Tag Archives: nasdaq

How To Bake A Highly Deficient Cake

What happens when you leave out a key ingredient in the recipe for baking a cake? We won’t keep you in suspense. What you get is a highly deficient cake, but how it is highly deficient can tell you quite a lot about what the omitted ingredient contributes to a competently executed cake! At Bristol Science Centre, Nerys and David illustrate what we can learn by baking four different cakes – one batch with all the ingredients the basic recipe calls for, then other batches where either the margarine, eggs or baking powder has been excluded from the recipe. The following video illustrates how the resulting cakes baked with a single missing ingredient differ from a proper cake baked with all the ingredients. The same principle applies to data analysis. For instance, if a set of economic data omits the contributions of one particular sector of the economy, and that sector turns out to contribute a large share to the performance of the overall economy, the analysis produced using such data that excludes the omitted sector’s contribution will be highly deficient, because the data itself is not adequately representative of the economy being analyzed. Much like what happens when you bake a cake without one ingredient and compare it with a cake baked with all of them, the deficiency becomes very evident when you compare the results of the deficient analysis with the results of analysis performed with data that does not omit the missing sector’s contributions. If a professional baker omitted an ingredient in a cake recipe, then their competence would certainly be at issue. If they weren’t aware that the ingredient was missing, it might all be chalked up to simple ignorance on their part – the kind of mistake that many of us all make from time to time, that we acknowledge, learn from and do not repeat. But if they were aware of the deficiency and then went on to claim that the results of their deficient recipe were just the same as a properly baked cake, then their integrity would certainly also be at issue. We wonder how many people would continue to buy the “cakes” of such a highly deficient professional baker!

Best And Worst Q1’16: Small Cap Growth ETFs, Mutual Funds And Key Holdings

The Small Cap Growth style ranks last out of the twelve fund styles as detailed in our Q1’16 Style Ratings for ETFs and Mutual Funds report. Last quarter , the Small Cap Growth style ranked eleventh. It gets our Dangerous rating, which is based on aggregation of ratings of 12 ETFs and 451 mutual funds in the Small Cap Growth style. See a recap of our Q4’15 Style Ratings here. Figures 1 and 2 show the five best and worst-rated ETFs and mutual funds in the style. Not all Small Cap Growth style ETFs and mutual funds are created the same. The number of holdings varies widely (from 28 to 1873). This variation creates drastically different investment implications and, therefore, ratings. Investors seeking exposure to the Small Cap Growth style should buy one of the Attractive-or-better rated mutual funds from Figure 2. Figure 1: ETFs with the Best & Worst Ratings – Top 5 Click to enlarge * Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity. Sources: New Constructs, LLC and company filings The AlphaMark Actively Managed Small Cap ETF (NASDAQ: SMCP ) and the First Trust Small Cap Growth AlphaDEX Fund (NYSEARCA: FYC ) are excluded from Figure 1 because their total net assets are below $100 million and do not meet our liquidity minimums. Figure 2: Mutual Funds with the Best & Worst Ratings – Top 5 Click to enlarge * Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity. Sources: New Constructs, LLC and company filings The Smith Group Small Cap Focused Growth Fund (MUTF: SGSNX ) (MUTF: SGSVX ) and the World Funds Trust: Toreador Explorer Fund (MUTF: TMRZX ) (MUTF: TMRLX ) are excluded from Figure 2 because their total net assets are below $100 million and do not meet our liquidity minimums. The SPDR S&P 600 Small Cap Growth ETF (NYSEARCA: SLYG ) is the top-rated Small Cap Growth ETF and the PNC Small Cap Fund (MUTF: PPCIX ) is the top-rated Small Cap Growth mutual fund. SLYG earns a Neutral rating and PPCIX earns an Attractive rating. The iShares Russell 2000 Growth ETF (NYSEARCA: IWO ) is the worst-rated Small Cap Growth ETF and the PACE Small/Medium Co Growth Equity Investments (MUTF: PQUAX ) is the worst-rated Small Cap Growth mutual fund. IWO earns a Neutral rating and PQUAX earns a Very Dangerous rating. Credit Acceptance Corp (NASDAQ: CACC ) is one of our favorite stocks held by PPCIX and earns a Very Attractive rating. Over the past decade, Credit Acceptance Corp has grown its after-tax profit ( NOPAT ) by 19% compounded annually. Over this same time, Credit Acceptance has improved its return on invested capital ( ROIC ) from 11% to a top quintile 26%. Despite the improvement in business fundamentals, CACC remains undervalued. At its current price of $210/share, CACC has a price-to-economic book value ( PEBV ) ratio of 0.8. This ratio means that the market expects Credit Acceptance Corp’s NOPAT to permanently decline by 20%. If CACC can grow NOPAT by just 9% compounded annually for the next decade , the stock is worth $437/share today – a 108% upside. Beacon Roofing Supply (NASDAQ: BECN ) is one of our least favorite stocks held by PQUAX and earns a Very Dangerous rating. Over the past decade, Beacon’s economic earnings have declined from $8 million to -$11 million and have been negative for each of the past three years. Beacon’s ROIC has fallen from 12% in 2005 to a bottom quintile 4% over the last twelve months. Given the business struggles at Beacon, its stock price looks significantly overvalued. To justify its current price of $38/share, BECN must grow NOPAT by 15% compounded annually for the next 16 years . Those expectations look awfully high compared to the company’s recent declines in profits. Figures 3 and 4 show the rating landscape of all Small Cap Growth ETFs and mutual funds. Figure 3: Separating the Best ETFs From the Worst Funds Click to enlarge Sources: New Constructs, LLC and company filings Figure 4: Separating the Best Mutual Funds From the Worst Funds Click to enlarge Sources: New Constructs, LLC and company filings D isclosure: David Trainer and Kyle Guske II receive no compensation to write about any specific stock, style, or theme. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Rate Cut Puts New Zealand ETF In Focus

