Tag Archives: lists

Inside The Continued Surge In Sugar ETFs

The rally in sugar prices seems to be unstoppable when most of the other commodities are finding the going tough. Its days of a supply glut ended in late August when future prices touched the lowest point since 2008. Since then, raw sugar prices at New York Mercantile Exchange recovered nearly 40% to around 14 cents per pound as of October 27, 2015, despite a surprising 1.5% fall in Tuesday’s trading session. The recent strengthening of the U.S. dollar on the back of Eurozone and Chinese stimulus measures could not derail the greenback priced commodity off the track. In fact, Morgan Stanley (NYSE: MS ) predicted raw sugar prices on the New York exchange will average 15.2 cents per pound in the final quarter of 2015 and 17.3 cents per pound in 2016. The advantage lies primarily in adverse weather conditions across the globe causing supply bottlenecks. Brazil, the world’s largest sugar producer accounting for 40% of global exports, is expected to witness above-average rainfall linked to a strong El Nino in growing regions that could disrupt the harvest, leaving a chunk of cane left to cut. Moreover, biofuel mandates and modification in energy taxation in Brazil are prompting sugarcane processors to convert cane for ethanol production instead of raw sugar, limiting its supply in the world market. According to the Brazilian Sugarcane Industry Association, or Unica, ethanol production in south-central Brazil went up 2.6% year over year to 20.2 million kiloliters while sugar production dipped 7.2% to 23.2 million tons during the April-September period. India, the world’s second largest sugar producer, is also expected to trim sugar production due to El Nino-induced drought in the region. Per Indian Sugar Mills Association, India is likely to cut its sugar output by 5% to 28.3 million tons in 2015. Other major sugar producing countries such as Thailand and China are also hit by droughts and are expected to cut sugar output. According to the International Sugar Organization and U.K. sugar trading house Czarnikow, there will be a sugar shortage of roughly 3-5 million tons in the global market for the current crop marketing year, which began this month. These apart, there are other factors that are driving the sugar price rally. China, the world’s largest importer of raw sugar, recently released data that showed a robust 80% year-over-year hike in sugar imports in September to 656,000 tons. It was the highest recorded volume since 2013, as per data from Commerzbank . Further, a recent report from Commitment of Traders revealed that hedge funds have been betting on sugar at a lower-than-expected pace, indicating the availability of surplus money to aid further rallies. Riding on the continued surge in sugar prices, ETFs that are exposed to this soft commodity have been experiencing double-digit gains over the past one month (as of October 27, 2015). Below, we highlight three of those ETFs that investors should definitely consider to play the bullish sugar market. iPath Dow Jones-UBS Sugar Subindex Total Return ETN (NYSEARCA: SGG ) SGG tracks the Dow Jones-UBS Sugar Subindex Total Return Index, which provides the returns that are in an investment in the futures contracts on the commodity of sugar. The note has garnered nearly $60 million in assets and trades in a daily volume of roughly 54,000 shares on average. It charges 75 bps in annual fees. The note was up 18.1% in the past one month and has a Zacks ETF Rank #3 (Hold) with a High risk outlook. Teucrium Sugar Fund (NYSEARCA: CANE ) This ETF tracks the Sugar Futures index, which reflects the daily changes of a weighted average of the closing prices for three futures contracts for sugar that are traded on ICE Futures US. The fund is nearly overlooked as it has gathered nearly $4 million in assets and trades in a paltry volume of around 6,000 shares. However, the ETF is expensive, charging a hefty 176 bps in fees from investors per year. It was up 12.3% over the last one month and carries a Zacks ETF Rank #3 with a High risk outlook. iPath Pure Beta Sugar ETN (NYSEARCA: SGAR ) This is another sugar ETN by iPath and follows the Barclays Capital Sugar Pure Beta TR Index. The index consists of a single futures contract but it has a unique roll structure which selects contracts using the Pure Beta Series 2 Methodology. SGAR is also neglected with only $1.5 million in AUM and is thinly traded with average volume of nearly 2,000 shares. The note charges 75 bps in annual fees and was up 17.5% in the past one month. It also carries a Zacks ETF Rank #3 with a High risk outlook. Original Post

Coffee Prices Crumbling: What Is The ETF Impact?

