Tag Archives: nasdaq

Auto ETFs And Stocks To Ride On This Holiday Season

The auto industry has been on a high gear and remains on track to break the all-time record of 17.35 million vehicles reached in 2000. Once again, the monthly auto sales data spread bullishness into the entire industry across the globe. In particular, auto sales rose 1.4% year over year to an annualized 18.2 million units in November. This represents the highest auto sales in 14 years and the third consecutive month of 18 million plus sales. Five of the six major American and Japanese automakers reported solid sales growth for November. Nissan ( OTCPK:NSANY ) led the way higher with 4% growth, followed by sales increases of 3% for Fiat Chrysler Automobiles (NYSE: FCAU ), 3.0% for Toyota (NYSE: TM ), 1.5% for General Motors (NYSE: GM ) and 0.3% for Ford Motor (NYSE: F ). However, Honda’s (NYSE: HMC ) auto sales fell 5% last month. A major boost came from attractive year-end offers, Black Friday deals, higher demand for sport utility vehicles, cheap fuel and low financing costs. Further, a plethora of new models, the need to replace aging vehicles, higher income, increasing consumer confidence, and higher spending power are adding enough fuel. The robust trend is likely to continue this month as well, as automakers continue offering discounts and holiday season incentives. Further, about two-thirds of the industries falling under the auto sector have a strong Zacks Rank in the top 39%, suggesting healthy growth. As such, investors seeking to take advantage of the current boom may consider the ETFs and stocks from this corner of the broad market. ETFs to Buy First Trust NASDAQ Global Auto Index ETF (NASDAQ: CARZ ) This fund offers pure play global exposure to the 37 auto stocks by tracking the NASDAQ OMX Global Auto Index. It is a large-cap centric fund, highly concentrated on the top 10 holdings with about 62% of assets. The four prime automakers – General Motors, Ford, Honda and Toyota – are among the top five holdings. In terms of country exposure, Japan takes the top spot at 36.8% while the U.S. and Germany round off the next two spots with 23.4% and 18.3% share, respectively. CARZ is under appreciated as indicated by its AUM of only $41.1 million and average daily trading volume of about 10,000 shares. The product charges 70 bps in fees per year and has gained 2.4% in the year-to-date time period. It has a Zacks ETF Rank of 2 or ‘Buy’ rating with a High risk outlook. Consumer Discretionary Select Sector SPDR ETF (NYSEARCA: XLY ) While XLY provides broad exposure to the consumer discretionary space, investors could go for this product as it has an at least 8% allocation to the auto industry. It holds 90 securities in its basket and some well known automakers like Ford, General Motor, O’Reilly Automotive (NASDAQ: ORLY ) and Delphi Automotive (NYSE: DLPH ) make up for a nice mix in the portfolio. It is the largest and the most popular product in this space with AUM of nearly $11.7 billion and average daily volume of roughly 6.6 million shares. It charges 14 bps in annual fees from investors and has gained 14.3% so far this year. The fund has a Zacks ETF Rank of 2 with a Medium risk outlook. Stocks to Buy We have used our Zacks stock screener to find out the best stocks in the auto space having a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a Growth Style Score of ‘B’ or better. The Growth Style Score analyzes the growth prospects of a company with a thorough analysis of the income statement, balance sheet and cash flow statement that evaluate its financial health and the sustainability of growth trajectory. The results show that stocks with Growth Style Scores of A or B when combined with Zacks Rank of 1 or 2 offer the best upside potential. Superior Industries International Inc. (NYSE: SUP ) Based in Southfield, Michigan, Superior Industries is one of the world’s largest original equipment manufacturer (OEM) of aluminum wheels for the automotive industry. It designs, manufactures and supplies cast aluminum road wheels to the automobile and light truck manufacturers. The stock has seen positive earnings estimate revisions from 90 cents to 93 cents per share for 2015 over the past 60 days, representing a year-over-year increase of 43.1%, which is much higher than the industry average of 5.4%. The company delivered an average positive earnings surprise of 32.44% in the last four quarters. The stock has a Zacks Rank #1 with a Growth Style Score of B, meaning that it is primed for further growth in the months to come. Motorcar Parts of America Inc. (NASDAQ: MPAA ) Based in Torrance, California, Motorcar Parts is a leading manufacturer of auto parts like replacement starters, alternators, wheel hub assemblies, bearings and master cylinders used for imported and domestic passenger vehicles, light trucks, and heavy-duty applications in the United States and Canada. The company has seen a solid earnings positive estimate revision of 6 cents for the current fiscal year over the past 60 days and is expected to grow at an annual rate of 24.4% versus negative industry growth. Further, the company delivered positive earnings surprises in the three of the past four quarters, with an average beat of 4.64%. The stock currently has a Zacks Rank #1 with a Growth Style Score of B, suggesting incredible growth in the months ahead. Bottom Line Holiday fervor, massive discounts, an improving economy, and increased consumer spending will continue to drive U.S. auto sales higher in the weeks ahead, making the above ETFs and stocks compelling choices for investors to play this holiday season. Original Post

