Tag Archives: management

5 ETFs For Loads Of Holiday Shopping Delight

The holiday season saw a gala start on an e-commerce bonanza. Smartphones and special deals on apps took charge of the shopping scene, with brick-and-mortar retail sales clearly losing steam. The Thanksgiving weekend, Black Friday and especially Cyber Monday demonstrate the growing popularity of mobile shopping and changing consumer habits. Further, strengthening of U.S. economic activities and a slew of upbeat economic data, especially on the job, auto and housing fronts, provide strong support to the holiday season, though consumer confidence has been shaky. Recap of Thanksgiving Weekend and Cyber Monday According to RetailNext, brick-and-mortar sales fell 4.7% to $20.4 billion over the four-day Thanksgiving weekend, while it dropped 10.4% year over year, as per ShopperTrak. Meanwhile, online sales grew 25.2% year over year during the weekend, as per IBM, and 25% on Thanksgiving Day and 14% on Black Friday, with combined sales of $4.45 billion, as per Adobe. After a massive surge in online sales on Black Friday, Cyber Monday once again became the heaviest online spending day ever, exceeding over $3 billion in sales for the first time. Online sales jumped 21% from last year and hit $3.12 billion for the first time, as per web analytics firm ComScore . Total online spending climbed 15% to $11 billion from Thanksgiving Day through Cyber Monday (November 26 to 30), according to Adobe. Most of the spending came from mobile devices, suggesting that mobile shopping is on the rise. Sluggish Consumer Sentiment The Consumer Confidence Index measured by the Conference Board – a barometer of the U.S. consumer health – dropped to its lowest level in a year to 90.4 in November from a revised 99.1 in October. On the other hand, the Thomson Reuters/University of Michigan index of consumer sentiment increased to 91.3 for November from 90 in October. The number was well below the Wall Street Journal expectation of 93.0 and preliminary reading of 93.1 recorded in mid-November. This shows that retailers might struggle to win customers this holiday season. U.S. on Track to Modest Growth Amid sluggish consumer confidence, the U.S. economy is showing impressive growth after a lazy summer. Though the manufacturing sector shrank for the first time in three years in November on a weak global economy and a strong dollar, robust automobile sales and construction spending suggest the economy is on a firmer footing. This is especially true as the economy expanded at a solid clip of 2.1% annually in the third quarter, up from the initial estimate of 1.5%, and was followed by 3.9% growth in the second quarter. The solid growth was driven by cheap fuel and greater job security. Hiring came in stronger than expected for November, reflecting back-to-back months of job growth. In particular, the economy added 211,000 jobs in November, much above the market expectation of 200,000, and unemployment remained at a seven-and-half year low of 5%. Further, the pace of hiring in October and September was stronger than previously expected. Average hourly wages rose by four cents last month, following a nine-cent increase in October. Apart from these, a gradual recovery in the housing market as well as stepped-up service activities are propelling the U.S. economy, setting the scene for a decent holiday season. As a result, the National Retail Federation (NRF) expects total holiday sales in November and December (excluding autos, gas and restaurant) to grow at a solid pace of 3.7%. Though this marks a deceleration from last year’s growth rate of 4.1%, it is well above the 10-year average of 2.5%. Online sales are projected to grow 6-8% to $105 billion. As per research firm Forrester, consumers will spend $95 billion this year, up 11% from last year, with mobile shopping playing a crucial role. ComScore expects online sales to jump 14% year over year to $70.06 billion for the full holiday season (November and December), outpacing the growth of brick-and-mortar retail sales. ETFs to Buy Given holiday optimism and a digital shopping boom, stocks and ETFs in the Internet and consumer space look poised for solid gains this month. Investors could tap this opportunity in a diversified way