Tag Archives: seeking

Banking Earnings Soft: Buy Financial ETFs On Value?

The financial sector, which accounts for around one-fifth of the S&P 500 index, had a sluggish- to-decent Q3. Weak capital market activities and global growth worries along with a low interest rate environment dealt a blow to the space. However, modest gains in loan growth amid low interest rates, investment banking activities thanks to surge in corporate actions and cost containment efforts helped the space to stay afloat in the quarter. As evident from the big bank earnings, the sector has been an average performer. Per the Zacks Earnings Trend issued on October 14, financial earnings are expected to jump 9.6% this quarter on 3.7% lower revenues. To be more specific, easy comparisons at Bank of America Corporation or BofA (NYSE: BAC ) is leading the sector. Excluding Bank of America, results would have been much more muted than it looks now. Earnings would fall in absence of BofA’s stellar growth (read: Guide to the 7 Most Popular Financial ETFs ). Let’s take a look at the big banks’ earnings which released lately. Big Bank Earnings in Focus JPMorgan (NYSE: JPM ) reported earnings of $1.32 per share missing the Zacks Consensus Estimate by 4.4% and the year-ago earnings by 2.9%. Managed net revenue of $23.5 billion in the quarter was down 6% from the year-ago quarter. It also compared unfavorably with the Zacks Consensus Estimate of $23.8 billion. Goldman (NYSE: GS ) earned $2.90 per share in Q3, falling short of the Zacks Consensus Estimate of $3.08 per share and declining from the year-ago figure of $4.57. The shortfall in earnings reflected a fall in revenues, hurt by lower trading activity in the quarter, be it bonds, currencies or commodities (read: 3 Sector ETFs Hit Hard by the Market Sell-off ). Net revenue dived 18% year over year to $6.9 billion for the quarter. Revenues also lagged the Zacks Consensus Estimate of $7.3 billion. Lower net interest as well as non-interest income weighed on the top line. Citigroup Inc.’s (NYSE: C ) adjusted earnings per share of $1.31 for the quarter outpaced the Zacks Consensus Estimate of $1.29. Further, earnings compared favorably with the year-ago figure of $0.95 per share. Adjusted revenues of Citigroup declined 8% year over year to $18.5 billion. Also, the revenue figure missed the Zacks Consensus Estimate of $18.76 billion. Wells Fargo (NYSE: WFC ) earned $1.05/share in 3Q15 beating the Zacks Consensus Estimate by a penny. The reported figure was also above the year-ago number of $1.02 per share. The quarter’s total revenue came in at $21.9 billion, outpacing the Zacks Consensus Estimate of $21.5 billion. Moreover, revenues rose 3.3% year over year. Bank of America Corporation’s third-quarter earnings of $0.37 per share outdid the Zacks Consensus Estimate of $0.34. Further, the bottom line witnessed a significant improvement from net loss of $0.04 incurred in the prior-year quarter. Net revenue of $20.7 billion was down 2% year over year and met the Zacks Consensus Estimate. ETF Impact Despite a run of listless results from banks this week, the concerned ETFs buoyed up on the recent Fed-induced optimism. Most U.S. financial ETFs returned at least 1% since the earnings came out (as of October 15, 2015). All the aforementioned companies have considerable exposure in funds like the i Shares U.S. Financial Services ETF (NYSEARCA: IYG ) , the PowerShares KBW Bank Portfolio ETF (NYSEARCA: KBWB ) , the Financial Select Sector SPDR ETF (NYSEARCA: XLF ) , the iShares U.S. Broker-Dealers ETF (NYSEARCA: IAI ) and the Vanguard Financials ETF (NYSEARCA: VFH ) . All the funds are in green post big banks’ results, having returned in the range of 1─1.8% (as of October 15, 2015). It seems that investors are paying more heed to the market rally which could boost the weakling of this quarter – trading activities, going forward. The bond market is also displaying a strong trend on a dovish Fed and a delayed rate hike possibility. This could go in favor banks’ client activity in the fourth quarter. In any case, sooner or later, the U.S. economy is due for a lift-off and U.S. banks are now much more well-balanced than they were at the time of the last recession. All the aforementioned ETFs apart from IAI have a Zacks ETF Rank # 2 (Buy), sport compelling valuation and thus emerge as better plays than an individual stock pick. Link to the original post on Zacks.com

High Yield Bond And Healthcare: 2 ETFs To Watch On Outsized Volume

In the last trading session, the U.S. stocks rose on better-than-expected results in the financial sector and the fading prospect of interest rates hike. Among the top ETFs, investors saw the SPDR S&P 500 Trust ETF (NYSEARCA: SPY ) gain 1.5% while the SPDR Dow Jones Industrial Average ETF (NYSEARCA: DIA ) rise 1.3% and the PowerShares QQQ Trust ETF (NASDAQ: QQQ ) move higher by 1.6% on the day. Two more specialized ETFs are worth noting as both saw trading volume that was far outside of normal. In fact, both these funds experienced volume levels that were more than double their average for the most recent trading session. This could make these ETFs ones to watch out for in the days ahead to see if this trend of extra-interest continues: Market Vectors International High Yield Bond ETF (NYSEARCA: IHY ) : Volume 5.73 times average This international high yield bond ETF was in focus yesterday as around 248,000 shares moved hands compared with an average of roughly 47,000 shares a day. We also saw some price movement as IHY lost 0.6% in the last session. The big move was largely the result of investors’ drive for higher yield amid ultra-low interest rates and delayed rate hike speculation. In the past one-month period, IHY was up 0.2%. This healthcare ETF was under the microscope yesterday as more than 542,000 shares moved hands. This compares with an average trading day of around 157,000 shares and came as IHF gained 0.5% in the session. The movement can largely be blamed on the earnings release of UnitedHealth Group (NYSE: UNH ) that can have a big impact on the healthcare stocks like what we find in this ETF portfolio. IHF was down 6.1% in the past one month and currently has a Zacks ETF Rank of 1 or ‘Strong Buy’ rating with a Medium risk outlook. Link to the original post on Zacks.com Share this article with a colleague

Quant Strategies – YTD Performance Update

Now, that equity markets have experienced a nice 10%+ correction this year I thought it would be of value to look at the performance of various quant strategies year to date, especially during a tough year for stocks as 2015 has been. For explanations of the various quant strategies see the portfolios page. All equity portfolios consist of 25 stocks and were formed at the end of 2014. No changes in the holdings since that time. In the table below I list various quant strategies along with their YTD performance and drawdowns. Also, listed are various benchmark indices (highlighted in yellow). In table above, strategies that have outperformed their benchmark indices are shown in green. As you may expect, the results are mixed, some strategies outperformed, some did not. 4 of the 7 equity strategies listed outperformed both U.S. and International stocks. The consumer staples value strategy (CS Value) has led the way with a 14% YTD return plus a very low drawdown. The laggard has been trending value (TV2) at -9.59%. This is not surprising when you look at the historical data. Momentum strategies can be quite volatile. Microcaps have also done well at 8.88% YTD. Enhanced Yield (EY) and Utility value have also lagged in performance. The ‘build your own index’ strategy (large SHY) has outperformed the SPY but with higher drawdown. Yield strategies in general have had a rough time in 2015. I also listed the TAA bond strategy in the table which has slightly underperformed the Vanguard Total Bond Market ETF (NYSEARCA: BND ) and outperformed the V anguard Total International Bond ETF (NASDAQ: BNDX ). That’s it. A quick look at some 2015 YTD performance figures for various quant strategies. In my next post I’ll take a look at a very simple way to further enhance quant strategy performance. Share this article with a colleague