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5 ETF Winners From Q3 Earnings Season

The Q3 2015 earnings picture appears weak especially with companies struggling to beat even low top-line estimates and declining fourth-quarter estimates. Total earnings for 90.3% of the S&P 500 companies that have reported so far are down 2.5% on an annual basis with a beat ratio of 68.3% while revenues decreased 4.6% with a beat ratio of 39.8%. In fact, the revenue beat ratio is the lowest relative to the recent quarters. Nevertheless, the technology sector bucked the revenue weakness and came up with better-than-expected results not only relative to pre-season expectations but also relative to the sector’s performance in the past quarters. Revenue surprise for the tech sector is 57.7%, just behind 58.3% for the medical sector. In terms of earnings surprises, transportation, conglomerates and medical are leading with impressive ratios of 85.7%, 83.3% and 81.3%, respectively. When it comes to stronger earnings growth rates, autos and transportation are the largest contributors with 30.7% and 22.5%, respectively. The other two sectors – medical and retail – also recorded double-digit earnings growth in Q3. With respect to revenues, retail has been trending up so far with growth of 18.4%, though results from about half of the retailers are still awaiting. Considering all the key metrics, several equity ETFs have impressed with their performances and have generated handsome returns over the trailing one month. While there are winners in many corners of the space, below are five ETFs that buoyed up on robust earnings results and crushed the broad market fund (NYSEARCA: SPY ) in the same period: ALPS Medical Breakthroughs ETF (NYSEARCA: SBIO ) – Up 11.4% This fund targets companies with one or more drugs in Phase II or Phase III FDA clinical trials by tracking the Poliwogg Medical Breakthroughs Index. It provides a well spread out exposure to 81 stocks in its basket with none holding more than 4.92% share. SBIO is a small cap centric fund, having amassed $160.9 million in its asset base. The product charges 50 bps in fees per year from investors and trades in average daily volume of around 151,000 shares. It has a Zacks ETF Rank of 2 or ‘Buy’ rating. PowerShares Nasdaq Internet Portfolio (NASDAQ: PNQI ) – Up 11.3% This fund targets the Internet corner of the broad technology space by tracking the Nasdaq Internet Index and charges 60 bps in fees per year. With AUM of $223.2 million, it holds a basket of 94 securities with concentration on the top five holdings at around 40.9% share. Large caps account for 70% share while the rest are evenly split between mid and small caps. The fund trades in a light volume of around 19,500 shares a day. In terms of industrial exposure, Internet software and services makes up for 57% share, followed by Internet retail (38.1%). PNQI has a Zacks ETF Rank of 2 with a High risk outlook. U.S. Global Jets ETF (NYSEARCA: JETS ) – Up 11.03% This fund provides exposure to the global airline industry, including airline operators and manufacturers from all over the world, by tracking the U.S. Global Jets Index. In total, the product holds 33 securities with double-digit allocation going to Southwest Airlines (NYSE: LUV ), American Airlines (NASDAQ: AAL ), Delta Air Lines (NYSE: DAL ), and United Continental (NYSE: UAL ). Other firms hold less than 4.1% share. The ETF has a certain tilt toward large cap stocks at 62% while small and mid caps account for 24% and 14% share, respectively, in the basket. The fund has gathered $49.4 million in its asset base while sees moderate trading volume of nearly 63,000 shares a day. It charges investors 60 bps in annual fees. iShares Dow Jones US Broker-Dealers ETF (NYSEARCA: IAI ) – Up 10.8% This fund offers exposure to the U.S. investment banks, discount brokerages, and stock exchange firms and tracks the Dow Jones U.S. Select Investment Services Index. The product currently holds 24 securities with largest allocation going to Goldman Sachs (NYSE: GS ) and Morgan Stanley (NYSE: MS ). The ETF has a nice mix of all cap securities with 52% going to large caps, 27% to small caps, and the rest to mid caps. The fund has accumulated $320.6 million in AUM and trades in moderate volume of nearly 64,000 shares a day. The product charges 43 bps in fees per year from investors and has a Zacks ETF Rank of 3 or ‘Hold’ rating. SPDR S&P Semiconductor ETF (NYSEARCA: XSD ) – Up 10.2% This fund targets the semiconductor corner of the broad technology space. It tracks the S&P Semiconductor Select Industry Index, holding 48 stocks in its portfolio. It is widely spread across securities as none of these allocates more than 3.86% of the assets. The product has a definite tilt toward small cap stocks at 60% while the rest is evenly split between the other two market cap levels. The fund is less popular in the semiconductor space with AUM of $155.5 million and average daily volume of about 160,000 shares. It charges 35 bps in fees per year and has a Zacks ETF Rank of 3. Original Post

