Tag Archives: investment

6 ETFs With The Largest Exposure To Netflix

Summary 6 ETFs have more than 2% of total assets dedicated to Netflix. Some have exposure as high as 7%. Netflix plunged almost 9% on Thursday, thanks to an earnings report that missed on both revenue and subscriber growth estimates. The size of some of the ETFs listed is very small and thus may face liquidity and tradeability issues. Netflix (NASDAQ: NFLX ) made news this week when it delivered its third-quarter earnings report. The company reported disappointing revenue and subscriber growth, and as a result, the stock dropped over 8% on the day. NFLX has been a very popular momentum stock not just among individual investors, but by ETFs as well. There are 6 ETFs that currently have at least a 2% weighting in Netflix. Some are significantly higher than that, and any ETF that had a large exposure to Netflix on Thursday likely had trouble matching the broader market’s performance. Each of these ETFs is primarily technology and Internet focused, and as a result, is riskier than the average broad equity market fund. Keep in mind that these weightings can change over time, but if you’re looking for exposure to Netflix, these ETFs would be the place to start. PowerShares NASDAQ Internet Portfolio (NASDAQ: PNQI ) – 7.47% weighting While this ETF has the largest weighting of Netflix stock in its portfolio, it shouldn’t be too surprising given how concentrated this portfolio is. It has 95 positions in the portfolio, but the top 10 holdings account for 60% of the fund’s assets. In fact, NFLX is only the 5th largest holding. Despite its significant weight in Netflix, this ETF still performed comparably to the NASDAQ on Thursday. It was up 1.3% compared to the NASDAQ 1.8% gain. SPDR Morgan Stanley Technology ETF (NYSEARCA: MTK ) – 6.04% weighting In this ETF, Netflix is the top dog. With just 37 holdings, this fund is also concentrated but weightings tend to be distributed a little more evenly. This fund has the added benefit of also being one of the cheapest. Its 0.35% expense ratio falls well below the 0.59% average ETF ratio. The heavy Netflix weighting helped weigh down this ETF’s performance Thursday. It managed a gain of just 0.3% on a day when technology stocks as a whole moved broadly higher. First Trust DJ Internet Index ETF (NYSEARCA: FDN ) – 5.44% weighting Another concentrated technology ETF, this fund has nearly 60% of assets in its top 10, and Netflix is just the 3rd largest holding here. This fund is easily the largest among the ETFs on this list at nearly $3.6 billion in assets, so this fund will be the most liquid and easiest to trade. This ETF nearly matched the pace of the NASDAQ on Thursday, rising nearly 1.5%. First Trust ISE Cloud Computing Index ETF (NASDAQ: SKYY ) – 4.47% weighting As an ETF index provider, ISE is probably better known for the PureFunds ISE Cyber Security ETF (NYSEARCA: HACK ) that’s garnered over $1 billion in assets in a short period of time, but this fund is slowly gaining notoriety in its own right. This fund’s composition is fairly similar to the Dow Jones Internet Index Fund – concentrated and roughly equal weighted – but it’s significantly smaller and hasn’t performed nearly as well. This fund wasn’t hit terribly hard by its Netflix position as it still delivered a 1.5% gain on Thursday. Ark Web x.0 ETF (NYSEARCA: ARKW ) – 3.88% weighting Here’s where we start getting into the really small ETFs. This fund has just $12 million in assets and is very thinly traded. Typically, trading just a few hundred shares a day, liquidity is a significant issue, and the costs of trading may be too high. Despite the fact that ARKW is about a year old but hasn’t really caught on it still makes the list for its large position in Netflix. This is the only ETF on the list that was actually down on Thursday. Ark Innovation ETF (NYSEARCA: ARKK ) – 2.83% weighting This ETF also from the Ark Investment Management family is even smaller than the one listed above with just $8 million in assets. Pretty much everything mentioned above with the Web x.0 ETF applies here as well. This fund manages to eke out a tiny gain on Thursday based on just one 100 share trade.

