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Worried About Looming Rate Hike? Try This Ex-US REIT ETF

The Federal Reserve Chair, Janet Yellen’s recent indication of a possible rate hike has possibly made investors putting their capital on real estate sector or real estate investment trust (REIT) in the U.S. jittery. This is because a rise in interest rates leads to a high borrowing cost for the REITs on which they are highly dependent. Moreover, high-dividend yielding stocks like REITs usually become less attractive when treasury yields rise amid rising interest rate. It is for this reason investors should definitely take a look at the SPDR MSCI International Real Estate Currency Hedged ETF (NYSEARCA: HREX ) , which focuses on the ex-U.S. REIT stocks. The fund is launched by State Street Global Advisors. HREX in Details HREX tracks the performance of the MSCI World ex USA IMI Core Real Estate Capped 100% Hedged to USD Index, which is a free float-adjusted market capitalization-weighted index, aimed to measure the performance of stocks in the MSCI World ex USA IMI Index. In order to be a part of the index, a company needs to generate at least 75% of its revenues from real estate activities related to core property types, including industrial, office, retail, residential, health care, hotel and resort, data centers, and storage. Since the fund’s investment is denominated in foreign currencies, it is susceptible to fluctuations in exchange rates between such currencies and the U.S. dollar. However, the Index applies a hedging methodology against such fluctuations by employing a one-month forward rate against the total value of the non-U.S. denominated securities in the Index. The fund replicates this hedging technique by entering into foreign currency forward contracts. The ETF comprises 261 stocks with top holdings including Unibail-Rodamco SE ( OTCPK:UNRDY ) (4.77%), Sun Hung Kai Properties Limited ( OTCPK:SUHJY ) (4.64%) and Mitsubishi Estate Company Limited ( OTCPK:MITEY ) (3.01%). The top 10 holdings constitute around 31% of the fund. Considering country-wise allocation, Japan, U.K. and Hong Kong occupy the top three positions with shares of 19.50%, 14.85% and 14.79%, respectively. The fund charges 48 bps in fees from investors per year (see all Real Estate ETFs here). How Does it Fit in a Portfolio? REITs are required to distribute at least 90% of its annual taxable income to shareholders annually in the form of dividends. Since the fund invests in ex-U.S. real estate sector, it definitely shields the investors enjoying the high dividend yield from the dangers of an impending rate hike in the U.S. Further, strengthening of dollar against most of the major currencies is attracting investments in the non-U.S. real estate sector, particularly hotels, office buildings and retail complexes. In addition, along with ongoing urbanization and fast-growing middle class in the emerging economies, easing of restrictions on foreign direct investments is leading to increased flow of international capital into REITs in these economies. In the first half of 2015, foreign investment turnover in Asia-Pacific escalated 9% year-on-year to $13 billion . All this bode well for the fund as investors can tap the booming real estate sector in the non-U.S. countries by investing in it (read: A Comprehensive Guide to REIT ETFs ). ETF Competition HREX definitely earns a point over most of the ex-U.S. real estate ETFs because it is currency hedged. Still, there are a number of such ETFs that worth to mention. A couple of top global real estate ETF includes the SPDR Dow Jones International Real Estate ETF (NYSEARCA: RWX ) and the Vanguard Global ex-U.S. Real Estate ETF (NASDAQ: VNQI ) . RWX tracks the Dow Jones Global ex-U.S. Real Estate Securities Index and focuses on publicly traded real estate securities in developed and emerging countries excluding the U.S. It has an asset base of $4.7 billion and focuses heavily on Japan, U.K. and Australia. On the other hand, VNQI tracks the S&P Global ex-U.S. Property Index and focuses on REITs in emerging markets and developed markets outside the U.S. It has amassed nearly $3 billion in assets and gives high preference to Asia Pacific countries. However, VNQI looks attractive than RWX on both the cost and yield fronts. RWX charges 59 bps in fees and has a dividend yield of 3.24% while VNQI charges 24 bps in fees and has a robust dividend yield of 4.45%. Link to the original article on Zacks.com