Impressive Auto Earnings Put This Car ETF In Focus

The automobile sector has been riding on a host of favorable elements this year such as plunging oil prices, a recovering U.S. economy, rising consumer confidence and spending, increasing aging vehicles on the road, high incentives and discounts and easy availability of credit. While these factors led to better-than-expected earnings during the third quarter, it is only the stronger dollar that stood in the way of the sector to realize its full potential, leading to revenue weaknesses across the board. As per Earnings Trend report, earnings of all the automobile companies that have reported so far are up 30.7% year over year for the third quarter of the year, with 60% of the companies beating the Zacks Consensus Estimate. Meanwhile, revenues of all the companies are down nearly 1% for the quarter, with only 20% of them surpassing the Zacks Consensus Estimate (read: ETF & Stocks Riding on Auto Sector Boom ). Below we have highlighted in detail the third quarter results of some of the major auto companies that have reported recently. Auto Earnings in Detail The largest U.S. automaker, General Motors Co.’s (NYSE: GM ) adjusted earnings of $1.50 per share for the quarter beat the Zacks Consensus Estimate of $1.17 by a wide margin. Earnings increased 55% from 97 cents per share recorded in the third quarter of 2014. The robust year-over-year improvement was driven by solid performance in China and the U.S. However, revenues in the quarter declined 1.3% year over year to $38.8 billion, marginally missing the Zacks Consensus Estimate of $39.1 billion. The year-over-year decline was due to the adverse impact of foreign currency translation. The second-largest carmaker by sales, Ford Motor Co. (NYSE: F ) posted adjusted earnings per share of 45 cents in the third quarter, way above the 24 cents earned in the prior-year quarter (all excluding special items). Earnings per share were in line with the Zacks Consensus Estimate. Pre-tax income (excluding special items) surged 128% to $2.7 billion, marking a third-quarter record. Revenues increased 9.1% to $38.1 billion due to full-scale production of the F-150 and surpassed the Zacks Consensus Estimate of $35.4 billion. The automaker reaffirmed its pre-tax profit guidance (excluding special items) in the range of $8.5-$9.5 billion for 2015, significantly higher than $6.3 billion recorded in 2014. Automotive revenues, operating margin and operating-related cash flow are also expected to be higher than 2014. Japanese automaker, Honda Motor Co., Ltd. (NYSE: HMC ) reported earnings per share of ¥70.88 (59 cents) in the second quarter of fiscal 2016 (ended September 30, 2015) compared with ¥66.32 (61 cents) in the year-ago quarter. Earnings per share missed the Zacks Consensus Estimate of 63 cents. Consolidated net sales and other operating revenues escalated 15.6% year over year to ¥3.62 trillion ($30.19 billion). However, revenues fell short of the Zacks Consensus Estimate of $30.22 billion. The year-over-year increase can be attributed to higher revenues from all the businesses. For fiscal 2016, Honda expects revenues to increase 9.5% to ¥14.6 trillion ($123.7 billion) while operating income is likely to rise 2.1% to ¥685 billion ($5.81 billion). Another Japanese automaker, Toyota Motor Corporation (NYSE: TM ) posted earnings of ¥192.51 per share ($3.16 per ADR) in fiscal 2016 second quarter, compared with ¥170.54 per share ($3.28 per ADR) in the prior fiscal quarter. Earnings per ADR surpassed the Zacks Consensus Estimate of $3.09. The company’s consolidated revenues grew 8.4% year over year to ¥7.1 trillion ($58.2 billion) and outpaced the Zacks Consensus Estimate of $57.81 billion. However, Toyota lowered its consolidated revenue guidance to ¥27.5 trillion ($233.1 billion) from ¥27.8 trillion ($237.6 billion) for fiscal 2016. Nevertheless, the revenue guidance reflects a 1% improvement over fiscal 2015. The automaker’s net earnings are expected to be around ¥2.25 trillion ($19.1 billion) or ¥713.76 per share ($12.10 per ADR), reflecting an expected 3.5% improvement over fiscal 2015. Due to better-than-expected earnings, most of the auto stocks have been posting gains following their results. In fact, the exclusive auto ETF, the NASDAQ Global Auto Index Fund (NASDAQ: CARZ ) – which has a sizable exposure to the above mentioned stocks – returned more than 3% (as of November 6, 2015) since General Motors released its quarterly results on October 21. Let us take a look at this ETF in detail, which is expected to post gains in the coming days as well. CARZ in Focus This ETF tracks the NASDAQ OMX Global Auto Index, having exposure to automobile manufacturers across the globe. The product holds 37 stocks in the basket with General Motors, Ford, Toyota and Honda placed among the top five holdings with a combined allocation of nearly one-third of fund assets. In terms of country exposure, Japan takes the top spot at 36.3% while the U.S. takes the second spot having a 23.9% allocation, followed by Germany and South Korea with 16.4% and 8.8% allocations, respectively. The ETF is neglected with $40.8 million in AUM and sees light trading volume of around 9,000 shares. The product is a bit expensive with 70 bps in annual fees and currently has a Zacks ETF Rank #2 (Buy) with a High risk outlook. Link to the original post on Zacks.com

