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Ivy Portfolio September Update

The Ivy Portfolio spreadsheet tracks the 10-month moving average signals for two portfolios listed in Mebane Faber’s book The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets . Faber discusses 5, 10, and 20 security portfolios that have trading signals based on long-term moving averages. The Ivy Portfolio spreadsheet tracks both the 5 and 10 ETF Portfolios listed in Faber’s book. When a security is trading below its 10-month simple moving average, the position is listed as “Cash.” When the security is trading above its 10-month simple moving average, the position is listed as “Invested.” The spreadsheet’s signals update once daily (typically in the late evening) using dividend/split adjusted closing price from Yahoo Finance. The 10-month simple moving average is based on the most recent 10 months including the current month’s most recent daily closing price. Even though the signals update daily, it is not an endorsement to check signals daily or trade based on daily updates. It simply gives the spreadsheet more versatility for users to check at his or her leisure. The page also displays the percentage each ETF within the Ivy 10 and Ivy 5 Portfolio is above or below the current 10-month simple moving average, using both adjusted and unadjusted data. If an ETF has paid a dividend or split within the past 10 months, then when comparing the adjusted/unadjusted data you will see differences in the percent an ETF is above/below the 10-month SMA. This could also potentially impact whether an ETF is above or below its 10-month SMA. Regardless of whether you prefer the adjusted or unadjusted data, it is important to remain consistent in your approach. My preference is to use adjusted data when evaluating signals. The current signals based on August 31st’s adjusted closing prices are below. It will probably come as no surprise that this month all ETFs; the Vanguard Total Bond Market ETF (NYSEARCA: BND ), the SPDR Dow Jones International Real Estate ETF (NYSEARCA: RWX ), the Vanguard FTSE Emerging Markets ETF (NYSEARCA: VWO ), the PowerShares DB Commodity Index Tracking ETF (NYSEARCA: DBC ), the iShares S&P GSCI Commodity-Indexed Trust ETF (NYSEARCA: GSG ), the Vanguard REIT Index ETF (NYSEARCA: VNQ ), Vanguard Total Stock Market ETF (NYSEARCA: VTI ), Vanguard Small Cap ETF (NYSEARCA: VB ), Vanguard FTSE All-World ex-US ETF (NYSEARCA: VEU ), and the iShares TIPS Bond ETF (NYSEARCA: TIP ), are below their 10-month moving average. Last month 7 of the 10 were below their respective moving average. The spreadsheet also provides quarterly, half year, and yearly return data courtesy of Finviz. The return data is useful for those interested in overlaying a momentum strategy with the 10-month SMA strategy: (click to enlarge) (click to enlarge) I also provide a “Commission-Free” Ivy Portfolio spreadsheet as an added bonus. This document tracks the 10-month moving averages for four different portfolios designed for TD Ameritrade, Fidelity, Charles Schwab, and Vanguard commission-free ETF offers. Not all ETFs in each portfolio are commission free, as each broker limits the selection of commission-free ETFs and viable ETFs may not exist in each asset class. Other restrictions and limitations may apply depending on each broker. Below are the 10-month moving average signals (using adjusted price data) for the commission-free portfolios: (click to enlarge) (click to enlarge) Disclosures: None.