We certainly enjoy sipping a warm cup of coffee to start the day but when it comes to green unroasted coffee, traders and farmers have no reason to rejoice. This is because their prices are down about 36% in the past one year (as of October 26, 2015) and is currently trading near its two-year low. Meanwhile, the December coffee contract, on the Inter Continental Exchange (ICE) Futures U.S. exchange, is down 41.7% in the last one year. There are three factors that added to the long rout in the coffee market. First is the depreciation of the Brazilian real against the dollar. The real was already under pressure due to rising inflation, an investment-grade rating downgrade by Standard and Poor’s and fears of economic recession. After a short respite at the beginning of this month, the real started depreciating again against the greenback amid growing concerns of a budget deficit (excluding interest payments) and other political woes. A weak real encourages exports of the greenback priced coffee from Brazil – the world’s largest producer – as farmers try to capture higher profits. This will lead to an oversupply in the global market and hurt prices. The second factor is the forecast of excessive rainfall in Brazil’s top coffee-growing state, Minas Gerais. Weather forecasts indicated monsoon rains in fall and the winter and normal rains during the crucial stage of pod development from mid-December to early February. This has erased fears of drought in the region – a primary factor that had caused a surge in coffee prices in early 2014 – and increased the possibility of a longer-than-expected crop season. Lastly, the move by the Columbian government to lower the benchmark on the quality of beans deemed fit for exports could add to the supply glut in the global market. The threat of a surplus production looms large despite the possibility of dry weather due to El Niño in the coffee-growing regions. The battering in coffee prices had an adverse impact on the funds tracking the coffee market. Below we highlight two ETNs that experienced more than a 4% fall in the past five days and more than a 40% slide in the past one year (as of October 26, 2015). iPath Dow Jones-UBS Coffee ETN (NYSEARCA: JO ) This ETN tracks the Dow Jones-UBS Coffee Subindex Total Return, providing the returns that are available through an investment in the futures contracts on the commodity of coffee. The note has garnered nearly $108 million in assets and trades in a solid volume of 167,000 shares on average. The product is expensive with 75 bps in annual fees. The note was down nearly 5% in the last five days and about 48% in the past one year. It has a Zacks ETF Rank #3 (Hold) with a High risk outlook. iPath Pure Beta Coffee ETN (NYSEARCA: CAFE ) This ETN follows the Barclays Capital Coffee Pure Beta TR Index, providing returns that are available through an investment in the futures contracts in the coffee markets. The index consists of a single futures contract but it has a unique roll structure which selects contracts using the Pure Beta Series 2 Methodology. CAFE is quite overlooked as it has gathered only $5 million in AUM and is thinly traded with an average volume of roughly 7,000 shares. This note also charges 75 bps in annual fees and lost 4% in the past five days and 44% in the last one year. It also carries a Zacks ETF Rank #3 with a High risk outlook. Original Post

