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2 Metal ETFs To Buy For Q4

Metal ETFs were clearly out of investors’ favor for much of 2014 and have been unloved so far this year. The combination of a stronger greenback, a slumping China, the oil price rout and the adverse demand-supply imbalance have put a hold over several industrial metals in recent times. Since the Chinese economy accounts for about half of the global consumption of the industrial commodities, a steep slowdown in the country’s economy and a protracted downturn in its manufacturing sector mean reduced demand for commodities. While the commodity market is yet to show any definite sign of recovery, a trend reversal seems to be playing on the horizon. A diminishing supply glut, multi-year low metal prices and production cuts in the face of loss-making might open up opportunities for some metal ETFs. Also, investors are increasingly wagering on hopes of a solid monetary stimulus in China which in turn will shore up the manufacturing sector and fuel metal prices and the related ETFs. Given this, investors may want to consider cycling into the industrial metal space in order to obtain a momentum play and profit out of a beaten-down space. How to Pick Right ETFs? First, fundamentals need to be favorable, then investors can look at our Zacks ETF Rank. This system looks to find the best ETFs in a given market segment based on a number fundamental and technical factors about the ETF and the Zacks forecast for the underlying industry or asset class. Following this technique we at Zacks revised our ETF ranks recently and found out that two metal ETFs have been upgraded from #3 (Hold) #2 (Buy). Below we highlight these two metal ETFs: Aluminum Aluminum consumption is likely to surge helped by the automotive and packaging industries. The boom in the airline industry is also another catalyst in driving the price higher. Also, policy easing in China should play a major role as the economy accounts for over 40% of global aluminum consumption. iPath Pure Beta Aluminum ETN (NYSEARCA: FOIL ) The product focuses on the Barclays Capital Aluminum Pure Beta TR Index. The index consists of a single futures contract but has a unique roll structure which selects contracts using the Pure Beta Series 2 Methodology. This strategy looks to limit the impact of contango while at the same time provides the collateralized return from U.S. T-Bills. The product has amassed about $1.6 million in assets and trades in paltry volumes of 500 shares a day. The product charges 75 bps in fees. FOIL was up over 4.5% in the last one month (as of September 25, 2015). Dow Jones-UBS Aluminum Total Return Sub-Index ETN (NYSEARCA: JJU ) This ETN delivers returns through an unleveraged investment in the futures contracts on aluminum and currently consists of one futures contract on the commodity. The product trades in a paltry volume of about 1,000 shares daily on average and has amassed $2.2 million in AUM. Expense ratio comes in at 0.75%. The product gained over 0.1% in the last one month. Nickel A fear of supply shortage could push up nickel price in Q4. Brazil’s giant producer expects the price to rebound in the last quarter brining about the ‘strongest performance’ since the start of 2015. GMK Norilsk Nickel PJSC, the world’s second-largest producer of nickel and Russia’s biggest mining company, ticked up its metal deficit forecast on a further cut in production. A significant reduction in LME inventory can be considered as a cue for a stable nickel market going forward. Plus, Indonesia’s decision to carry on the ban on exporting unprocessed ores would support the nickel price recovery. Notably, Indonesia is the world’s biggest producer and exporter of nickel, and accounts for 18-20% of global supply. iPath Pure Beta Nickel ETN (NYSEARCA: NINI ) This note seeks to match the performance of the Barclays Capital Nickel Pure Beta Total Return Index. Unlike many commodity indexes, this product can roll into one of a number of futures contracts with varying expiration dates, as selected, using the Barclays Pure Beta Series 2 Methodology. The ETN manages just $0.8 million in its asset base and sees light volume of about 1,500 shares a day, suggesting additional cost beyond the annual fee of 75 bps per year. The note was down 2.4% in the last one month (as of September 25, 2015). iPath Dow Jones-UBS Nickel Subindex Total Return (NYSEARCA: JJN ) This ETN tracks the Dow Jones-UBS Nickel Subindex Total Return. The index delivers returns through an unleveraged investment in the futures contracts on nickel and currently consists of one futures contract on the commodity. The product is a bit expensive as it charges 75 bps in fees per year. It trades in a paltry volume of nearly 5,000 shares daily on average that increases the trading cost in the form of a wide bid/ask spread. The fund is also unpopular and has attracted just $6.3 million in AUM. JJN lost 0.8% in the last one month. Original Post

Will The Labor Market Bring Down GLD?

