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Guide To Inverse And Leveraged Biotech ETF Investing

Biotech investing has been on a see-saw ride of pains and gains this year. This piping hot corner of the broad U.S. health care market can easily be termed as one of the super performers in the last five years and can be an intriguing bet for investors with a long-term view. The biggest biotech ETF, the iShares Nasdaq Biotechnology ETF (NASDAQ: IBB ), gained over 285% during this frame. Last year too, this high-growth sector delivered a stellar 34% return and outdid all the other sectors. The Fed’s super-easy monetary policy, a whirlwind of mergers and acquisitions, promising industry fundamentals, plenty of drug launches, FDA approvals for the highlyawaited drugs, ever-increasing demand in emerging markets, surging health care spending and Obama care wrote the success story at biotech. However, the space has long been guilty of overvaluation; with even the Fed chair Yellen pointing to it last year. As a result, the space succumbs to a correction just as the broader market hits any growth-related bump and a risk-off trade sentiment takes over. This well explains why the biotech space has been floundering in the recent global market rout instigated by a Chinese market crash. If this was not enough, Hillary Clinton, who is a presidential candidate, recently raised concerns about the over pricing on life-saving drugs on Twitter. This tweet came on the heels of a 5,455% price hike (in about two months) of a drug called Daraprim, used to treat malaria and toxoplasmosis. This apparently eccentric pricing action was taken by a privately held biotech company Turing Pharmaceuticals. On the whole, branded drug prices underwent a rise of about 14.8% last year, as per research firm Truveris. There are several other drugs namely cycloserine, Isuprel, Nitropress, and doxycycline that have seen enormous price hikes this year, per the source. As a result, the drumbeat of losses for biotech stocks resumed in full volume on apprehensions of stringent government regulation on pricing matters. What’s in Store? No wonder, sectors as important and sensitive as biotech and pharmaceutical should be in talks prior to the election season. Barrons.com notified that biotech and pharma stocks underperformed the broader market during the last four election cycles when comparing figures 3 months before to the primaries and 3 months after the elections (read: The Comprehensive Guide to Biotech ETFs ). Barrons’ analysis shows that the broader market indices including S&P 500, Dow Jones, and NASDAQ composite gained 11%, 8%, and 18%, respectively, on average against 15% and 1% loss incurred by the NASDAQ Biotech index and NYSE Arca Pharmaceutical Index, respectively during last four election phases. Thus, like several analysts we too believe that the biotech space will likely remain flippant. However, the space should soar once these doubts clear up given the strong fundamentals and a compelling valuation especially after the recent sell-off. Till everything settles, investors might intend to choose products with short-term notion. And what could be better options than inverse and leverage biotech ETFs to accomplish this notion? Due to their compounding effect, investors can enjoy higher returns for a very short period of time. Holding the product for long could lead to extreme losses. Below, we have highlighted three ETFs in each case – both for bear and bull markets – that could deliver astounding gains, depending on the biotech market trend, easily crushing the broader market. Bear Biotech ETFs – Inverse Leveraged These products would be apt for the present beaten-down market environment. ProShares UltraPro Short NASDAQ Biotechnology ETF (NASDAQ: ZBIO ) Leveraged Factor: (-)3x Benchmark Index : NASDAQ Biotechnology Index The index is a modified capitalization weighted and includes biotech or pharma securities listed on the NASDAQ. The ETF has amassed about $7.7 million in its asset base while charges 95 bps in fees per year from investors. The fund trades over 50,000 shares a day on average and added 29% in the last three months (as of September 24, 2015). Direxion Daily S&P Biotech Bear 3x Shares (NYSEARCA: LABD ) Leveraged Factor: (-)3x Benchmark Index : S&P Biotechnology Select Industry Index The fund has amassed about $18.7 million so far and trades in volumes of about 275,000 shares a day. This product also