Tag Archives: seeking-alpha

ETF Update: 5 New Funds To Be Thankful For

Summary Every week, Seeking Alpha aggregates ETF updates in an effort to alert readers and contributors to changes in the market. There were 5 ETF launches over the last 2 weeks, a slowdown from the 17 launches in the first half of November. Have a view on something that’s coming up or a new fund? Submit an article. Welcome back to the SA ETF Update. My goal is to keep Seeking Alpha readers up to date on the ETF universe and to gain some visibility, both for the ETF community, and for me as its editor (so users know who to approach with issues, article ideas, to become a contributor, etc.). Every weekend, or every other weekend (depending on the reader response and submission volumes), we will highlight fund launches and closures for the week, as well as any news items that could impact ETF investors. I hope all my American readers had a delicious Thanksgiving and a great holiday weekend. Mine is always a great event with +20 family members converging upon Chicago (I’m still celebrating the fantastic Bears/Packers upset from Thursday). However, every Thanksgiving since the beginning of my career has inevitable involved the following vague question: “So, what do you think of the market?” My solution last year was to sign questioners up for Seeking Alpha’s Wall Street Breakfast , and I must say the conversations about the economy were much more rewarding this time around. Now if only we could skip “so, who are you voting for in 2016?” Always my cue to get seconds of sweet potatoes. Fund launches for the week of November 16th, 2015 Fund launches for the week of November 23rd, 2015 Deutsche Bank (NYSE: DB ) launches a pair of multifactor smart-beta ETFs (11/24): The Deutsche X-trackers FTSE Developed ex US Enhanced Beta ETF (NYSE: DEEF ) and the Deutsche X-trackers Russell 1000 Enhanced Beta ETF (NYSE: DEUS ) track benchmarks derived from their indexes, but with a smart beta twist. According to the press release , “both FTSE Russell Comprehensive Factor indexes weight each stock within their respective underlying benchmark based on five academically-proven characteristics that influence the risk and performance of stocks: Value, Quality, Momentum, Volatility and Size.” FlexShares rolls out a fund of funds ETF (11/24): Northern Trust’s (NASDAQ: NTRS ) FlexShares Real Assets Allocation Index Fund (NASDAQ: ASET ) seeks to achieve optimal exposure to the three underlying ETFs while limiting volatility by investing in three FlexShares ETFs. This are the FlexShares Morningstar Global Upstream Natural Resources Index ETF (NYSEARCA: GUNR ), the FlexShares STOXX Global Broad Infrastructure Index ETF (NYSEARCA: NFRA ) and the FlexShares Global Quality Real Estate Index ETF (NYSEARCA: GQRE ). According to its homepage, the fund will “provide investors with a core real assets allocation that helps address their inflation-hedging, diversification, and income needs.” There were no fund closures for the weeks of November 16th and 23rd, 2015 Have any other questions on ETFs or ETNs? Please comment below and I will try to clear things up. As an author and editor I have found that constructive feedback is the best way to grow. What you would like to see discussed in the future? How can I improve this series to meet reader needs? Please share your thoughts on this first edition of the ETF Update series in the comments section below. Have a view on something that’s coming up or a new fund? Submit an article.