Lipper Fund Flows: Mass Exit For Money Market Funds

By Patrick Keon Lipper’s fund macro-groups (including both mutual funds and exchange-traded funds [ETFs]) suffered net outflows for the first time in five weeks, with over $8.1 billion leaving their coffers during the fund-flows week ended Wednesday, November 4. Money market funds (-$13.8 billion) accounted for the majority of the net outflows, while taxable bond funds (-$100 million) also posted negative numbers. Equity funds (+$5.7 billion) and municipal bond funds (+$63 million) both had net inflows for the week. The S&P 500 Index (+0.57%) and the Dow Jones Industrial Average (+0.50%) both recorded positive performance numbers for the trading week. These numbers capped a month in which both indices recorded their largest monthly percentage increases since October 2011; the Dow was up 8.5% for October, while the S&P 500 appreciated 8.3% for the month. October’s stellar performance came on the heels of two consecutive down months that saw the S&P 500 give back 8.9% in total and the Dow retreat 8.0%. October’s rally could be largely attributed to the easing of global growth fears (which were the main impetus for the meltdown of the prior two months), thanks to the European Central Bank’s indicating it is considering more quantitative easing and China’s economy looking more stable. The Federal Reserve continued to jawbone the market with additional hawkish comments about the potential for an interest rate hike in December. Despite data suggesting a cooling economy should weigh against any moves in December (weak third quarter GDP of 1.5%, a drop in pending home sales for the second consecutive month, and consumer spending recording its smallest increase in eight months), Federal Reserve Chair Janet Yellen continued to prepare the market for a possible rate increase next month. Yellen stated that a rate hike in December would not inhibit the recovery and continued to point to low unemployment and growth in the inflation rate as the key determining factors. This past week’s net outflows for money market funds (-$13.8 billion) were largely attributable to institutional money market funds (-$14.1 billion). The week marked the second week in the last three the group has suffered net outflows. Similar to the prior week, equity ETFs were once again responsible for the overwhelming majority of the net inflows (+$4.0 billion) for the equity group, while equity mutual funds did increase their contribution to $1.7 billion. On the ETF side, Lipper’s Financial Services Funds (+$1.3 billion) and Science & Technology Funds (+$814 million) classifications were the largest contributors to the positive flows, while for mutual funds nondomestic equity funds (+$931 million) accounted for slightly more of the net inflows than did domestic equity funds (+$791 million). Mutual funds were responsible for all the net inflows for taxable bond funds (+$1.5 billion), while ETF products saw over $1.6 billion of net outflows. Lipper’s High Yield Funds and Core Bond Funds classifications (+$1.2 billion and +$494 million, respectively) recorded the two largest net inflows on the mutual fund side. For ETFs two Treasury products had the largest individual net outflows: iShares 1-3 Year Treasury Bond ETF ((NYSEARCA: SHY ), -$1.1 billion) and iShares 7-10 Year Treasury Bond ETF ((NYSEARCA: IEF ), -$247 million). Municipal bond mutual funds took in $53 million of net new money – for their fifth consecutive week of positive flows. Funds in Lipper’s national municipal bond fund classifications (+$30 million) contributed the most to the week’s net inflows.