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3 Large Cap Value ETFs For Every Kind Of Investor

Large Cap Value ETFs offer great balance to go-go growth stocks. Patience is rewarded with value stocks. The market often beats down great companies to levels below intrinsic value. Most Large cap value ETFs offer familiar names trading at discounts. 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. The large-cap sector can provide outsized returns with reduced risk, by not buying stocks that are even close to being fairly valued. These value stocks require patience that is often rewarded, and comes without the handwringing that goes along with growth stocks. I’ve been hunting down 3 large-cap ETFs to share with aggressive investors, conservative investors, and the average investor. Why own a large-cap ETF? As mentioned, value stocks give you a hedge against taking on too much risk, and they are necessary to offset the increased risk that comes with investing in small-cap stocks that offer higher rewards but higher risk. Also 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. For conservative investors, have a look at the Vanguard Value ETF (NYSEARCA: VTV ). One of the cheapest ETFs in the category, it carries an expense ratio of 0.09%. Vanguard asserts that similar funds have a 1.11% expense ratio. That expense ratio is easily covered by its 2.52% yield, so you get a little spending money along with this ETF. With 318 holdings and a median market cap of $85.5 billion, you are getting the top-of-the-line companies in this ETF. The top 10 holdings only account for 25.8% of the total asset base, and they are safe and reliable investments with all the premier names you recognize. The sector diversity of the Vanguard Value ETF is impressive. It has 22% of assets invested in financials, 18% in consumer goods and services, 15% in health care, 11% in industrials, 10% in technology and 10% in energy. The rest is divided between basic materials, telecom and utilities. What I really like here is the fund has a beta of 0.98, meaning is to 2% less volatile than the broad market. However, with a Sharpe Ratio of 1.85, it has significantly enhanced risk-adjusted return compared to a risk-free investment. Here we find the kind of famous names you’d expect: ExxonMobil (NYSE: XOM ) , Microsoft (NASDAQ: MSFT ) , Johnson & Johnson (NYSE: JNJ ) , Berkshire Hathaway ( BRK ) , and Wells Fargo (NYSE: WFC ). This is a buy-and-hold fund, with only 5.5% of stocks turned over in the past year. That’s as it should be. The point is that value stocks require patience, not switching in and out of stocks. Its average price-earnings ratio is 17.9. It has a 96% total return over the past ten years. Aggressive investors should have a look at the First Trust Large Cap Value AlphaDEX ETF (NYSEARCA: FTA ) . It has 204 holdings, so it isn’t highly concentrated and therefore too risky, but it isn’t spread too thin, either. The top 10 stocks only make up 10% of the asset base, so you don’t have too much concentration risk, either. That’s why I like it – its more aggressive approach is tempered by these moves.. The expense ratio is a bit high at 0.64%, but still 47 bps below the average fund, if Vanguard is to be believed. Since inception, it has only returned 30%. However, coming off the low of the financial crisis, it is up almost 260%. The top holdings are from several different sectors. They include Tesoro (NYSE: TSO ), Edison International (NYSE: EIX ), PPL Corp. (NYSE: PPL ) and Traveler’s Companies (NYSE: TRV ). The fund has concentrated itself into six sectors: 18.5% utilities, 16% energy, 15% financials, 5% consumer discretionary, 14% industrials, and 11% IT. It carries a 3-year beta of 1.05, meaning it is only 5% more volatile than the market and comes with a Sharpe Ratio of 1.51 – meaning enhanced risk-adjusted returns compared to risk-free investments. A solid large-cap value ETF choice for the general investor is the Guggenheim S&P 500 Pure Value ETF (NYSEARCA: RPV ) . At 199 holdings, it’s a bit too concentrated that I would like, but that’s still a lot of stocks to give you diversification that you need. The top 10 stocks account for 19% of the asset base. Its expense ratio is only 0.35%. Looking at risk, its 3-year beta is 1.2, meaning it has 20% more volatility than the broad market. However, the reason I like it for average investors is that the additional volatility comes with a Sharpe Ratio of 1.92 – meaning it has an excellent risk-adjusted return. Diversification is pretty good, with 25% energy, 33% allocationin financials, 4% health care, 4% technology, 5% industrial and 16% consumer holdings. Top names include Assurant (NYSE: AIZ ), Velaro (NYSE: VLO ), Gamestop (NYSE: GME ) , and Phillips 66 (NYSE: PSX ). 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.