charges 95 bps in fees and added 19.5% in the last three months. ProShares UltraShort Nasdaq Biotechnology ETF (NASDAQ: BIS ) Leveraged Factor: (-)2x Benchmark Index : NASDAQ Biotechnology Index This $171.6-million ETF trades in volumes of about 750,000 shares a day and charges 95 bps in fees. The fund surged over 21% in the last three months. Bull Biotech ETFs – Leveraged These products would suit investors on a biotech market recovery. ProShares UltraPro NASDAQ Biotechnology ETF (NASDAQ: UBIO ) Leveraged Factor: 3x Benchmark Index : NASDAQ Biotechnology Index This $37-million ETF trades in volumes of about 275,000 shares a day and charges 95 bps in fees. The fund lost over 39% in the last three months. Direxion Daily S&P Biotech Bull 3x Shares ETF (NYSEARCA: LABU ) Leveraged Factor: 3x Benchmark Index : S&P Biotechnology Select Industry This $112-million ETF trades in volumes of about 600,000 shares a day and charges 95 bps in fees. The fund shed over 42% in the last three months. ProShares Ultra Nasdaq Biotechnology ETF (NASDAQ: BIB ) Leveraged Factor: 2x Benchmark Index : NASDAQ Biotechnology Index This $786.1-million ETF trades in volumes of about one million shares a day and charges 95 bps in fees. The fund was down about 27% in the last three months. Link to the original link on Zack.com

Q4 Outlook For Telecom ETFs

The U.S. telecom industry has lately emerged as an intensely contested space where success thrives largely on technical superiority, quality of services and scalability. Thus, in order to stay abreast of competition, existing players need to be constantly on their toes to introduce innovative products or merge with other companies despite strict vigil by the Federal Communications Commission (FCC). In the near future, the U.S. telecom industry is slated to witness further mergers and acquisitions (M&A) and product diversifications. Spectrum Auctions to Boost Network Capacity Wireless networks are the key for future growth of the overall telecom industry. As wireless networks run on radio frequency, spectrums (airwaves) have naturally become the most sought after commodity in the industry. The FCC, which concluded an Advanced Wireless Servies-3 (AWS-3) spectrum auction in Jan 2015, accumulated a record-breaking $44.89 billion. The FCC also plans to conduct a broadcast incentive (spectrum with TV broadcasters) auction in 2016 to ease the pressure on wireless operators and thereby ensure uninterrupted transmission of data/voice packets. Unexpected high bidding for AWS-3 spectrum clearly indicates that telecom operators expect the demand for mobile data and video services to rise substantially in the near future. The spectrum license winners from different regions are gearing up to upgrade their respective networks to gain a competitive edge. Wireless network standards are continuously evolving around the globe to offer faster speed. This, in turn, is likely to result in increased capital expenditures and a surge in demand for telecom infrastructure gears. Momentum to Continue The need to remain connected is a human need. An era of digitization and technology is essentially built on this human need. It is here that telecommunications come to the fore as a necessary utility. The need for telecommunications in both rural and urban areas as well as its role in the infrastructural development of an economy is of vital importance. Telecommunications is one of the few industries to have seen rapid technological improvement even during recession. Owing to the significance of this service as an infrastructure product, we expect the overall economic dynamics to shift in the industry’s favor. Unprecedented growth in high-speed mobile Internet traffic, in particular with respect to wireless data and video, has transformed the industry into the most evolving, inventive and keenly contested space. Any new network standard that emerges aims at providing faster data connectivity, quick video streaming with high resolution and rich multimedia applications. The U.S. telecommunications industry is presently comfortably settled on the growth trajectory and the momentum is likely to continue through 2015. The rising demand for technologically superior products has been a silver lining for the telecommunication industry in an otherwise tough environment. Uninterrupted advancement in telecom technologies helped telecom operators adopt newer business models in order to boost revenues. ETFs to