The V20 Portfolio – Relative Calm

Summary The V20 Portfolio declined by 0.51%, less than S&P 500’s gain of 0.04%. The share repurchase program will continue to support Conn’s. I wouldn’t worry too much about MagicJack. Despite lower activation, the company continued to produce good cash flow. The V20 portfolio is an actively managed portfolio that seeks to achieve annualized return of 20% over the long term. If you are a long-term investor, then this portfolio may be for you. You can read more about how the portfolio works and the associated risks here . Always do your own research before making an investment. Read last week’s update here ! The S&P 500 was essentially flat this week, rising only 0.04%, beating the V20 Portfolio’s performance of -0.51%. While the V20 Portfolio didn’t beat the index, considering its historical volatility, the “decline” was inconsequential. Portfolio Update Our biggest position, Conn’s (NASDAQ: CONN ), continued to rally, rising 5% from $25.72 to $27.02. This echoes my sentiment in my previous update, that the company’s share repurchasing activity will continue to buoy the share price. As the company inches closer to its Q3 earnings in December, it would appear that investors are quite optimistic (or at least more optimistic than before). Month to date, shares have risen by 42% from its low in October. Last week I also mentioned that we should pay attention to the consumer sentiment index, which could impact investor expectations, especially for the retail sector. Recently we’ve seen several retail stocks fall (e.g. Walmart, Best Buy). The final consumer sentiment index for November was 91.3, which was higher than October’s reading of 90.0. This hasn’t stopped investors from dumping retail stocks however. Fortunately for us, Conn’s buyback program will offset this near-term downward pressure. MagicJack (NASDAQ: CALL ), previously our largest position, continues to account for a substantial portion of the entire portfolio (~20%). It was quite surprising when I heard of news of a short attack on the stock. MagicJack can possibly take the title for the worst short candidate in the world with its high cash balance and high cash flow generation. These are the reasons why I still want the V20 Portfolio to get some exposure to the stock in the first place. I haven’t bothered to write a piece rebuking the short pitch, since it doesn’t reveal anything that we don’t all know already. The facts are right, but everyone is entitled to their own interpretation. Ever since day one, I believed that MagicJack’s value is derived from a core group of customers that will renew year after year. Now that shares have appreciated from a few months ago, more value has to come from growth. But this doesn’t change the fact that the company still has a good business (albeit declining) that is generating cash flow year after year. Furthermore, growth opportunities come at almost no cost to MagicJack. There aren’t expensive projects that would require a truckload of cash or any upfront commitments that would put a drag on the company’s current operation if things don’t go their way. In other words, the company can’t really lose with these expansions Looking Ahead Conn’s will report Q3 earnings next month. From a sales perspective, we know that Q3 numbers will experience a boost from new stores. The company releases monthly sales data, so the revenue increase should be expected. The determining factor will be the company’s bad debt expense, which forecasts future delinquency rates. The company has made significant improvements in its credit policy, so I believe that the number could improve. After all, the company is now lending to more credit-worthy customers. Dex Media (NASDAQ: DXM ) is still undergoing restructuring negotiations. The forbearance period was supposed to expire on Monday, but it was extended since the negotiation is still ongoing. It would seem that the forbearance period is really just a legal nuisance, and could be dragged on while negotiations take place. Nevertheless, I do believe that Dex Media is very close to its end-game, and shareholders will soon know the results of the restructuring. The amended forbearance period expires on December 14th, so keep your eyes peeled for any new developments. Editor’s Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