Is A Recession Necessary For The S&P 500 To Fall 20% From All-Time Highs?

Is it possible for a bear market to occur when the U.S. economy is expanding? Certainly. In spite of the obvious evidence that U.S. stock assets tend to fall long before the most prominent minds affirm contraction in the U.S. economy, an overwhelming number of analysts keep exclaiming that there is no recession in sight. Right now, U.S. stocks require clarity on rate policy more than they require anything else. Is it possible for a bear market to occur when the U.S. economy is expanding? Certainly. In fact, most bear markets are already well on their way to becoming 20% price declines long before a recession is formerly identified. Consider the most recent bearish retreat (10/07-3/09). The National Bureau of Economic Research (NBER) officially declared on 12/1/08 that the U.S. recession had started in December of 2007 – a declaration that came nearly one year after the economic downturn’s inception. Nine months before the NBER expressed its “recession” call, the S&P 500 had already plummeted close to the 20% level (March 2008.) At that moment, the Federal Reserve saved financial markets by joining JPMorgan Chase in bailing out Bear Stearns. Then, in the first week of July, five months before the NBER proclamation, the S&P 500 had descended more than the requisite 20%. And by the time anyone could count on an authenticated recession, the S&P 500 had already plummeted roughly 47.8% – close to half of its entire value. Well, okay. I suppose that the world’s best economists should err on the side of caution before making hasty decisions. Perhaps NBER, composed of academic economists from Harvard, Stanford and other top-notch universities, were quicker in warning investors prior to the 3/2000-10/2002 tech wreck? Unfortunately, nine months before the NBER expressed a March 2001 recession start in November of 2001, the S&P 500 had already made its bearish descent. (Nine months again?) It gets worse. The S&P 500 had already dropped 29% by November of 2001 and the “New Economy” NASDAQ had already plummeted 65%! In spite of the obvious evidence that U.S. stock assets tend to fall long before the most prominent minds affirm contraction in the U.S. economy, an overwhelming number of analysts keep exclaiming that there is no recession in sight. And without a recession, they say, there’s not going to be a bear. I am not sure this is an accurate statement. Since 1950, we have seen non-recession 20%-plus drops in 1962, 1966, 1978 and 1987. We have also seen non-recession drops that do not get the full benefit of the bear title (e.g., 1998’s Asian currency crisis/Long-Term Capital Management, 2011’s eurozone, etc.), yet reached the 20% threshold via “intra-day” price movement and/or “rounding.” What’s more, why do people automatically assign the recession tag to bear markets like the 3/2000-10/2002 tech wreck when the recession first began one year later in March of 2001? Perhaps because NBER later revised the recession date as having started in Q4 2000? I have no idea if we will see a bear on this correction go-around or the next 10%-19% pullback or the one after that. What I do know is that the commodity slump has resulted in ConocoPhillips (NYSE: COP ) slashing 10% of its global workforce; high paying oil jobs continue to disappear in a world of $45 oil. I also know that the Federal Reserve wants to hike overnight rates, likely raising the borrowing costs for consumers and businesses just as the Atlanta Fed expects Q3 GDP at an anemic 1.2%. Perhaps most importantly, I recognize that the U.S. economy is part of a global economy that has been decelerating. JPMorgan’s Global Manufacturing PMI is now at 50.7 where a reading below 50 would be indicative of a global manufacturing recession. In mid-August’s ” 15 Warning Signs ,” I discussed the reasons why a pullback from the market top was exceptionally likely. One week later, in ” Don’t Blame China, ” I talked about the reasons why investors should expect a relief rally. And in my Thursday (8/27) commentary, ” Are You Selling The Drama Or Buying The Rally ,” I wrote: If history teaches us that benchmarks tend to retrace half of their losses before retesting their lows – if you feel like you’ve been here before and you don’t choose to be scarred like that again – perhaps you might anticipate better buying opportunities in the weeks ahead. You should not be surprised by today’s (Tuesday, September 1) extremely volatile move lower. The S&P 500 has moved back below the correction point of 1917 because the global economy is decelerating and investors are fearful that a rate hiking campaign by the Federal Reserve might be the straw that breaks the U.S. camel’s spine. And manufacturer-dependent sector funds like Materials Select Sector SPDR (NYSEARCA: XLB ) are taking the heaviest hits. Do I think that a Fed tightening cycle might cause an imminent U.S. recession? Not if chairwoman Yellen and other committee members decide upon a sloth-like pace of one-eighth of a point every third meeting or a “one-n-done” quarter point that would not be revisited for six months. Then again, I am not sure that the recession/non-recession matters as much as others do. Right now, U.S. stocks require clarity on rate policy more than they require anything else. The longer it takes for the Fed to provide clarity, the more U.S. stocks are likely to struggle. Disclosure: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships.