$100,000 Investment Into Yearly Income: The Southern Company Example

Summary A dividend strategy is essentially turning investment into a yearly income stream. Boring utilities stocks can help you generate great levels of wealth. Here is the way it can work for you. In the article “Can A $100K Investment Produce A $50K Yearly Income? Walking The Model Step By Step” I introduced a model to generate an ongoing income steam through initial investment of $100,000 and by reinventing the net dividend flow. There were many comments and feedbacks to this model and I thank all commentators for their good inputs. One key concern that was raised was that achieving a $100,000 worth of savings is almost an impossible challenge these days. Well, I will fool you not. Getting to a significant amount of wealth is not an easy task. It requires both discipline and setting straight the priorities. There is no magic here. In order to achieve significant amount of savings one must put aside a portion of his income. These amounts can be either fixed or it can change from week to week or month to month. Nevertheless there should be constant contribution. In order to achieve something there must be a goal. A goal should be set realistically based on the ability to routinely contribute to the accumulated wealth. In the next example I will continue to use the $100,000 as the goal. After we set our mindset straight and agreed to take responsibility over our spending and savings, and after we set up a goal that is reasonable to achieve, how can we generate wealth using dividend investing strategy? The example of The Southern Company I decided to use The Southern Company (NYSE: SO ) as an example as it is conceived as a boring type of investment. It is less exciting from the growth machines out there but it can definitely fit to our purpose of generating wealth. SO is a holding company that operates in the South East counties of the U.S. It owns Alabama Power Company, Georgia Power Company, Gulf Power Company, and Mississippi Power Company, each of which operates as a public utility company. SO is the 16th largest utility company in the world, and the fourth largest in the U.S. It serves more than 4.5 million customers in Alabama, Georgia, Florida, and Mississippi. The company was founded back in 1945 and began paying quarterly dividends in 1972. SO never had a dividend cut and has been steadily increasing its dividend since the year 2002. An investor who decided back in November 2005 (ten years ago) to regularly invest in SO, to routinely invest $450 per month and buy more shares. And alongside during this period, each quarter he reinvested the dividends after tax to buy more of SO’s shares he could have reached the $100,000 goal by the end of 2014. Even after the 2015 correction in the Utilities’ stock prices he would have reached the goal again by the month of September 2015. It means that based on these particular assumptions the goal was achieve after nine years. Let’s see how it worked in more details. The investment Since SO paid a quarterly dividend through the assumed period, the investment is built out of two elements: the first one is the monthly contributions of a fixed $450. That means yearly contributions of $5,400 each year. The second element is the dividends net of 25% tax rate which have constantly grew from year to year. The higher dividends together with the higher number of accumulated shares delivered an everlasting growing purchasing power to buy more shares. As we can see in the next graph, during the recent years the dividend became a significant portion of the yearly investment and by 2014 it was about 40% of the $8,568 yearly investment. The shares accumulation The monthly contributions allowed to constantly increase the amount of shares but the accumulation was highly dependent on the share price. The next graph shows the yearly stock price average during the recent ten years alongside the accumulated number of shares during each period. At times of high stock price the accumulation power was lower. The situation of the zero interest rate brought the stock price to recent highs and by that reduced the buying power of the routine contributions. In a scenario of a hiking interest rate we might see SO’s stock price going down and by that a fix accumulation will allow to purchase more shares. The total investment value: The dividend yield went down from the levels of 6-7% in the years 2005-2009 to the levels of 5% in the recent years due to the stock price hike. But this exact hike also drove the holding value to higher levels and led the total value to exceed $100,000 by December 2014. If indeed the interest rate hike will arrive soon (and it depends how high it would reach in the next couple of years) the value of the portfolio will be highly volatile and might go down in value. The income: Which brings us to the last piece. The accumulated holding at the value of $100,000 generates in 2015 a yearly net income of $3,566. As this machine will continue to work it would grow its income power even higher. Even if the stock price will go down due to a FED’s action the power of time and reinvestment will allow to accelerate the income machine even faster (as lower stock price allows to accumulate more shares). If you are interested in the excel model behind this example you can find it here . Conclusions: Even a boring type of investment like SO can serve well the patient investor to generate wealth using a sound dividend investment strategy. Dividend strategy cannot depend on a sole stock and should be based on a diversified portfolio. The monthly contributions should be aimed towards high quality stocks that face temporary headwinds but have long and proven history. Nowadays this list may include companies like Chevron (NYSE: CVX ), ConocoPhillips (NYSE: COP ), Deere & Company (NYSE: DE ), Eaton (NYSE: ETN ), Johnson & Johnson (NYSE: JNJ ), HCP (NYSE: HCP ) and other names from the Industrial sector. A consistent strategy of constant contributions and dividends reinvestment will allow to obtain sound results overtime. There would be those who would criticize the length of the time required to achieve the goal at it was shown in this example. As mentioned earlier: there is no magic here. In order to accelerate the accumulation and reduce the length of time the monthly contributions should be higher. For example, a monthly contribution of a $1,000 would have reduce the time by ~40% allowing the goal to be achieved in early 2011 or after six and a half years. There are highly subjective decisions to be made and it will vary from one person to the other, but if the mindset should be set to take responsibility over your financials, a sound goal should be set and the only thing left is to execute the strategy. Happy investing.