5 More Dividend ETFs For Your Consideration

Summary These five dividend ETFs have similar expense ratios but very different yields. Sector analysis shows that the portfolios have some very material differences. SPHD, SDY, and NOBL all work for investors that want to handle their investing in the technology sector on their own. The one that catches my eye for high yield and utility allocations that may go on sale during December is SPHD. One of the areas I frequently cover is ETFs. I’ve been a large proponent of investors holding the core of their portfolio in high quality ETFs with very low expense ratios. The same argument can be made for passive mutual funds with very low expense ratios, though there are fewer of those. In this argument I’m doing a quick comparison of several of the ETFs I have covered and explaining what I like and don’t like about each in the current environment. The Five ETFs Ticker Name Index DLN WisdomTree LargeCap Dividend ETF WisdomTree LargeCap Dividend Index DGRW WisdomTree U.S. Dividend Growth ETF WisdomTree U.S. Quality Dividend Growth Index SPHD PowerShares S&P 500 High Dividend Portfolio ETF S&P 500® Low Volatility High Dividend Index SDY SDPR Dividend ETF S&P High Yield Dividend Aristocrats Index NOBL ProShares S&P 500 Dividend Aristocrats ETF S&P 500® Dividend Aristocrats® Index By covering several of these ETFs in the same article I hope to provide some clarity on the relative attractiveness of the ETFs. One reason investors may struggle to reconcile positions is that investments must be compared on a relative basis and the market is constantly changing which will increase and decrease the relative attractiveness. For investors that want to see precisely which assets I’m holding, I opened my portfolio earlier in November. Dividend Yields I charted the dividend yields from Yahoo Finance for each portfolio. You may notice that despite each of these portfolios being named for dividends, the yields on the ETFs are significantly different. Expense Ratios These funds are all very comparable on expense ratios which is nice for creating a more direct comparison. (click to enlarge) Sector Assuming your decision isn’t based strictly on yields, the next area to look into is the sector allocations. There were clearly no big differences in expense ratios, so this race should really come down to getting a strong enough yield and getting a great sector allocation. I built a fairly nice table for comparing the sector allocations across dividend ETFs to make it substantially easier to get a quick feel for the risk factors: (click to enlarge) First Glance The first thing I would expect investors to notice is that there are a few areas where one or two of the ETFs have vastly different allocations from their peers. The most obvious standouts in this regard are NOBL allocating nearly 28% to the consumer defensive sector and SPHD allocating over 24% to the utility sector. NOBL Since I see a fairly expensive market, I find the heavier allocation to the consumer defensive sector to be appealing. If the market undergoes a severe correction then I would want to be more aggressive with the portfolio when it appeared the worst had passed. In the later stages of a bull market or entering a bear market I’d rather focus on the consumer defensive sector. It is interesting to note that the technology allocation here is zero. If investors feel very confident in analyzing technology companies, it could make NOBL a great fit for them since the lack of technology companies within the fund would work out well for an investor that was managing their own investments in the sector. SPHD SPHD uses a very heavy allocation to utilities. For investors that already build their own utility positions in their portfolio, this wouldn’t be a great fit since it would double up on the exposure. On the other hand, for the investor that does not have utility exposure in their portfolio, the ETF could be a great fit. The utility sector often demonstrates some correlation with bonds because investors treat it as an alternative source of income. This may be a fairly volatile sector going into December because investors are expecting the Federal Reserve to raise rates and if a rate increase is confirmed it could send bond yields higher and utility stocks would be expected to fall at the same time so that the dividend yields would increase. For investors willing to take the exposure on utilities if the stocks go on sale, the middle of December could bring Christmas a little early with sales in the sector. SPHD also offers the highest yield which may be very attractive for investors seeking to grow more income immediately. Similar to NOBL, SPHD has a very low weight for the technology sector. The combination of high yield, utility exposure, and no technology makes it ideal for the dividend growth investor that focuses their research time on technology. What do You Think? Which dividend ETF makes the most sense for you? Do you want to overweight consumer staples for more safety in a downturn or would you rather have more upside in a prolonged bull market? Do you want to own the oil companies, or do you foresee gas as being in a long term downtrend that makes the business model much weaker?