3 Mid Cap Growth ETFs To Buy For Q4

Increasing uncertainty pertaining to the China turmoil, global growth worries, slumping commodities and timing of the interest rates hike in the U.S. are general concerns. In this backdrop that has lasted for quite some weeks now, the broader U.S. market has trapped itself in a nasty web of trading. While the U.S. economy is on a firmer footing, calling for a rates hike sometime later in the year, the fundamentals in other developed and developing markets are deteriorating. This is especially true given the slowdown in Japan, sluggishness in Europe, technical recession in Canada and weak growth in emerging markets. Additionally, investors are wary of third-quarter earnings, which are expected to drop 5.8% on 3.9% lower revenues for the S&P 500 index, as per the Zacks Earnings Trends . Moreover, the ongoing battle over the funding for Planned Parenthood between Republicans and Congress could lead to the possible shutdown of the federal government at the end of the month. All these conditions are increasing the volatility in the market, putting the stocks’ returns at risk. However, the bullish sentiment for U.S. stocks remains intact given the substantial improvement in the economy and a healing job market. In such a scenario, investors seeking to participate in the growing economy, but are worried about uncertainty, should consider mid-cap stocks in the basket form. Why Mid Caps? While large companies are normally known for stability and smaller ones for growth, mid caps offer the best of both the worlds, allowing growth and stability in portfolios simultaneously. These middle-of-road securities are arguably safer options and have the potential to move higher in turbulent times, especially if political issues or financial instability creeps into the picture. Further, honing in on growth securities in this capitalization level allows investors to earn more returns. This is because growth stocks refer to those high quality stocks that are likely to witness revenues and earnings increase at a faster rate than the industry average. These stocks harness their momentum in earnings to create a positive bias in the market, resulting in rocketing share prices. There are currently a number of ways to tackle this overlooked part of the market segment through ETFs, giving exposure to various styles including broad, value and growth. With such a large number of choices, it may be difficult to choose the right funds. After all, many of these products target the same securities though they have different tilts, weighting schemes or focus for their portfolios. How to Pick Right ETFs? One way to narrow down the list is to utilize the Zacks ETF Rank. This system looks to find the best ETFs in a given market segment based on a number of factors such as industry outlook and expert surveys; and then apply ETF-specific factors (like expense ratios and bid/ask spreads). And given the rise of the outlook for mid caps of late, it shouldn’t be too surprising that a few have moved to the top Zacks ETF Rank of 1 (Strong Buy) from Zacks ETF Rank 2 (Buy) or 3 (Hold) in the latest ratings’ update. Below, we have highlighted these three surging funds in brief detail for investors seeking a way to make a great play on the overlooked mid cap growth space in basket form: Vanguard Mid-Cap Growth ETF (NYSEARCA: VOT ) This fund follows the CRSP US Mid Cap Growth Index. Holding 177 securities in its basket, it is highly diversified across each component with none holding more than 1.5% share. In terms of sector exposure, industrials occupies the top position at 19.3%, followed by consumer services (19.2%), technology (14.7%), and consumer goods (14.2%). The product has managed nearly $3.4 billion in its asset base and trades in moderate volume of around 177,000 shares. Expense ratio came in at 0.09%. VOT has lost 1.6% in the year-to-date timeframe. iShares Morningstar Mid-Cap Growth ETF (NYSEARCA: JKH ) With AUM of $217.4 million, this product tracks the Morningstar Mid Growth Index. In total, it holds 204 mid cap securities with none accounting for more than 1.53% of assets. Information technology, industrials, consumer discretionary, health care and financials are the top five sectors with double-digit exposure each. The ETF charges 30 bps in annual fees and trades in a light volume of less than 5,000 shares a day. It has shed 2.2% so far this year. Vanguard S&P Mid-Cap 400 Growth ETF (NYSEARCA: IVOG ) This ETF tracks the S&P MidCap 400 Pure Growth Index, charging investors 20 bps in fees per year. It has amassed $379.3 million in its asset base while sees a light volume of less than 13,000 shares. The fund holds 229 stocks with a well-diversified portfolio as each firm holds no more than 1.4% of total assets. However, it is skewed toward financials with one-fourth share while information technology, consumer discretionary, industrials and health care round of the top five. The ETF has gained 1.6% in the year-to-date timeframe. Link to the original article on Zacks.com