September 2015, Funds In Registration

By David American Beacon Bridgeway Large Cap Growth Fund American Beacon Bridgeway Large Cap Growth Fund will seek long-term total return on capital, primarily through capital appreciation. Bridgeway is selling their LCG fund to American Beacon, pending shareholder approval. The fund will still be managed by John Montgomery and the Bridgeway team. The initial expense ratio will be 1.20%, rather above the current Bridgeway charge. The minimum initial investment is $2500. Aristotle Small Cap Equity Fund Aristotle Small Cap Equity Fund will seek long-term capital appreciation by investing in high quality, small-cap businesses that are undervalued. The fund will be managed by David Adams and Jack McPherson. The initial expense ratio will be 1.15%. The minimum initial investment is $2,500. Aristotle Value Equity Fund Aristotle Value Equity Fund will seek long-term capital appreciation by investing mostly in undervalued mid- and large-cap stocks. The fund will be managed by Howard Gleicher, Aristotle’s CIO. The initial expense ratio will be 0.68%. The minimum initial investment is $2,500. Aston/River Road Focused Absolute Value Fund Aston/River Road Focused Absolute Value Fund will seek long-term capital appreciation. The plan is to deploy that “proprietary Absolute Value® approach,” in hopes of providing “attractive, sustainable, low volatility returns over the long term.” The fund will be managed by Andrew Beck, River Road’s CEO, and Thomas Forsha, their co-CIO. The initial expense ratio will be 1.26%. The minimum initial investment is $2,500, reduced to $500 for various sorts of tax-advantaged accounts. Brown Advisory Equity Long/Short Fund Brown Advisory Equity Long/Short Fund will seek to provide long-term capital appreciation by combining both “long” and “short” equity strategies. The plan is pretty straight forward: go long on securities with “few or no undesirable traits” and short the ugly ones. They have the option of using a wide variety of instruments (direct purchase, ETFs, futures and so on) to achieve that exposure. The fund will be managed by Paul Chew, Brown Advisory’s CIO and former manager of the Growth Equity fund. The initial expense ratio will be 2.24% for investor shares and 2.49% for advisor shares. The minimum initial investment is $5,000 for investor shares and $2000 for advisor shares, which are designed to be purchased through places like Scottrade. Dana Small Cap Equity Fund Dana Small Cap Equity Fund will seek long-term growth. The plan is to create a risk-managed portfolio by using a sector-neutral, relative-value, equal-weight discipline. The large cap version of the strategy has been around for five years and has been perfectly respectable if not particularly distinguished for good or ill. The fund will be managed by a team from Dana Investment Advisers. The initial expense ratio will be 1.20%. The minimum initial investment is $1,000. Driehaus Turnaround Opportunities Fund Driehaus Turnaround Opportunities Fund will seek to maximize capital appreciation, while minimizing the risk of permanent capital impairment, over full-economic cycles. The plan is to invest in the equity and debt securities of “distressed, stressed and leveraged companies,” on the popular premise that they’re widely misunderstood and their securities are often incorrectly priced. The fund will be managed by Elizabeth Cassidy and Thomas McCauley of Driehaus. The initial expense ratio has not been released. The minimum initial investment is $10,000 for retail accounts, reduced to $2000 for retirement accounts. Ensemble Fund Ensemble Fund will seek long-term capital appreciation. The plan is to identify 15-25 high-quality companies with undervalued stock, then buy some. The fund will be managed by Sean Stannard-Stockton, Ensemble’s