with the help of following ETFs. Each of these products have a solid Zacks ETF Rank of 1 (Strong Buy) or 2 (Buy), and have retuned handsomely over the past 10 days, making them compelling for the holiday season (see all the Consumer Discretionary ETFs here ). Market Vectors Retail ETF (NYSEARCA: RTH ) This fund provides exposure to the retail segment of the broad consumer space by tracking the Market Vectors US Listed Retail 25 Index. It holds about 26 stocks in its basket, with AUM of $142.2 million, while the average daily volume is light at around 75,000 shares. Expense ratio came in at 0.35%. It is a large-cap centric fund, and is heavily concentrated on the top firm Amazon (NASDAQ: AMZN ) with 14.6% share, closely followed by Home Depot (NYSE: HD ) at 8.4%. Sector-wise, specialty retail occupies the top position with 29% share, followed by a double-digit allocation each to Internet and catalogue retail, hypermarkets, drug stores, and healthcare services. The product has added 3.8% over the past 10 days and has a Zacks ETF Rank of 1. SPDR S&P Retail ETF (NYSEARCA: XRT ) This product tracks the S&P Retail Select Industry Index, holding 104 securities in its basket. It is widely spread across each component, as none of these holds more than 1.36% of total assets. Small cap stocks dominate about two-thirds of the portfolio, while the rest have been split between the other two market cap levels. In terms of sector holdings, apparel retail takes the top spot with 21.7% share, while specialty stores, automotive retail, and Internet retail also have double-digit allocation each. XRT is the most popular and actively traded ETF in the retail space, with AUM of about $714 million and average daily volume of more than 4.1 million shares. It charges 35 bps in annual fees and has gained 3.3% over the past 10 days. The fund has a Zacks ETF Rank of 1. PowerShares Nasdaq Internet Portfolio ETF (NASDAQ: PNQI ) This fund follows the Nasdaq Internet Index, giving investors exposure to 94 Internet stocks. It is moderately concentrated on the top 10 holdings, with Amazon, Alphabet (NASDAQ: GOOGL ) and Facebook (NASDAQ: FB ) taking the top three spots in the basket, with at least 8% share each. Internet software and services makes for nearly 56% share in the basket, while Internet and catalog retail takes 39% share. The product has amassed $260.8 million in its asset base, while trades in lower volume of about 25,000 shares per day, on average. Expense ratio came in at 0.60%. PNQI added about 3% in the same time frame and has a Zacks ETF Rank of 2. PowerShares DWA Consumer Cyclicals Momentum Portfolio ETF (NYSEARCA: PEZ ) This product targets the broad consumer space by tracking the DWA Consumer Cyclicals Technical Leaders Index. It holds 38 stocks having positive relative strength (momentum) characteristics, with none holding more than 5.4% of assets. This approach results in a large cap tilt at 43%, followed by 33% in mid caps and the rest in small. About 29% of the portfolio is dominated by specialty retail, while hotel restaurants and leisure, textiles apparel and luxury goods, and airlines round off the next three positions with double-digit exposure each. The fund has managed $274.5 million in its asset base, while it trades in lower average daily volume of 57,000 shares. It charges 60 bps in annual fees, and has added about 1.7% over the past 10 days. The fund has a Zacks ETF Rank of 1. First Trust Consumer Discretionary AlphaDEX ETF (NYSEARCA: FXD ) This follows an AlphaDEX methodology and ranks stocks in the consumer space by various growth and value factors, eliminating the bottom-ranked 25% of stocks. This approach results in a basket of 129 stocks that are well spread out across each security, with none holding more than 1.7% of assets. About 50% of the portfolio is focused on mid cap securities, with specialty retail being the top sector, accounting for nearly one-fourth of the portfolio, closely followed by media (16%). FXD is one of the popular and liquid ETFs in the consumer discretionary space, with AUM of $2.4 billion and average daily volume of 462,000 shares per day. It charges a higher 63 bps in annual fees and has gained 1.5% over the past 10 days. The product has a Zacks ETF Rank of 1. Original Post

