Tag Archives: nasdaq

Solar Shines at Dominion Resources, Inc. This Quarter

While the milder weather over the past year continues to plague utilities, its impact wasn’t quite as noticeable on Dominion Resources ‘ first quarter results. Although below what the company earned in

Digging Into 2 New DoubleLine ETFs

It’s difficult to dispute the success of the first ETF offering from DoubleLine, which has managed to acquire more than $2.3 billion in assets during its short 14-month tenure. The SPDR DoubleLine Total Return Tactical ETF (NYSEARCA: TOTL ) is a hybrid strategy that is sourced from two prominent fixed-income mutual funds that are run by Jeffrey Gundlach. I have long been a fan of Gundlach’s approach and have owned his flagship DoubleLine Total Return Bond Fund (MUTF: DBLTX ) for myself and clients for some time now. I have also recommended the TOTL strategy for those who are seeking a core fixed-income fund with a lower average duration than the Barclays U.S. Aggregate Bond Index. Looking at a chart of TOTL versus its benchmark over the last year, the active fund has aggressively lagged the passive index. This has primarily been a result of the strength in treasuries and investment grade corporates in addition to differences in duration exposure. TOTL isn’t designed to kill the benchmark in a falling interest rate environment that favors longer duration. It’s designed to offer a more competitive yield with moderated interest rate risk. That’s its true value for those who are seeking a differentiated approach to their fixed-income allocation. Note that TOTL currently sports a 30-day SEC yield of 2.90% versus 1.90% for the iShares Core U.S. Aggregate Bond ETF (NYSEARCA: AGG ). Recently, Gundlach and State Street released two new actively managed ETFs that are also aimed at setting themselves apart from the pack. These include the SPDR DoubleLine Short Duration Total Return Tactical ETF (BATS: STOT ) and the SPDR DoubleLine Emerging Markets Fixed Income ETF (BATS: EMTL ). STOT is aimed at an even more conservative mix of bonds with a similar multi-sector approach as TOTL. The fund sports a modified adjusted duration of 2.40 years compared to TOTL’s 3.73 years. Think less price volatility and also a concomitant step down in yield. The new fund hasn’t paid a dividend yet, so we don’t know exactly what the difference in yield will be. However, suffice it to say that this type of fund will be deemed more of a place holder for those who want to focus on capital preservation with a small income stream. Bear in mind, you will have to pay a 0.45% expense ratio to access the STOT conservative strategy. That sounds on the high side for a short duration bond fund, but may still be acceptable for those who are stepping out of an even more expensive mutual fund alternative . There are also several other active low duration competitors in the ETF space by the likes of PIMCO, Guggenheim, Fidelity, and others. The more interesting fund from my perspective is EMTL. Prior to the launch of this ETF, there were only four other actively managed bond funds in the emerging market category. That makes for a very enticing opportunity to exercise their expertise in country screening, security selection, risk management, and duration positioning. The EMTL portfolio will be managed by Luz Padilla, who runs the emerging market strategies for the open ended DoubleLine mutual funds as well. One of the advantages of the looser active management restrictions in EMTL is that the fund manager can select both corporate and sovereign debt in the portfolio. Most passively managed indexes and even some of their active counterparts are relegated to one or the other. The comingling of these two emerging market bond classes can potentially unlock greater value and allow for superior differentiation from its peers. At the outset, EMTL has heavy exposure to bonds in Latin America via Mexico, Peru, Colombia, and Chile. It currently sports a modified adjusted duration of 5.34 years and will likely offer a competitive yield to other funds in this category. This type of fund may offer investors a way to add a tactical emerging market bond allocation in tandem with core fixed-income or other strategic yield enhancing plays. Furthermore, this fund only sports a modestly higher expense ratio than traditional options as well. EMTL carries a net expense ratio of 0.65% versus 0.50% in the PowerShares Emerging Market Sovereign Debt Portfolio (NYSEARCA: PCY ) and 0.40% in the iShares JPMorgan Emerging Market Bond Fund (NYSEARCA: EMB ). The Bottom Line It will be interesting to watch how both these new offerings evolve over time and whether the active management underpinnings add value for shareholders over a passive benchmark. DoubleLine has been known to make some bold calls with their global bond exposure and these funds will likely stand out from the pack in their overall positioning. Disclosure: I am/we are long TOTL, PCY, DBLTX, EMB. 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. Additional disclosure: David Fabian, FMD Capital Management, and/or clients may hold positions in the ETFs and mutual funds mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell, or hold securities.