It Is A Good Time To Invest In The YieldCo ETF

Summary The renewable energy market is growing and yieldcos are gaining traction. The Global X YieldCo ETF remains insulated from the Chinese stock market weakness. Better performance than peers. The Global X YieldCo Index ETF (NASDAQ: YLCO ) is an ETF investing in YieldCos. This ETF provides a good chance of increasing investor returns, since it invests in the high yielding yieldcos as their underlying asset. In addition to investing in yieldcos which are considered a less risky way of earning stable dividends, this ETF also provides the benefit of diversification. The renewable energy market is set to grow at a rapid pace and will account for the lion’s share of electricity capacity going forward. YLCO has been battered recently due to a sharp fall in the overall energy sector. This has led to a jump in their yields as prices have declined. After drawing strong investor interest, the situation has reversed with investors shunning these securities. SunEdison (NYSE: SUNE ) which runs 2 yieldcos has said that it will not drop further projects into its yieldcos, given the sharp price erosion. Other companies such as Trina Solar (NYSE: TSL ) have also halted their plans of listing a yieldco. However, my view is that this is a temporary hiccup due to a combination of high exuberance for yieldcos and an overall selloff in energy prices. YLCO is currently trading down 27% since its listing in May 2015. Given the current slump in yieldco prices, I think it should be a good time to build some position in this safe bet. Why you should invest in this YieldCo ETF Underlying assets are yieldcos, which are growing – YieldCos are considered a safe bet given their low risk profile and ability to generate stable and predictable cash flows. They are also less volatile than renewable energy stocks. Even when the entire energy market is going through a severe downturn, I believe yieldcos are a good bet as they should continue paying their dividends since their cash flows are relatively immune from recessions. The growth story is also strong as the renewable energy industry is set to continue over the long term. No exposure to the Chinese market – The Chinese market turmoil has strongly affected the global commodity industry, with many commodity producers trading at multi year lows. There is a fear that the Chinese economy may face a hard landing leading to global slowdown. The global YieldCo ETF does not have any exposure in the Chinese market. The ETF has its maximum exposure in the U.S. market followed by the U.K. These two economies are performing well relative to other regions, such as Japan and Europe. A better shield to downside risks than individual holdings – YLCO has lost 27% since inception. Given below is the YTD performance of some of its top holdings, suggesting the ETF’s performance was better than most of its constituents. % of Holding YieldCos YTD performance 12.45 Brookfield Renewable Energy Partners (NYSE: BEP ) -10% 8.32 Terraform Power (NASDAQ: TERP ) -38% 7.68 NRG Yield Inc (NYSE: NYLD ) -45% 7.36 Nextera Energy Partners (NYSE: NEP ) -27% 6.53 Abengoa Yield (NASDAQ: ABY ) -27% Data as on 13th October’15 closing The renewable Energy Market is booming – There is an increased awareness about the renewable energy usage and its benefits in reducing the effects of global warming. Countries like India have large power deficits and rely on coal for their energy needs. Now these countries are at the forefront of an energy revolution, shifting largely towards solar, wind and other renewable forms of energy for their power needs. The U.S. has also made its stand clear by passing its recent ‘Climate Action Plan’. All of this speaks of a booming renewable energy demand. It is estimated that renewable energy could account for almost 80% of the world’s energy supply within four decades. The market for yieldcos is growing – YieldCos have proven to be a success amongst the shareholders, primarily due to their stable dividend growth and relatively lower risk profile. With the growing renewable energy market, more yieldcos are coming into existence. After the success of SunEdison’s ( SUNE ) Terraform Power, the company has also listed another yieldco specializing in developing economies – Terraform Global (NASDAQ: GLBL ). There was also a joint yieldco by SunPower (NASDAQ: SPWR ) and First Solar (NASDAQ: FSLR ) called 8point3 Energy Partners (NASDAQ: CAFD ). Likewise, Canadian Solar (NASDAQ: CSIQ ) is also thinking of forming a yieldco before year end. Stock performance & Valuation YLCO gave better returns than some of its top holdings, as shown in the table above. The YTD performance was also better than solar ETFs like the Guggenheim Solar ETF (NYSEARCA: TAN ) and the Market Vectors Solar Energy ETF (NYSEARCA: KWT ). The stock is currently trading at ~$11 which is 26% low than its all-time high price. The ETF was listed in May 2015 with an expense ratio of 0.65%. (click to enlarge) Source: Google Finance What could go wrong The energy stocks have taken quite a beating in recent days and yieldcos have not been immune to this fall. The slowdown of the Chinese economy has not only hurt the Chinese energy demand growth, but also the growth in other countries due to secondary indirect effect as their exports to the Chinese economy has declined. As we can see from the graph above, the stock price decline has happened in line and is following the trend in the broader energy market. If conditions get worse, the ETF could also lose more value. The project business is a highly capital intensive business, where developers resort to large amount of debt. Any problems in the sponsor company to honor their debt might lead to a slowdown in the yieldco business. Some of the yieldcos are now adopting a more prudent growth strategy to take into account the market turmoil. Some of the solar companies have also put their plans to do yieldco in cold storage. This might help YLCO as the competition for renewable energy assets will reduce, thereby making existing yieldcos more attractive. Conclusion The current weakness in the energy sector has caused major downturn in the energy sector. I believe this will cause the weaker players to close shop and only good quality stocks would survive. The major advantage of YLCO is that it does not have any exposure in the Chinese market, which is experiencing a major slowdown. Though it will not be totally isolated from the Chinese slowdown effects, it will still not be very drastic. Also the investment case for renewable energy market continues to be strong and YLCO insulates its investors from the volatility of directly investing in this sector. I think this is a good time to build a position in this yieldco ETF. Share this article with a colleague