Tap the Sector Against this backdrop, investors seeking to tap the growth potential of the highly competitive telecom sector may take a closer look at the ETF approach to reap maximum benefit from investing in this sector. This technique can help to spread out assets among a wide variety of companies and reduce company specific risks for a very low cost. Below, we highlight the ETFs in this sector in greater detail for Telecom ETF investors: iShares Global Telecom ETF (NYSEARCA: IXP ) IXP is one of the most popular Telecom ETF available in the market. Launched in Nov 2001, this ETF tracks investment results before fees and expenses corresponds to the price and yield performance of the S&P Global 1200 Telecommunications Sector Index. The fund has nearly $418.3 million of assets under management and an average trading volume of roughly 63,886 shares a day in the last 3 months. The fund charges an expense ratio of 47 basis points a year. The fund holds 30 stocks in its portfolio and has a concentrated approach in the top ten holdings with 72.79% of the asset base invested in them. Among individual holdings, top stocks in the ETF include AT&T Inc. (NYSE: T ), Verizon Communications Inc. (NYSE: VZ ), and Vodafone Group Plc. (NASDAQ: VOD ) with asset allocation of 17.02%, 15.79% and 7.73%, respectively. Integrated Telecommunication Services, Wireless Telecommunication Services and Alternative Carriers are the three major sectors with asset holdings of 73.72%, 24.66% and 1.13% respectively. This ETF offers a dividend yield of 3.63%. Vanguard Telecom Services ETF (NYSEARCA: VOX ) Another popular fund in the Telecom ETF space is VOX. Launched in Sep 2004, this ETF seeks to track the performance corresponding to the benchmark MSCI US Investable Market Telecommunication Services 25/50 Index. It has assets under management of nearly $957.4 million and an average trading volume of roughly 74,143 shares a day in the last 3 months. The fund charges an expense ratio of 12 basis points a year. The fund holds 32 stocks in its portfolio and has a concentrated approach in the top ten holdings with 71.40% of the asset base invested in them. Among individual holdings, top stocks in the ETF are AT&T, Verizon, and SBA Communications Corp. (NASDAQ: SBAC ). Integrated Telecommunication Services, Alternative Carriers and Wireless Telecommunication Services are the three major sectors with asset holdings of 61.80%, 19.40% and 18.60%, respectively. This ETF offers a dividend yield of 2.69%. SPDR S&P Telecom ETF (NYSEARCA: XTL ) Incepted in Jan 2011, XTL ETF tries to match the returns of the S&P Telecom Select Industry Index, before expenses. The fund manages an asset size of nearly $24.7 million and an average trading volume of roughly 20,769 shares a day in the last 3 months. The fund charges an expense ratio of 35 basis points a year. The fund holds 56 stocks in total in its basket. However, this ETF is not following any concentrated approach as the top ten stocks hold only 26.86% of the asset base invested in them. Among individual holdings, top stocks in the ETF include Motorola Solutions Inc. (NYSE: MSI ), Ubiquiti Networks Inc. (NASDAQ: UBNT ) and Frontier Communications Corp. (NASDAQ: FTR ) with asset allocation of 3.00%, 2.79% and 2.77%, respectively. Communications Equipment, Integrated Telecommunication Services, Alternative Carriers, Wireless Telecommunications Services and Application Software are the five major sectors with asset holdings of 59.46%, 15.24%, 11.83%, 11.54% and 1.61% respectively. This ETF offers a dividend yield of 1.24%. iShares U.S. Telecommunications ETF (NYSEARCA: IYZ ) Incepted in May 2000, IYZ ETF tracks investment results before fees and expenses corresponds to the price and yield performance of the Dow Jones US Select Telecommunications Index. The fund manages assets worth of nearly $407.11 million and an average trading volume of roughly 235,547 shares a day in the last 3 months. The fund charges an expense ratio of 45 basis points a year. The fund holds 24 stocks and has a concentrated approach in the top ten holdings with 61.97% of the asset base invested in them. Among individual holdings, top stocks in the ETF include AT&T, Verizon, and SBA Communications with asset allocation of 11.85%, 10.40% and 5.85%, respectively. The four major sectors of this ETF include Integrated Telecom, Wireless Telecom, Alternative Carriers and Communications Equipment with asset holdings of 