,000 of its own funds to persuade shareholders to vote against our proposal and to keep its friendly “independent” directors on the Board. Legg Mason knows that they are unlikely to bite the hand that feeds them. Things have gotten a little “chippy” of late with RIT’s management pushing back on some of Bulldog’s proposals. In a letter filed April 20, 2015, Phillip Goldstein says: As they say, liars cheat and cheaters lie. Regardless of what any shareholder thinks about the merits of our tender offer proposal, the actions described above should be troubling. They should cause shareholders to consider whether management of RIT can be trusted to do the right thing when its own interests conflict with the interests of shareholders. BOTTOM LINE The company trades at a 5.16% discount from its NAV. The discount to NAV is not as large as we would like in this case. Seeing as most tender offers are ~100% of NAV, we don’t see an overly attractive investment at current levels unless you believed in the underlying closed-end fund. We do not see an adequate margin of safety right now to justify investment. We would pass on this right now, but keep it on our watch list for any opening of the gap between current prices and NAV. Notable Shareholders: Mariner Investment Group | Bulldog Investors Please share your thoughts in the comments section below as I learn just as much from you as you do from me. It can be a timely endeavor, but I answer all of your comments and questions myself. Your patience and understanding is greatly appreciated. I will get to your comments as soon as possible. Source of above figures and quotes: Morningstar , Letter to Shareholders , SEC Filing

Believe In T. Rowe Price? Invest In These EM ETFs

Worries over the emerging market (EM) bloc are piling up on the impending Fed tightening, commodity market crash, slowing growth and currency weakness. If this was not enough, China – the largest emerging market – is seeing a serious upheaval in its financial market and economy and sending shockwaves to the entire EM bloc. Several hedge funds are cutting their stake in EM equities and ETFs in the wake of the Fed move. Capital inflows to emerging markets are likely to turn negative this year for the first time since 1988. The fund outflows ($12.4 billion) in Q3 were the highest since the first quarter of 2014 when the emerging market funds bled $12.7 billion in assets. In September, emerging market ETFs witnessed $1.9 billion of extraction. Though bond funds were also unsteady, equities were hit hard. Two top EM ETFs – Vanguard FTSE Emerging Markets ETF (NYSEARCA: VWO ) and iShares MSCI Emerging Markets ETF (NYSEARCA: EEM ) – have shed 12% and 10.6% so far this year (as of November 20, 2015). However, not all emerging markets are seeing the same downtrend at least, if we are to go by T. Rowe Price , an American publicly owned investment firm. As per the organization, an improving U.S. economy will lug along other regions of the world including this vulnerable part, though a short-term setback in EM securities can’t be overruled. Moreover, the organization remains upbeat on several specific economies. Below we highlight those economies and their respective ETFs for investors who want to follow T. Rowe Price. Philippines T. Rowe Price described this economy as bearing all the features investors look for in an emerging market, i.e. growth, great demographics and a current account surplus. The Philippine economy recorded 66 successive quarters of economic growth. Barclays indicated that the economy has grown 6% on average per annum under the current administration, while inflation stayed at 3.7%, which is quite commendable as per the standard of emerging markets, per Financial Times. The Philippines economy grew 5.6% in the second quarter of 2015, which is still a strong growth rate compared with other developed economies. This calls for a look at iShares MSCI Philippines ETF (NYSEARCA: EPHE ). The fund has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook. EPHE is down 9.6% so far this year (as of November 20, 2015). India Though India’s economic growth slowed to 7% in the June quarter, consecutive interest rate cuts, decline in sky-high inflation, still-laudable economic growth and hopes of pro-growth policy reforms under the ministry of prime minister Narendra Modi put India investing in the best position in the BRIC bloc. An acute plunge in oil prices also went in favor of the huge oil-importing nation India. Currency condition is also not as vulnerable as it was in 2013 when taper talks ravaged the EM equities. Greenback gained about 2% against the Indian rupee in the last one month. Thus, India ETFs like PowerShares India Portfolio (NYSEARCA: PIN ), iShares MSCI India ETF (BATS: INDA ) and EGShares Indxx India Small Cap Fund (NYSEARCA: SCIN ) can be followed. However, each of these three ETFs is in red this year. PIN and INDA has lost about 8% while SMIN is down 1.7%. Indonesia T. Rowe Price views Indonesia as a contrarian bet and seeks bottom fishing. Indonesia ETFs have seen a horrendous sell-off this year and the worst-performing emerging market ETFs in the year-to-date frame. MSCI Indonesia ETF (NYSEARCA: EIDO ) is down about 22.3% so far this year. However, such a beating has made the Indonesia ETF fairly valued at the current level. Also, stimulus packages announced by its pro-growth President Joko Widodo put this largest Southeast Asian economy on watch for gains. In the last one month (as of November 20, 2015), U.S. dollar was over 2% up against the Indonesian Rupiah. T. Rowe Price has termed Indonesia as the ‘India of tomorrow’. Peru T. Rowe Price has a choice in the struggling Latin American pack too, i.e. in Peru. The country is famous for the production of this metal, the price of which has slid steeply this year. Peru’s economy will likely expand 3.9% year over year in Q4 and close out 2015 with a growth rate of about 3%, as per a central bank official . This will miss the central bank’s prior full-year growth forecast of 3.1% by a slight margin. The bank official went on saying that the economy’s 2016 growth will be 4.2%, unless an adverse weather condition hits the economy. Investors can play this growth via iShares MSCI All Peru Capped ETF (NYSEARCA: EPU ). Peru ETF has lost over 30% so far this year (as of November 20, 2015). Original Post