HYG Junk Bond ETF Continues Lower As Oil Prices Fall

The high-yield junk bond ETF (NYSEARCA: HYG ) continues to trend lower, and Monday’s drop of 0.7% left it at a new multi-year low. As HYG’s price moves lower, its yield moves higher, but at 5.8%, the yield is still half of what it was at the start of the equity bull market in early 2009. Investors look for the “risky” equity market to trend in the same direction as the junk bond market, but clearly that hasn’t been the case over the last 18 months or so. As “junk” has fallen, the S&P 500 has continued to trend slightly higher. The reason is because of the drop in oil prices. High-yield debt in the Energy sector accounts for a large portion of the drop in the broad high-yield debt market, but stock price drops in the Energy sector haven’t been enough to move the needle significantly lower for the broad S&P 500. Below is a chart of the price of oil compared to the HYG junk-bond ETF. They have tracked each other very closely recently. We covered this topic in more detail in Monday’s Chart of the Day (subscription required). (click to enlarge)

Is Abenomics 2.0 Boosting Japan Mutual Funds?

In late September, Japanese Prime Minister Shinzo Abe had announced the second stage of his popular Abenomics plan. The “stage two” plan is aimed to resuscitate the Japanese economy. Among other things, the goal is to boost Japan’s gross domestic product by a significant 20% to $5 trillion by 2020. Following this, Japan Stock mutual funds have gained relatively well. In October, the sector gained 7.9% and in November Japan stock funds added 1.3%, which helped it to finish among the top gainers for the month. Morningstar data also shows that Japan Stock funds are leading one-month gains currently. Abe unveiled a new set of economic initiatives, which he dubbed as “Abenomics 2.0.” He promised to take Japan into a new era of prosperity. His proposals have, however, been met with both bouquets and brickbats. Some economists and market watchers have questioned the viability of the proposals. For instance, executives from leading business lobby termed Abe’s numerical targets as “outrageous” and “impossible.” During the first phase of Abenomics, Japan’s benchmark, Nikkei 225, had shown a significant uptrend. Though it is too early to predict whether the new targets are already having a positive impact, Nikkei 225 has gained 4.5% since Sept. 29. The focus once again shifts to Japan mutual funds, which were topping the charts earlier this year before stumbling in the third quarter. Japan’s economic situation is not as fragile as is widely believed. So, it’s not a bad idea to pick Japan mutual funds which are poised to benefit under existing conditions and will gain further as the economy continues to gather steam. Abenomics 2.0: The Three Arrows Abe outlined several new policy measures late last month, which he calls “Abenomics 2.0.” Abe spoke of new targets or his new “three arrows”: achieving a higher GDP over the next five years, providing support for child care and better social security. The last two are aimed at improving child rearing and care for the elderly for economically distressed families. Abe also aims to boost social security by offering care to the nearly 150,000 people who are slated to enter nursing homes. He also said that he would increase employment opportunities for the retired. Several prominent newspapers and economists have questioned where Abe will find the resources to fuel the last two initiatives. Has There Been A Positive Trend? Market watchers and economists have also pointed to the fact that several of Abe’s initial targets are still unfulfilled. Others question the efficacy of the first phase of Abenomics and have argued that only the monetary policy has proven to be effective. However, an assessment of the state of Japan’s economy by the Financial Times tells us a different story. The study has praised Abenomics’ record on improving corporate governance standards. The objective of these changes has been to increase return on equity and raise the number of independent directors. The ability to push through reforms in the agricultural sector has also been praised. Japan’s unemployment rate of 3.3% is much lower than several developed economies. Real monthly wages recorded their first yearly increase in July in more than two years. Additionally, the average wage increase for fiscal 2015 is 2.2%, the highest level achieved in 17 years. Japan Mutual Funds Japan Stock fund category had emerged as the best gainer in the first half of 2015. The market rout since then has dragged down major categories. However, Japan funds were less affected than its neighboring regions. Japan funds are up nearly 14% year to date, according to Morningstar. This is the best year-to-date gain so far among all fund categories. Banking on the optimism, investors interested in investing in Japan region may bet on the following three mutual funds. These funds carry either a carry a favorable Zacks Mutual Fund Ranks. The following funds carry either a Zacks Mutual Fund Rank #1 (Strong Buy) or Zacks Mutual Fund Rank #2 (Buy) as we expect the 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. The minimum initial investment is within $5,000. These funds are in the green over year to date and one-year periods. The three- and five-year annualized returns are also favorable. Fidelity Japan Smaller Companies Fund No Load (MUTF: FJSCX ) seeks capital appreciation over the long term. It invests most of its assets in Japanese securities or other instruments economically connected with Japan. FJSCX invests in securities of companies with market cap similar to those listed in Russell/Nomura Mid-Small Cap Index or the Japanese Association of Securities Dealers Automated Quotations (JASDAQ) Index. Fidelity Japan Smaller Companies currently carries a Zacks Mutual Fund Rank #1. FJSCX has gained 13.7% and 13.5% over year-to-date and one-year periods, respectively. The three- and five-year annualized returns are respectively 18.7% and 12%. Annual expense ratio of 1% is lower than the category average of 1.43%. T. Rowe Price Japan Fund No Load (MUTF: PRJPX ) invests a lion’s share of its assets in companies located in Japan. The fund invests in companies of all sizes and across Japanese industries. Managers use a bottom-up stock selection process while also being aware of industry outlooks. T. Rowe Price Japan currently carries a Zacks Mutual Fund Rank #1. PRJPX has gained 16% and 11.7% over year-to-date and one-year periods, respectively. The 3- and 5-year annualized returns are respectively 12.7% and 7.8%. Annual expense ratio of 1.05% is lower than the category average of 1.43%. Rydex Japan 2x Strategy Fund A (MUTF: RYJSX ) seeks to give returns that correspond to two times the performance of the fair value of the Nikkei 225 Stock Average. RYJSX invests in common stocks having market capital within the range of those listed in the index. RYJSX invests a lion’s share of its assets in securities that have the potential to return two times the performance of the underlying index. Rydex Japan 2x Strategy Fund Class A currently carries a Zacks Mutual Fund Rank #2. RYJSX has gained 20.3% and 11.8% over year-to-date and one-year periods, respectively. The three- and five-year annualized returns are respectively 20% and 6.8%. Annual expense ratio of 1.54% is lower than the category average of 2.03%. Original post