Summary Demand for gold has come down in the past quarter. Russia and China have recorded huge losses due to their purchases of gold in the past year. But the big question will remain what’s next for the demand for gold as an investment. It will all boil down to the Fed and the timing of raising rates. The price of GLD could come down in the short run, if the NFP report shows a stronger-than-expected gain. Even though the gold market hasn’t done well this year, shares of SPDR Gold Trust (NYSEARCA: GLD ) remained nearly flat in the past month. The Fed’s decision to keep rates unchanged, the rally of the U.S. dollar and the fall in long-term U.S. treasury yields in the past month have dragged the price of GLD in different directions. The demand for gold continues to fall with Russia and China recording huge losses for their gold positions. Nonetheless, demand for gold in ETFs such as GLD will keep falling if the U.S. economy shows signs of a recovery that will bring the Fed closer to raise rates. Russia and China, among the two largest buyers of gold in recent years, have caused these countries to lose around $5.4 billion, according to Bloomberg . Russia has increased its gold reserves by more than 10% since the beginning of year. But the ongoing fall in gold prices may lead these countries to curb down their purchases of gold. In any case, gold consumption continues to fall: According to the Gold Council, total gold demand declined by 12% in Q2 2015, year on year. Most of the drop in demand came from jewelry and bars. ETFs kept selling off gold. Further, GLD’s gold hoards fell by nearly 4% since the beginning of the year. Source of data: Gold Council Looking forward, the main event of the week will be the release of the non-farm payrolls report. In the past, this report (the difference between NFP jobs gains and market expectations) tended to move the price of GLD, as presented in the table below. (click to enlarge) Source of data: U.S. Bureau of Labor Statistics and Google finance Last month, the employment report presented a 173,000 gain in jobs, which was below market expectations. And still GLD prices slightly declined. This time, the market estimates a gain of 202,000 jobs. If the report were to present a greater-than-expected gain in jobs, this could result in fall in GLD prices. The report will be among the last three for the year. And they could bring the Fed closer towards raising rates in December. If the report presents another gain of below 200,000 in jobs and annual growth in wages – which is also a concern for the Fed – remains in the 1.9%-2.3% range, as it did in the past year, the odds of raising rates will keep falling. For now, the implied probabilities for a rate hike in October remain very low at 11%; for December the probabilities are only 35%. So the market remains unconvinced about the Fed’s intent to raise rates, despite the recent speech Yellen gave, in which she stated again that she and her colleagues at the FOMC expected to see a rate hike this year. The gold market remains stagnant, as the market isn’t convinced what’s up ahead for the Fed’s policy. The U.S. dollar’s recovery, which, in part, relates to the grim global economic outlook, is keeping down the price of GLD. But, as the Fed delays its rate hike, the gold market stays put for now. If we were to see stronger-than-expected jobs report, however, the tides could turn and the odds of a rate hike could rise, which may fuel additional selloff in gold. For more, please see” GLD Continues to lose its appeal ”