Creating A Quality Growth Portfolio For Millennials

Summary I searched through all ETFs and found five for building a quality growth portfolio given the current environment. The five ETFs I found cover: U.S. Mega-Cap growth, biotechnology, International Growth, High Yield Bonds and Cash. The portfolio is weighted 70% stocks, 20% bonds, 10% cash. In this article, I will be creating a simple growth oriented portfolio for millennial investors. The goal of the portfolio is to hold five ETFs to gain exposure to high quality growth stocks as well as targeting specific high growth areas. U.S Equity: Vanguard Mega Cap Growth ETF (NYSEARCA: MGK ) I chose MGK because it only holds the largest market-cap growth stocks. I wanted to be more conservative with my main growth selection because the second part of my U.S. equity allocation consists of a high growth/high risk segment of the market, therefore for balance, I chose MGK. When looking for large-cap growth ETFs, I narrowed my search down to MGK and the iShares Russell Top 200 Growth ETF (NYSEARCA: IWY ). I chose MGK over IWY because of the lower cost and exposure to health care. MGK charges 0.11% and IWY charges 0.20%, which is not a huge difference, however when taken in combination with the data table below MGK stood out as the superior choice. My second ETF selection is a health care ETF, therefore, I did not want a lot of exposure to health care from my main selection. I looked at the health care allocations of IWY and MGK and found that MGK has a lower allocation to health care. Health Care Allocation MGK 14.00% IWY 17.95% [Table Data from IWY & MGK websites] Targeted Sector Growth Equity: ALPS Medical Breakthroughs ETF (NYSEARCA: SBIO ) I chose SBIO because of its exposure to small & mid cap high growth biotechnology companies. SBIO only holds companies with a market cap between $200 million and $5 billion. Most importantly, SBIO only holds those stocks with a sustainable cash burn rate and companies with at least one product in phase 2 or phase 3 of development. This distinguishes SBIO from other biotech ETF offerings because it is targeting companies that have moved passed the initial stage of development and have the cash available to be able to fund continued clinical trials. It is widely know that many biotechs with promising drugs build hype when they are in phase 2 or phase 3 because of the potential to go from zero or very little revenues to a significant amount. A complete picture of the selection process can be seen in the image below. (click to enlarge) [Chart from SBIO Fund page ] International Equity: iShares MSCI EAFE Growth ETF (NYSEARCA: EFG ) I chose EFG because it holds mainly large cap companies in developed markets excluding the United States and then selects those companies whose earnings are expected to grow at an above-average rate relative to the market. The following chart shows that growth oriented stocks in the EAFE have significantly outperformed the broad iShares MSCI EAFE ETF (NYSEARCA: EFA ) and value oriented stocks of the iShares MSCI EAFE Value ETF (NYSEARCA: EFV ). (click to enlarge) [Chart from Google Finance] Short-Term High-Yield Corporate Bonds: First Trust Tactical High Yield ETF (NASDAQ: HYLS ) I chose HYLS because of its high-yield and superior performance during the most recent run up in interest rates. I believe all investors; even millennials should have an allocation to fixed income even though it is not growth oriented. With the potential for rising rates aggressive bond ETFs will most likely suffer, which is why when I searched through all the high-yield ETFs available, HYLS stood out among its competitors. HYLS stood out because of its structure, 6%+ dividend yield and its performance. HYLS is actively managed and uses a fundamental process to select long positions and has the ability to short treasury bonds or corporate bonds. According to the HYLS fact sheet: The team uses a combination of a rigorous fundamental credit selection process with relative value analysis and believes that an evolving investment environment offers varying degrees of investment risk opportunities in the high-yield, senior loan, derivative and fixed-income instrument markets. The second reason I chose HYLS was because it performed very well during the most recent rising rate period from February 2nd 2015 until June 10th 2015. As you can see HYLS [Yellow Line] outperformed both major broad high yield bond ETFs including the iShares iBoxx $ High Yield Corporate Bond ETF (NYSEARCA: HYG ) and the SPDR Barclays Capital High Yield Bond ETF (NYSEARCA: JNK ). In addition, HYLS also outperformed short-duration high yield bond funds including the iShares 0-5 Year High Yield Corporate Bond ETF (NYSEARCA: SHYG ), the SPDR Barclays Capital Short Term High Yield Bond ETF (NYSEARCA: SJNK ) and the PIMCO 0-5 Year High Yield Corporate Bond Index ETF (NYSEARCA: HYS ). (click to enlarge) [Chart from Google Finance] Cash: PIMCO Enhanced Short Maturity Strategy ETF (NYSEARCA: MINT ) My final selection was MINT because I believe all portfolios either should have cash for safety or available to use for strategic purchases of quality growth stocks/ETFs. Millennials have a long-term horizon and if there is an opportunity to pick up a quality growth ETF or stock that is trading unjustly lower, having the cash available to do so is desirable. Portfolio Overview I have provided an example of what the portfolio would look like. As you can see, I allocated 30% to each main equity selection and 10% to SBIO, which made the total equity allocation to be 70%. Allocation MGK 30% SBIO 10% EFG 30% HYLS 20% MINT 10% Portfolio Composition Stocks 70% Bonds 20% “Cash” 10% Closing Thoughts The portfolio I created has exposure to quality growth companies in the U.S. and internationally. With the added allocation to target biotechnology, the portfolios growth should be enhanced by this high growth area of the market. In addition, by moving out on the credit risk spectrum for fixed income, the portfolio would generate some income, which instead of being reinvested into more HYLS, could be used to purchase more growth stocks/ETFs. Disclaimer : See here .