Taking cues from global growth worries, the Central Bank of New Zealand surprisingly cut interest rates to a new record low on March 9 and hinted at additional easing, if need be. The move followed the bandwagon of global policy easing, especially in the developed world to boost economic growth and inflation. The central bank of New Zealand slashed its official cash rate by 25 bps to 2.25% to counter threats emanating from soft global growth mainly around China and the Eurozone. Also, uncertain global financial markets, the commodity market rout, a struggling dairy sector – one of the key contributors to the country’s GDP – and troubles in the housing market led the bank to ease its policy unexpectedly, per tradingeconomics . Prior to this, the bank had lowered its key interest rate by 25 bps in December 2015. Consumer prices in New Zealand nudged up 0.1% year over year in the fourth quarter of 2015, missing market expectations and marking the lowest level since the third quarter of 1999. This raised concerns among policy makers. Super accommodative monetary policies from Japan to the Eurozone made the New Zealand dollar stronger and kept consumer prices below the target range of 1-3%, per Bloomberg . So, a rate cut is essential to attain the 2% inflation goal by early 2018. Investors should note that New Zealand became the first nation in the developed world to raise its benchmark interest rate in March 2014. This was followed by three more hikes to 3.5% till July 2014. However, the trend reversed from June 2015 when the central bank resorted to a 25 bp rate cut to 3.25%. Market Impact The New Zealand dollar soon lost strength against the greenback following the announcement, though by 0.2% in one day (as of March 9, 2016). While a rate cut is normally viewed as a step forward in expediting growth and boosting the stock market, we are uncertain about how much return can be reaped by the strategy that New Zealand has adopted. It is true that many other developed economies are presently practicing way more accommodative policies. But they haven’t been able to make a jumpstart in their growth goals. Still, the move was probably necessary to give export a boost. The coming few days should go in favor of the New Zealand stock market. All these possibilities definitely turn our attention to the only pure-play ETF on this nation – the iShares MSCI New Zealand Capped ETF (NYSEARCA: ENZL ) . ENZL in Focus This ETF tracks the MSCI New Zealand Investable Market Index, giving investors exposure to 29 stocks. The product is not immensely popular with an asset base of $69.1 million and trading volume of about 35,000 shares per day. It charges investors 47 bps in annual fees. The fund is not widely spread across individual securities. It puts nearly 65% of the assets in the top 10 holdings with Auckland International ( OTCPK:AUKNY ), Spark New Zealand Ltd (NXTCY) and Fletcher Building ( OTCPK:FCREY ), taking the top three positions. The trio makes up for a combined 30% share. From a sector perspective, utilities, healthcare, industrials, telecom, consumer discretionary and materials receive a double-digit allocation each. In terms of performance, ENZL is up about 1.5% so far this year (as of March 8, 2016). In the last one year (as of March 8, 2016), the fund lost just 2.2%. The ETF currently yields 4.18% in dividend per annum making it a useful destination for income-seeking investors, especially at this low-yield environment. The fund has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook. Original Post