Material ETFs Up On Dow Chemical, DuPont Earnings Beat

We are in the middle of the earnings season, and the materials sector is seemingly tempering the overall Q3 growth picture after energy. This is especially true as total earnings from 60.9% of the sector’s total market capitalization reported so far are down 26.8% on 21% revenue decline. Despite the earnings weakness, the sector is showing impressive performance, having gained an average 1.76% (average price difference between a day before and after the earnings announcement of a stock), per the Zacks Earnings Trend . In particular, Dow Chemical (NYSE: DOW ) and DuPont (NYSE: DD ) led the rally in the sector as both companies beat on their earnings. However, revenues remained weak and missed our estimates. DOW Earnings in Focus The largest U.S. chemical maker continued its streak of earnings beat for the eight consecutive quarter. Earnings per share came in at 82 cents, easily trumping the Zacks Consensus Estimate of 68 cents and improving from 72 cents earned a year ago. Healthy earnings were credited to the incredible performance by the Performance Plastics segment due to lower cost of raw materials like oil and natural gas. Revenues dropped 16% year over year to $12.04 billion and missed our estimate of $12.25 billion. EBITDA margin expanded 370 bps to 20%, representing the best third-quarter margin since 2005 even as a strong dollar took a toll on revenues. The company remained committed to cost reduction and efficiency programs that are likely to boost margins and shareholders returns in the coming quarters. It is selectively spinning off or selling its underperforming assets and gradually shifting to high-growth markets such as construction, packaging and automotive. Dow Chemical raised its quarterly dividend by 10% to 46 cents, taking the annualized dividend to $1.84 per share, which is the highest in the company’s history. This new dividend is payable on January 29 to shareholders of record on December 31. Driven by a solid earnings beat, shares of Dow Chemical has risen 8.2% to date post its earnings announcement on October 22. DD Earnings in Focus While DuPont crushed our earnings estimate due to cost-reduction initiatives, revenues and profits tumbled on a strong dollar, a soft agriculture business and weakness in emerging markets. The world’s second-largest seed maker reported earnings per share of 13 cents, which beat the Zacks Consensus Estimate by 3 cents but deteriorated from 39 cents from the year-ago quarter. Total revenue slipped 17% year over year to $4.9 billion and fell short of our $5.2 billion estimate. Cost reductions from operational redesign contributed 10 cents to third-quarter earnings and are expected to add 40 cents per share to the full-year bottom line. The action will further save $1.3 billion in annual costs by 2016, a year ahead of the earlier expectation, and an additional $1.6 billion by 2017 end. With its cost-cutting initiatives, the chemicals and seed producer maintained its 2015 earnings per share guidance of roughly $2.75, which was below the Zacks Consensus Estimate of $2.93 at the time of earnings release. It expects currency headwinds to dilute full-year earnings by 72 cents per share. Following the earnings announcement on October 27, DD shares climbed nearly 5% over the past two days. ETFs in Focus Solid price performance of these two chemical titans has led to a rally in material ETFs that are heavily invested in these two stocks. Though these funds have an unfavorable Zacks ETF Rank of 4 or ‘Sell’ rating, they have gained over 3.5% in the past five days and are on investors’ radar for the weeks ahead: Materials Select Sector SPDR (NYSEARCA: XLB ) The most popular material ETF follows the Materials Select Sector Index. This fund manages about $2.1 billion in its asset base and trades in heavy volume of around 6.1 million. The ETF charges 14 bps in fees per year from investors. In total, the fund holds about 30 securities in its basket with DOW and DD taking the top two spots, with nearly 11% allocation each. In terms of industrial exposure, chemicals dominates the portfolio with three-fourth share while metals & mining and containers & packaging round off the top three positions. iShares U.S. Basic Materials ETF (NYSEARCA: IYM ) This ETF tracks the Dow Jones U.S. Basic Materials Index and holds 54 stocks in its basket. The fund has AUM of $361 million and charges 43 bps in fees and expenses. Volume is good as it exchanges around 106,000 shares in hand a day. DOW and DD occupy the top two positions in the basket, with over 10% of assets each. The product is heavily skewed toward the chemical segment, as it makes up for more than three-fourths of the portfolio while steel, forestry & paper, metals & mining receive minor allocations. Vanguard Materials ETF (NYSEARCA: VAW ) This fund has amassed about $1 billion in its asset base and offers exposure to 121 stocks by tracking the MSCI US Investable Market Materials 25/50 Index. The ETF has 0.12% in expense ratio while volume is moderate at 75,000 shares. Here, DOW and DD are the top two firms accounting for nearly 6% share each. Chemicals make up for nearly 70% of assets while container & packaging and steel also make a nice mix in the portfolio. Fidelity MSCI Materials Index ETF (NYSEARCA: FMAT ) This fund provides exposure to 122 materials stocks with AUM of $51.1 million. This is done by tracking the MSCI USA IMI Materials Index. Here too, DOW and DD are the top two firms with nearly 8% allocation. Chemicals accounts for 69.7% share while container & packaging, and metals & mining round off the top three spots with double-digit exposure each. The ETF has 0.12% in expense ratio while volume is moderate at 80,000 shares a day. Original Post