Ill At Ease With Biotech? Prescribing #1 Healthcare ETFs

The recent carnage in biotech investing seems more vicious than anticipated. This hot corner of the broad U.S. healthcare market has seen many a correction before, but none seemed as rigorous as it looks now. The recent rout was instigated merely by a tweet – by presidential candidate Hillary Clinton. Her tweet raised concerns over the over pricing on life-saving drugs. Questions over biotech pricing 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 gigantic leap in pricing action was taken by a privately held biotech company Turing Pharmaceuticals (read: How Hillary Clinton Crushed Biotech ETFs with One Tweet ). Pricing issues in the biotech space has long been a concern. 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. This along with overvaluation concerns led to a bloodbath in this otherwise soaring sector last week. In fact, growing pains for biotech investing led the biggest related ETF iShares Nasdaq Biotechnology ETF (NASDAQ: IBB ) to incur the largest weekly loss in seven years. Plus, investors should note that biotech stocks underperformed the broader market during the last four election cycles, as noted by Barrons.com . 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% loss incurred by the NASDAQ Biotech index during last four election phases. In such a scenario, it is wise to take some rest off biotech stocks and ETFs, and instead spin your attention toward the more stable but equally promising broader healthcare ETFs (read: Guide to Inverse & Leveraged Biotech ETF Investing ). Why Broader Healthcare? The broader healthcare sector is also loaded with potential. A whirlwind of mergers and acquisitions, promising industry fundamentals, plenty of drug launches, growing demand in emerging markets, ever-increasing healthcare spending and Obama care play major roles in making it a lucrative bet for the long term. Moreover, unlike biotech, healthcare ETFs are relatively defensive in nature and do not completely let investors down even in a broader market sell-off. In the latest biotech tumult, when ETFs like the SPDR Biotech ETF (NYSEARCA: XBI ) , the ALPS Medical Breakthroughs ETF (NYSEARCA: SBIO ) and the BioShares Biotechnology Clinical Trials ETF (NASDAQ: BBC ) retreated in the range of 6% to 8% on September 25, most broader healthcare ETFs lost in the range of 2% to 3%. As a result, Zacks Rank #1 (Strong Buy) healthcare ETFs could be in watch ahead, at least until the penchant for biotech investing returns. Investors should note that the following healthcare ETFs hold a Zacks ETF Rank #1. PowerShares S&P SmallCap Health Care Portfolio ETF (NASDAQ: PSCH ) This ETF has delivered a spectacular performance in the broad healthcare world, returning nearly 25% so far this year and losing just 2.4% in the last one month overruling the biotech woes (as of September 25, 2015). The fund offers concentrated exposure to small cap healthcare securities. It holds 74 securities in its basket, with each security holding less than 4.61% share. From an industry perspective, about one-third of the portfolio is allotted toward healthcare equipment and supplies, followed by healthcare providers and services (28.3%) and pharmaceuticals (15.7%). The ETF has amassed $268.5 million in assets and trades in a lower volume of about 40,000 shares per day, while charging a relatively low fee of 29 bps a year. The fund continues to hold a Zacks ETF Rank #1 with a High risk outlook. SPDR S&P Health Care Equipment ETF (NYSEARCA: XHE ) This product looks to track the S&P Health Care Equipment Select Industry Index. Holding 73 stocks in its basket, each security accounts for less than 1.73% of total assets. This is often an overlooked fund with AUM of $51 million and average daily volume of about 5,000 shares. From an industry look, healthcare equipment accounts for over three-fourth of the portfolio while healthcare supplies have a considerable allocation. The product charges 35 bps in annual fees. XHE gained about 18.6% in the last one year and lost 4.2% in the last one month. It was also upgraded from Zacks Rank #3 (Hold) to Rank #1 in our latest Rank updates. iShares U.S. Medical Devices ETF (NYSEARCA: IHI ) This ETF follows the Dow Jones U.S. Select Medical Equipment Index with exposure to medical equipment companies. In total, the fund holds 52 securities in its basket with major allocations going to Medtronic Plc (NYSE: MDT ) and Abbott Laboratories (NYSE: ABT ) at 14.5% and 710.7%, respectively. The fund has been able to manage about $708 million in its asset base while volume is moderate at about 100,000 shares per day on average. It charges 45 bps in annual fees and expenses. This ETF was also upgraded from a Zacks ETF Rank #3 to Rank #1 recently. The product added 12.6% in the last one year and could be a nice pick for Q4. In the last one month, the fund lost 5.8% which was much lower than double-digit losses incurred by biotech ETFs. Link to the original article on Zacks.com