3 Mid-Cap Value ETFs For Every Kind Of Investor

Mid-cap value ETFs are often overlooked, yet have significant upside. Quasi-active management at some funds have helped performance while reducing risk. They also offer modest dividend yield, making them exceptional for all investors. I am a value investor, meaning I look for stocks that the market hasn’t discovered yet or that are out of favor for some reason. One of my favorite areas for value stocks is the mid-cap arena. Some of my best picks over the years have been those that started as small-caps and grew due to their success. It’s these overlooked stocks whose stories I like that I spend most of my time on. However, I can’t spend all my time on them, and that’s why I’ve been hunting down 3 mid-cap ETFs to share with aggressive investors, conservative investors, and the average investor. Why own a mid-cap ETF? Other than the fact that mid-cap stocks have historically outperformed their larger brethren and offer the best chances of obtaining a multi-bagger return, you must have diversification in your portfolio. Sector outperformance occurs all the time, and the more diversification you have, the better. If you don’t have diversification, then you risk seeing your overall portfolio fall more in bad times by having your money overly concentrated. Here are my choices for mid-cap value ETFs for the average Joe investor, aggressive investor and conservative investor. For aggressive investors, have a look at the WisdomTree MidCap Earnings Fund (NYSEARCA: EZM ) . I like its very low expense ratio of 0.38%, which is more than covered by its 1.2% yield. As quasi-actively managed model, it means there’s a bit more risk involved than an ETF that seeks to mirror an index. It takes companies in the top 75% of the market capitalization of the WisdomTree Earnings Index, removes the top 500 largest companies, and is earnings-weighted in December of each year. Thus, companies with greater earnings generally have larger weight in the index. So it isn’t just blindly cap-weighted. The fund holds 612 stocks. The top 10 account for about 6% of the total asset base, and this speaks to its broad diversification. The top holdings tend to rotate quite a bit. Right now, the top three are WABCO Holdings (NASDAQ: WB ), Santander Consumer USA Holdings (NYSE: SC ) and Brunswick Corp. (NYSE: BC ) . It has 25% of assets invested in financials, 19% in industrials, 17% in consumer discretionary, 13% in IT, 6% in utilities, 6% in materials, and 5% in energy. This more aggressive approach is why it has significantly outperformed the S&P 500 since inception in February of 2007 – 79% to 37%. It’s also why it carries a beta of 1.14 over 3 years, where 1.0 means it carries about the same risk as the S&P 500. For the average Joe investor, I’m sticking with the same fund family in the form of the WisdomTree MidCap Dividend Fund (NYSEARCA: DON ). The approach is somewhat similar to the previous fund but even less actively managed. The fund holds the companies that compose the top 75% of the market capitalization of the WisdomTree Dividend Index after the 300 largest companies have been removed. The index is dividend-weighted annually to reflect what each company is expected to pay in the coming year. The dividend yield isn’t something investors will kill to own, but at 2.76%, it more than covers the 0.38% expense ratio. The fund’s assets are also nicely diversified with 396 stocks. The top 10 holdings are about 10% of the total asset base. The top components also tend to rotate a good deal. The biggest holdings now are Maxim Integrated Products (NASDAQ: MXIM ), Mattel (NASDAQ: MAT ) and Ameren (NYSE: AEE ). The fund has earned about the same return of the S&P 500 but with a beta of 0.95, meaning about 5% less risk. If you’re a conservative, then take a look at the PowerShares Russell Midcap Pure Value Portfolio (NYSE: PXMV ) . Be alert that up until May 22 the fund was known as the PowerShares Fundamental Pure Mid Cap Value Portfolio. First of all, the fund removes the largest 70% of cumulative fundamental weight from a mid-cap value index. It then takes the remaining companies and screens them via fundamental analysis – including five-year average sales, cash flow, latest book value and five-year average dividend. Then there’s another step. The stocks are compared to the sector to see which ones are valued below their peers. So this is a more actively managed fund, which I would generally characterize as carrying more risk. Yet the historic returns are such that when adjusted for risk, I feel it is a more conservative choice. It has 21% concentration in utilities, which adds to the conservative approach and