48.42%, 29.74%, 18.47% and 3.08% respectively. This ETF offers a dividend yield of 2.49%. Fidelity MSCI Telecommunications Services Index ETF (NYSEARCA: FCOM ) Incepted in Oct 2013, FCOM ETF tracks investment results before fees and expenses corresponds to the performance of the MSCI USA IMI Telecommunication Services 25/50 Index. The fund manages assets worth of nearly $105.6 million and an average trading volume of roughly 33,447 shares a day in the last 3 months. The fund charges an expense ratio of 12 basis points a year. The fund holds 25 stocks and has a concentrated approach in the top ten holdings with 69.86% of the asset base invested in them. Among individual holdings, top stocks in the ETF include Verizon, AT&T and CenturyLink Inc. (NYSE: CTL ), with asset allocation of 22.56%, 22.08% and 4.36%, respectively. Diversified Telecommunication Services and Wireless Telecommunication Services are the two major sectors of this ETF with asset holdings of 81.63% and 18.07%, respectively. This ETF offers a dividend yield of 3.13%. Link to the original article on Zacks.com

Q4 Outlook For Oil And Gas ETFs

Crude Oil The free fall in oil prices have made energy the most talked-about sector of the entire market in 2015, apart from the fact that its performance has been the worst. Year-to-date, The Energy Select Sector SPDR ETF (NYSEARCA: XLE ) has posted a loss of 20%. On the other hand, the broad-based Dow Jones Industrial Average and the S&P 500 index shed just 8% and 5%, respectively, over the same period. As of now, crude prices are trading just above the key psychological level of $40-a-barrel after hitting a new 6-1/2 year low of $37.75 recently. This, despite a short spike that saw the commodity scale a year-high of $61.43 per barrel in June. (Read: 4 Ways to Short the Energy Sector with ETFs ) Oil is facing the heat on several fronts. Perhaps, the most important of them pertains to the mounting worries about China’s crude demand. In particular, the Asian giant’s currency devaluation has stoked speculation about soft economic growth in the world’s No. 2 energy consumer. What’s more, in the absence of production cuts from OPEC, the effects of booming shale supplies in North America and a stagnant European economy, not much upside is expected in oil prices in the near term. Moreover, a stronger dollar has made the greenback-priced crude more expensive for investors holding foreign currency. The Iranian nuclear framework agreement, which has the potential to release more of the commodity in the already oversupplied market, has put the final nail in the coffin. As it is, with inventories near the highest level during this time of the year in 80 years at least, crude is very well stocked. On top of that, OPEC members (like Saudi Arabia) have made it clear time and again that they are more intent on preserving market share rather than attempting to arrest the price decline through production cuts. Therefore, the commodity is likely to maintain its low trajectory throughout 2015. (Read: Still Believe in Goldman’s $20 Oil, Go Short with These ETFs ) This has forced the oil companies and associated service providers to make deep cost cuts by reducing their workforce. Oilfield services behemoths like Halliburton Co. (NYSE: HAL ), Schlumberger Ltd. (NYSE: SLB ) and Weatherford International plc (NYSE: WFT ) were the first to respond to the worsening situation, announcing substantial redundancies earlier in the year. Of late, they have been joined by integrated majors including Royal Dutch Shell plc (NYSE: RDS.A ) and Chevron Corp. (NYSE: CVX ). In the medium-to-long term, while global oil demand will be driven by China – which continues to be the main catalyst to liquids consumption growth despite the current slowdown – this will be more than offset by sluggish growth prospects exhibited by Asian and the European economies. In our view, crude prices in the next few months are likely to exhibit a sideways-to-bearish trend, mostly trading in the $40-$50 per barrel range. As North American supply remains strong and demand looks underwhelming, we are likely to experience a pressure in the price of a barrel of oil. Natural Gas Over the last few years, a quiet revolution has been reshaping the energy business in the U.S. The success of ‘shale gas’ – natural gas trapped within dense sedimentary rock formations or shale formations – has transformed domestic energy supply, with a potentially inexpensive