Upbeat Industrial Q1 Results Fail To Lift ETFs

Most of the industrial bellwethers have beaten on earnings in the first quarter of 2016. However, it’s not surprising given the low estimates, which had fallen ahead of this reporting cycle. Among other factors, a recent pullback in the greenback and encouraging manufacturing trends could have played a role in the beat. A strong dollar impacts most industrial bigwigs adversely as most of these companies have significant international exposure. However, the earnings beat came largely on the back of lowered expectations (read: ETFs to Watch on U.S. Manufacturing Revival ). Meanwhile, revenue weakness in the sector remains thanks to reduced spending, volatility in oil prices and lackluster global growth. Below we have highlighted in greater detail earnings of some of the major industrial companies which really drive this sector’s outlook. Industrial Earnings in Focus General Electric Company (NYSE: GE ) Diversified industrial conglomerate General Electric posted mixed first quarter results as it reported in line earnings but missed on revenues. The company’s earnings came in at 21 cents per share, in line with the Zacks Consensus Estimate but up 5% from the year-ago quarter. Shares of the company fell slightly after the earnings release. Revenues were up 6% to $27.8 billion, missing the Zacks Consensus Estimate of $29 billion. The revenue miss was due to a weak global economy and an oil price slide that hurt the renewable and oil and gas segments. For 2016, the company reaffirmed its earnings per share guidance of $1.45-$1.55 (read: Industrial ETFs in Focus on Mixed GE Q1 Performance ). 3M Company (NYSE: MMM ) Another major conglomerate, 3M Company reported earnings of $2.05 per share in first-quarter 2016, beating the Zacks Consensus Estimate of $1.92. Net sales during the quarter were $7.4 billion, down 2.2% year over year but ahead of the Zacks Consensus Estimate of $7.3 billion. The year-over-year decrease in sales was largely due to a significantly negative foreign currency translation impact. 3M shares fell on the day of its earnings release. Honeywell International Inc. (NYSE: HON ) Honeywell International’s earnings per share of $1.53 in the reported quarter beat the Zacks Consensus Estimate of $1.50. Revenues in first-quarter 2016 were up 3% year over year to $9.5 billion, ahead the Zacks Consensus Estimate $9.4 billion. Based on favorable business conditions, Honeywell narrowed its 2016 guidance. The company anticipates earnings in the range of $6.55 to $6.70 per share on revenues of $40.3 billion and $40.9 billion. Shares of the company rose slightly on the day of its earnings release. Union Pacific Corporation (NYSE: UNP ) The rail transportation operator, Union Pacific reported first-quarter 2016 earnings of $1.16 per share, which beat the Zacks Consensus Estimate of $1.09. Earnings declined 11% on a year-over-year basis. Revenues decreased 14% year over year to $4.8 billion in the first quarter, falling short of the Zacks Consensus Estimate of $4.9 billion. A 14% decline in freight revenues hurt the top line. Declining coal shipments weighed on the railroad operator’s results yet again. The stock gained after reporting results. ETF Impact Despite reporting encouraging earnings, most of the industrial stocks failed to hold up gains over the past 10 days, sending the related ETFs into rocky territory. This has put the spotlight on industrial ETFs. Below we discuss four of these ETFs having a sizeable exposure to the above stocks. Industrial Select Sector SPDR Fund (NYSEARCA: XLI ) This product tracks the Industrial Select Sector Index. General Electric occupies the top spot with 11.2% allocation, while 3M, Honeywell and Union Pacific have a combined exposure of roughly 14.7% in the fund. XLI has garnered $7.2 billion in assets and trades in a heavy volume of 13.2 million shares per day. It has a low expense ratio of 0.14%. The fund has the highest exposure to Aerospace & Defense (26%), followed by Industrial Conglomerates (21%). The product gained 0.3% in the past 10 days and currently has a Zacks ETF Rank #4 or ‘Sell’ rating with a Medium risk outlook. Vanguard Industrials ETF (NYSEARCA: VIS ) This fund follows the MSCI US IMI Industrials 25/50 index and holds about 342 securities in its basket. Of these firms, GE occupies the top position with 12.7% share, while 3M, Honeywell and Union Pacific together comprise almost 10.7% of the fund’s assets. The fund manages nearly $2.1 billion in its asset base and charges only 10 bps in annual fees. From an industry perspective, the fund has the highest exposure to Aerospace & Defense (21.7%), followed by Industrial Conglomerates (20.6%). Volume is moderate as it exchanges roughly 112,000 shares a day on average. The product lost 0.1% in the past 10 days and currently has a Zacks ETF Rank #3 or ‘Hold’ rating with a Medium risk outlook. iShares U.S. Industrials ETF (NYSEARCA: IYJ ) IYJ tracks the Dow Jones U.S. Industrials Index to provide exposure to 214 U.S. companies that produce goods used in construction and manufacturing. General Electric occupies the top spot in the fund with almost 11% share while 3M, Honeywell and Union Pacific have a combined exposure of more than 10%. The ETF manages an asset base of $737.6 million and trades in an average volume of 75,000 shares. The fund has top exposure to Capital Goods (58.9%) and Software & Services (12.7%) and Transportation (11.7%) have double-digit exposure each. The fund is slightly expensive with 45 basis points as fees. It rose almost 0.4% in the last 10 days and currently has a Zacks ETF Rank #3 with a Medium risk outlook. Fidelity MSCI Industrials Index ETF (NYSEARCA: FIDU ) This fund tracks the MSCI USA IMI Industrials Index, holding 342 stocks in its basket. General Electric takes the top spot at 12.7% share while 3M, Honeywell and Union Pacific have a combined exposure of almost 11.5%. The product has amassed $161.2 million in its asset base while it trades in moderate volume of nearly 115,000 shares a day on average. The fund has top exposure to Aerospace & Defense (23.4%) and Industrial Conglomerates (20.9%). It is one of the low cost choices in the space charging 12 bps in annual fees from investors. The fund gained 0.5 % in the last 10 days and currently has a Zacks ETF Rank #3 with a Medium risk outlook. Link to the original post on Zacks.com