president and CIO. The initial expense ratio will be 2.0%. The minimum initial investment is $5,000, reduced to $1000 for IRAs and accounts established with an automatic investment plan. FFI Diversified US Equity Fund FFI Diversified US Equity Fund will seek long-term capital growth. The plan is to invest in 40-50 U.S. stocks, with a target portfolio market cap of $20 billion. The fund will be managed by a team from FormulaFolio Investments, led by CIO James Wenk. The initial expense ratio will be a stout 2.25%. The prospectus doesn’t offer any immediate evidence that the guys will overcome a high expense ratio in such a competitive slice of the market. The minimum initial investment is $2,000, reduced to $1,000 for retirement accounts and those established with an automatic investing plan. Gripman Absolute Value Balanced Fund Gripman Absolute Value Balanced Fund will seek long-term total return and income. The plan is to pursue a conservative asset allocation on the order of 30% equity/70% intermediate-term fixed income. A sliver might be in junk bonds. The fund will be managed by Timothy W. Bond. The initial expense ratio hasn’t been announced. The minimum initial investment is $2,000. Harbor Diversified International All Cap Fund Harbor Diversified International All Cap Fund will seek long-term growth of capital. The plan is to invest mostly in cyclical companies, which you typically buy when they look absolutely ghastly and sell as soon as they start looking decent. The fund will be managed by a very large team led by William J. Arah from Marathon Asset Management, a London-based adviser. Mr. Arah founded Marathon, which also serves as sub-advisor to Vanguard Global Equity. The initial expense ratio will be 1.22%. The minimum initial investment is $2,500. Iron Equity Premium Income Fund Iron Equity Premium Income Fund will seek to provide superior risk-adjusted total returns relative to the CBOE S&P 500 BuyWrite Index (BXM). The plan is to buy ETFs which track the S&P 500 while writing call options to generate income. The fund will be managed by a team from IRON Financial. The initial expense ratio will be 1.45%. The minimum initial investment is $10,000. Preserver Alternative Opportunities Fund Preserver Alternative Opportunities Fund will seek high total returns with low volatility. The plan is to hire sub-advisers to do pretty typical liquid alts stuff in the portfolio. The subs have not yet been named, though. The initial expense ratio will be 2.43%. The minimum initial investment is $2,000. Quantified Self-Adjusting Trend Following Fund Quantified Self-Adjusting Trend Following Fund (really? It feels like they consulted with Willy Wonka to select their name.) will seek “high appreciation on an annual basis consistent with a high tolerance for risk.” Do you suppose it’s really seeking a high tolerance for risk, or merely requires that prospective investors have a high tolerance? The plan is to determine the market’s trend, then invest in ETFs, leveraged ETFs or inverse ETFs. If there’s no discernible trend, they’ll invest in bonds. The fund will be managed by Jerry Wagner, President of the Flexible Plan Investments, and Dr. Z. George Yang, their director of research. The initial expense ratio will be 1.75%. The minimum initial investment is $10,000. T. Rowe Price Mid-Cap Index Fund T. Rowe Price Mid-Cap Index Fund will seek to match the performance of the Russell Select Midcap Completion Index, with a correlation of at least 0.95. The fund will be managed by Ken D. Uematsu. The initial expense ratio will be 0.32%. T. Rowe Price Small-Cap Index Fund T. Rowe Price Small-Cap Index Fund will seek to match the performance of the Russell 2000®Index with a correlation of at least 0.95. The fund will be managed by Ken D. Uematsu. The initial expense ratio will be 0.34%.