and abundant new source of fuel for the world’s largest energy consumer. With the advent of hydraulic fracturing (or “fracking”) – a method used to extract natural gas by blasting underground rock formations with a mixture of water, sand and chemicals – shale gas production is now booming in the U.S. Coupled with sophisticated horizontal drilling equipment that can drill and extract gas from shale formations, the new technology is being hailed as a breakthrough in U.S. energy supplies, playing a key role in boosting domestic natural gas reserves. As a result, once faced with a looming deficit, natural gas is now available in abundance. Statistically speaking, the current storage level – at 3.261 trillion cubic feet (Tcf) – is up 473 Bcf (17%) from last year and is 127 Bcf (4%) above the five-year average. Expectedly, this has taken a toll on prices. Natural gas peaked at about $13.50 per million British thermal units (MMBtu) in 2008 but fell to sub-$2 level in 2012 – the lowest in a decade. Though it has recovered somewhat, at around $2.70 now, the commodity is still way off the heights reached seven years back. In fact, natural gas been trading range bound over the last couple of quarters with investors looking for direction. It has been stuck between $2.50 and $3 per MMBtu over the past 5 months. In response to continued weak natural gas prices, major U.S. producers like Chesapeake Energy Corp. (NYSE: CHK ), Cabot Oil & Gas Corp. (NYSE: COG ) and Range Resources Corp. (NYSE: RRC ) have all taken significant cost-cutting measures, including a reduction in their capital expenditure budgets for the year. With production from the major shale plays remaining strong and the commodity’s demand failing to keep pace with this supply surge, natural gas prices have been held back. Even the summer cooling demand has been of little help. What’s more, with improved drilling productivity offsetting the historic decline in rig count, and expectations of tepid heating demand with the imminent arrival of soft late-summer temperature, we do not expect gas prices to rally anytime soon. Playing the Sector Through ETFs Considering the turbulent market dynamics of the energy industry, the safer way to play the volatile yet rewarding sector is through ETFs. In particular, we would advocate tapping the energy scene by targeting the exploration and production (E&P) group. This sub-sector serves as a pretty good proxy for oil/gas price fluctuations and can act as an excellent investment medium for those who wish to take a long-term exposure within the energy sector. While all oil/gas-related stocks stand to move with fluctuating commodity prices, companies in the E&P sector tend to be the most important, as their product’s values are directly dependent on oil/gas prices. (See all Energy ETFs here ) SPDR S&P Oil & Gas Exploration & Production ETF (NYSEARCA: XOP ) Launched in June 19, 2006, XOP is an ETF that seeks investment results corresponding to the S&P Oil & Gas Exploration & Production Select Industry Index. This is an equal-weighted fund consisting of 73 stocks of companies that finds and produces oil and gas, with the top holdings being HollyFrontier Corp. (NYSE: HFC ), Tesoro Corp. (NYSE: TSO ) and PBF Energy Inc. (NYSE: PBF ). The fund’s expense ratio is 0.35% and pays out a dividend yield of 1.98%. XOP has about $1,472.9 million in assets under management as of Sep 10, 2015. iShares Dow Jones US Oil & Gas Exploration & Production ETF (NYSEARCA: IEO ) This fund began in May 1, 2006 and is based on a free-float adjusted market capitalization-weighted index of 74 stocks focused on exploration and production. The top three holdings are ConocoPhillips (NYSE: COP ), Phillips 66 (NYSE: PSX ) and EOG Resources Inc. (NYSE: EOG ). It charges 0.45% in expense ratio, while the yield is 1.77% as of now. IEO has managed to attract $403.5 million in assets under management till Sep 10, 2015. PowerShares Dynamic Energy Exploration and Production (NYSEARCA: PXE ) PXE, launched in Oct. 26, 2005, follows the Energy Exploration & Production Intellidex Index. Comprising of stocks of energy exploration and production companies, PXE is made up of 30 securities. Top holdings include Phillips 66, Valero Energy Corp. (NYSE: VLO ) and Marathon Petroleum Corp. (NYSE: MPC ). The fund’s expense ratio is 0.64% and the dividend yield is 2.20%, while it has got $92.9 million in assets under management as of Sep 10, 2015. Original Post