Tag Archives: investing

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

The ETF Monkey Vanguard Core Portfolio: April 13, 2016 Rebalance

Back on February 11, 2016, I executed a series of transactions to rebalance The ETF Monkey Vanguard Core Portfolio . As explained in that article, the severe decline in both domestic and foreign stocks left these two asset classes significantly underweight, with bonds being overweight. Here, for convenience, is a “before and after” snapshot of that transaction. Click to enlarge As it turns out, the timing of that rebalancing could not have been better. In hindsight, it can be seen that February 11 represented, at least to this point, the low point for 2016. I don’t take particular credit for this. My efforts were simply an application of the principles found in this article . As I also noted in my previous article, I executed a fairly aggressive set of transactions. Mindful of the fact that I am deliberately incurring trading commissions on all transactions in this particular portfolio, to make the exercise as “real world” as possible, I commented that I need to make each transaction count. This being the case, I temporarily underweighted bonds in favor of adding to the other two severely depressed asset classes. Here is the equivalent Excel spreadsheet for today’s transaction. Have a look, and then I will offer some comments. Click to enlarge Likely, the first thing that jumped out at you is that both domestic and foreign stocks have staged fairly stunning comebacks since February 11. The Vanguard Total Stock Market ETF (NYSEARCA: VTI ) registered a gain of 14.69% during this period, while the Vanguard FTSE All-World ex-US ETF (NYSEARCA: VEU ) did even better, at 15.55%! On the flip side, this incredible performance, combined with my aggressive rebalancing transaction, left bonds substantially underweight, with their 13.37% weighting being a full 4.13% below my target weight of 17.50%, or a full 23.6% in relative terms (13.37 / 17.50). Given these developments, it appeared to me that this was a fitting point to take some of those profits, so to speak, and get the portfolio more closely aligned with my target weights. While it is not yet May, I will admit that the old adage “Sell in May and go away” contributed in some small way to the timing of this decision. I didn’t want to take a chance on being overweight domestic equities, only to have them experience a summer swoon! You may also notice that foreign stocks were about even with my target allocation as I reviewed the portfolio today. This is because I did not add as heavily to this asset class in the prior rebalance. Therefore, I decided to only affect the domestic stock and bond asset classes with this transaction, saving me one trading commission. Take one last peek at the “after” section of the spreadsheet, and you will notice that all 3 asset classes are now fairly closely aligned with their targets. I hope that this sets the portfolio up nicely for the summer. Disclosure: I am not a registered investment advisor or broker/dealer. Readers are cautioned that the material contained herein should be used solely for informational purposes, and are encouraged to consult with their financial and/or tax advisor respecting the applicability of this information to their personal circumstances. Investing involves risk, including the loss of principal. Readers are solely responsible for their own investment decisions.