Mixed Views On Emerging Markets: Funds To Buy And Sell

There are mixed views on emerging markets now. According to a report from Bank of America Merrill Lynch, fund managers have mostly been pessimistic about emerging-market equities since 2001. On the other hand, some strategists at leading banks and financial companies believe that securities from emerging markets may have hit their lowest point. Amid the contradictory opinions, certain market experts are of the view that investors often invest in emerging market funds too late or they stay invested for too long. So, while buying certain favourably ranked emerging market funds at a discount now should be a prudent move, investors may also dump certain Sell-rated funds that their portfolio will not miss. The Pessimism According to Bank of America Merrill Lynch’s monthly survey, fund managers are the most underweight on emerging-market equities against developed-market equities since the survey began in 2001. While post 2009, fund managers’ relative positioning had jumped and stayed mostly in the green till 2013, the sentiment soured after that. In 2014, the sentiment dropped to a new low before rebounding in late 2014 and early 2015. However, the sentiment is the most pessimistic now. The bearish outlook is concentrated mostly on Asia. Investors are apprehensive about the slowdown in China’s economy while the U.S. central bank may hike rates. The International Monetary Fund (IMF) meeting on Nov 30 is also crucial. Investors fear further devaluation in the Chinese currency but not before IMF adds the yuan to its Special Drawing Rights basket of currencies. And if this happens, Bank of America strategists fear that the markets will move even lower. Goldman Sachs projects that yuan traded at offshore rate may weaken by 2.5% to 3% against the dollar in the next 2 months. Eventually, the devaluation of yuan may impact other emerging-market currencies, as they are often influenced by the monetary policies in the world’s second-largest economy, China. The Contrarian View Meanwhile, market watchers at a number of leading banks and financial institutions have said that they believe asset values for emerging markets have hit a rock bottom. In fact, the views come from the likes of Bank of America, Goldman Sachs and Barclays PLC. Following three continuous years of losses, markets and assets from developing nations are poised for a rebound. According to Morningstar, in the 12 months ended October, emerging-market stock funds traded in the US dropped an average 13.4%. A major indicator of valuations for emerging markets is the MSCI Emerging Markets Index, which is down 30% from the high achieved in 2011. The index is currently trading at approximately 12x its earnings estimates. Additionally, the index’s valuation is nearly three times lower than the S&P 500’s current figure. This is why analysts at Barclays believe that prices of emerging market securities are significantly lower than their intrinsic value. Over the six-month period since the last three American market tightening cycles began, global markets have gained an average 15%. Strategists are also hopeful that emerging markets might rebound in 2016. They say that it might not mirror the “roaring”2000s, but 2016 might be the year the emerging markets “find their feet”. 2 Emerging Market Funds to Buy As mentioned earlier, investors should not miss the buying opportunity. An uptrend in emerging economies brings good tidings for investment instruments from these countries. Many of them currently have reasonable valuations compared to their historical averages. Below we present 2 International Bond – Emerging Market mutual funds that carry either a Zacks Mutual Fund Rank #1 (Strong Buy) or Zacks Mutual Fund Rank #2 (Buy). Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund. Fidelity New Markets Income (MUTF: FNMIX ) fund invests the lion’s share of its assets in emerging markets or makes other investments that are economically linked to emerging markets that have stock markets as defined by MSCI. These emerging market countries also may also be the ones with low- to middle-income as classified by the World Bank. FNMIX currently carries a Zacks Mutual Fund Rank #1. FSRPX has gained respectively 3.7% and 0.2% in the year-to-date and 1-year periods. The 3- and 5-year annualized returns are 1.2% and 5.4%, respectively. Annual expense ratio of 0.84% is lower than the category average of 1.16%. Goldman Sachs Emerging Market Debt A (MUTF: GSDAX ) predominantly invests in emerging market debt securities. These instruments may be issued by governments as well as corporate entities. To gain exposure to certain emerging economies, GSDAX may use structured securities or derivatives among others. GSDAX currently carries a Zacks Mutual Fund Rank #2. GSDAX has gained respectively 2.8% and 0.5% in the year-to-date and 1-year periods. The 3- and 5-year annualized returns are 1.5% and 5.1%, respectively. Annual expense ratio of 1.24% is higher than the category average of 1.16%. 2 Emerging Market Funds to Sell It is also important to not stay invested in certain underperforming funds. For investors not ready to bet on the emerging markets now or for investors who have lost plenty staying invested in some emerging market funds, below we present 2 funds that either carry a Zacks Mutual Fund Rank #4 (Sell) or Zacks Mutual Fund Rank #5 (Strong Sell). Eaton Vance Emerging Markets Local Income A (MUTF: EEIAX ) gains exposure to the emerging economies by investing in securities and derivatives among other instruments. Bulk of EEIAX’s assets are invested in securities denominated in currencies of emerging market countries, fixed income instruments that are issued by emerging market entities, and in emerging-market denominated derivative instruments. EEIAX currently carries a Zacks Mutual Fund Rank #5. EEIAX has lost respectively 10.6% and 16.5% in the year-to-date and 1-year periods. The 3- and 5-year annualized returns are negative 7.2% and negative 2.5%, respectively. Annual expense ratio of 1.25% is higher than the category average of 1.16%. PIMCO Emerging Markets Currency A (MUTF: PLMAX ) invests most of its assets in currencies of emerging market countries or in fixed income instruments denominated by these currencies. PLMAX currently carries a Zacks Mutual Fund Rank #4. PLMAX has lost respectively 5.2% and 9.7% in the year-to-date and 1-year periods. The 3- and 5-year annualized returns are negative 4.7% and negative 2.4%, respectively. Annual expense ratio of 1.25% is lower than the category average of 1.58%. Original post