also boosts the yield over 3%. This ETF holds only 161 stocks, which is a bit more concentrated than I’d like, but is perfectly acceptable. The top 10 holdings account for 11% of assets. The sector diversity is also nice, with 46% financials, 3% consumer, 6% industrial, 4% IT, 4% materials, and 11% energy. As with any article regarding investments, you should never rely on information you read without doing your own due diligence. My articles contain my honest, forthright and carefully considered personal opinion, and conclusions, containing information derived from my own research. This may include discussions with management. I do not repeat “talking points” but may quote management from an interview. I am never influenced by third parties in arriving at my conclusions. Do not solely rely on my articles or anyone else’s when making an investment decision. Always contact your financial advisor before investing in any security. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Best And Worst Q3’15: Small Cap Growth ETFs, Mutual Funds And Key Holdings

Summary The Small Cap Blend style ranks eleventh in Q3’15. Based on an aggregation of ratings of 11 ETFs and 353 mutual funds. SLYG is our top-rated Small Cap Growth ETF and VSCRX is our top-rated Small Cap Growth mutual fund. The Small Cap Growth style ranks eleventh out of the 12 fund styles as detailed in our Q3’15 Style Ratings for ETFs and Mutual Funds report. It gets our Dangerous rating, which is based on an aggregation of ratings of 11 ETFs and 353 mutual funds in the Small Cap Growth style as of July 20, 2015. See a recap of our Q2’15 Style Ratings here. Figure 1 ranks from best to worst the eight small-cap growth ETFs that meet our liquidity standards and Figure 2 shows the five best and worst-rated small-cap growth mutual funds. Not all Small Cap Growth style ETFs and mutual funds are created the same. The number of holdings varies widely (from 29 to 1218). 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 Vanguard S&P Small-Cap 600 Growth ETF (NYSEARCA: VIOG ) and the PowerShares Russell 2000 Pure Growth Portfolio ETF (NYSEARCA: PXSG ) 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 Managed Portfolio Smith Group Small Cap Focused Growth Fund ( SGSNX , SGSVX ) is excluded from Figure 2 because its total net assets are below $100 million and do not meet our liquidity minimums. The State Street SPDR S&P 600 Small Cap Growth ETF (NYSEARCA: SLYG ) is the top-rated Small Cap Growth ETF and the Virtus Small Cap Core Fund (MUTF: VSCRX ) is the top-rated Small Cap Growth mutual fund. SLYG earns a Neutral rating and VSCRX earns an Attractive rating. The iShares Russell 2000 Growth ETF (NYSEARCA: IWO ) is the worst-rated Small Cap Growth ETF and the Alpine Small Cap Fund (MUTF: ADIAX ) is the worst-rated Small Cap Growth mutual fund. IWO earns a Dangerous rating and ADIAX earns a Very Dangerous rating. Methode Electronics, Inc. (NYSE: MEI ) is one of our favorite stocks held by Small Cap Growth funds and earns our Very Attractive rating. Since 2009, the company has grown after-tax profit ( NOPAT ) by 61% compounded annually. Methode Electronics currently earns a top-quintile return on invested capital ( ROIC ) of 23% and boasts an impressive 12% NOPAT margin. Weak quarterly guidance caused an overblown decline of 50% in the stock in early July. We think MEI is undervalued. At the current price of $27/share, Methode Electronics has a price to economic book value ( PEBV ) ratio of 0.9. This ratio implies that the market expects the company’s profits to permanently decline by 10%. If Methode Electronics can grow NOPAT by just 5% compounded annually for the next five years , the stock is worth $33/share today – a 22% upside. Healthways Inc. (NASDAQ: HWAY ) is one of our least favorite stocks held by Small Cap Growth funds and earns our Dangerous rating. The company’s NOPAT has fallen by 28% compounded annually since 2010. ROIC dropped to a bottom-quintile 3% from 8% over the same time period. Healthways’ business fundamentals are showing signs of weakness. In stark contrast, the stock price reflects quite sanguine expectations about future cash flows. To justify the current price of $12/share, Healthways must grow NOPAT by 12% compounded annually for the next 14 years . Expecting Healthways not only to reverse its profit decline but also sustain such levels of profit growth for over a decade seems highly optimistic and risky. 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 Max Lee receive no compensation to write about any specific stock, style, 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. (More…) 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.