Q4 Outlook For Telecom ETFs

The U.S. telecom industry has lately emerged as an intensely contested space where success thrives largely on technical superiority, quality of services and scalability. Thus, in order to stay abreast of competition, existing players need to be constantly on their toes to introduce innovative products or merge with other companies despite strict vigil by the Federal Communications Commission (FCC). In the near future, the U.S. telecom industry is slated to witness further mergers and acquisitions (M&A) and product diversifications. Spectrum Auctions to Boost Network Capacity Wireless networks are the key for future growth of the overall telecom industry. As wireless networks run on radio frequency, spectrums (airwaves) have naturally become the most sought after commodity in the industry. The FCC, which concluded an Advanced Wireless Servies-3 (AWS-3) spectrum auction in Jan 2015, accumulated a record-breaking $44.89 billion. The FCC also plans to conduct a broadcast incentive (spectrum with TV broadcasters) auction in 2016 to ease the pressure on wireless operators and thereby ensure uninterrupted transmission of data/voice packets. Unexpected high bidding for AWS-3 spectrum clearly indicates that telecom operators expect the demand for mobile data and video services to rise substantially in the near future. The spectrum license winners from different regions are gearing up to upgrade their respective networks to gain a competitive edge. Wireless network standards are continuously evolving around the globe to offer faster speed. This, in turn, is likely to result in increased capital expenditures and a surge in demand for telecom infrastructure gears. Momentum to Continue The need to remain connected is a human need. An era of digitization and technology is essentially built on this human need. It is here that telecommunications come to the fore as a necessary utility. The need for telecommunications in both rural and urban areas as well as its role in the infrastructural development of an economy is of vital importance. Telecommunications is one of the few industries to have seen rapid technological improvement even during recession. Owing to the significance of this service as an infrastructure product, we expect the overall economic dynamics to shift in the industry’s favor. Unprecedented growth in high-speed mobile Internet traffic, in particular with respect to wireless data and video, has transformed the industry into the most evolving, inventive and keenly contested space. Any new network standard that emerges aims at providing faster data connectivity, quick video streaming with high resolution and rich multimedia applications. The U.S. telecommunications industry is presently comfortably settled on the growth trajectory and the momentum is likely to continue through 2015. The rising demand for technologically superior products has been a silver lining for the telecommunication industry in an otherwise tough environment. Uninterrupted advancement in telecom technologies helped telecom operators adopt newer business models in order to boost revenues. ETFs to Tap the Sector Against this backdrop, investors seeking to tap the growth potential of the highly competitive telecom sector may take a closer look at the ETF approach to reap maximum benefit from investing in this sector. This technique can help to spread out assets among a wide variety of companies and reduce company specific risks for a very low cost. Below, we highlight the ETFs in this sector in greater detail for Telecom ETF investors: iShares Global Telecom ETF (NYSEARCA: IXP ) IXP is one of the most popular Telecom ETF available in the market. Launched in Nov 2001, this ETF tracks investment results before fees and expenses corresponds to the price and yield performance of the S&P Global 1200 Telecommunications Sector Index. The fund has nearly $418.3 million of assets under management and an average trading volume of roughly 63,886 shares a day in the last 3 months. The fund charges an expense ratio of 47 basis points a year. The fund holds 30 stocks in its portfolio and has a concentrated approach in the top ten holdings with 72.79% of the asset base invested in them. Among individual holdings, top stocks in the ETF include AT&T Inc. (NYSE: T ), Verizon Communications Inc. (NYSE: VZ ), and Vodafone Group Plc. (NASDAQ: VOD ) with asset allocation of 17.02%, 15.79% and 7.73%, respectively. Integrated Telecommunication Services, Wireless Telecommunication Services and Alternative Carriers are the three major sectors with asset holdings of 73.72%, 24.66% and 1.13% respectively. This ETF offers a dividend yield of 3.63%. Vanguard Telecom Services ETF (NYSEARCA: VOX ) Another popular fund in the Telecom ETF space is VOX. Launched in Sep 2004, this ETF seeks to track the performance corresponding to the benchmark MSCI US Investable Market Telecommunication Services 25/50 Index. It has assets under management of nearly $957.4 million and an average trading volume of roughly 74,143 shares a day in the last 3 months. The fund charges an expense ratio of 12 basis points a year. The fund holds 32 stocks in its portfolio and has a concentrated approach in the top ten holdings with 71.40% of the asset base invested in them. Among individual holdings, top stocks in the ETF are AT&T, Verizon, and SBA Communications Corp. (NASDAQ: SBAC ). Integrated Telecommunication Services, Alternative Carriers and Wireless Telecommunication Services are the three major sectors with asset holdings of 61.80%, 19.40% and 18.60%, respectively. This ETF offers a dividend yield of 2.69%. SPDR S&P Telecom ETF (NYSEARCA: XTL ) Incepted in Jan 2011, XTL ETF tries to match the returns of the S&P Telecom Select Industry Index, before expenses. The fund manages an asset size of nearly $24.7 million and an average trading volume of roughly 20,769 shares a day in the last 3 months. The fund charges an expense ratio of 35 basis points a year. The fund holds 56 stocks in total in its basket. However, this ETF is not following any concentrated approach as the top ten stocks hold only 26.86% of the asset base invested in them. Among individual holdings, top stocks in the ETF include Motorola Solutions Inc. (NYSE: MSI ), Ubiquiti Networks Inc. (NASDAQ: UBNT ) and Frontier Communications Corp. (NASDAQ: FTR ) with asset allocation of 3.00%, 2.79% and 2.77%, respectively. Communications Equipment, Integrated Telecommunication Services, Alternative Carriers, Wireless Telecommunications Services and Application Software are the five major sectors with asset holdings of 59.46%, 15.24%, 11.83%, 11.54% and 1.61% respectively. This ETF offers a dividend yield of 1.24%. iShares U.S. Telecommunications ETF (NYSEARCA: IYZ ) Incepted in May 2000, IYZ ETF tracks investment results before fees and expenses corresponds to the price and yield performance of the Dow Jones US Select Telecommunications Index. The fund manages assets worth of nearly $407.11 million and an average trading volume of roughly 235,547 shares a day in the last 3 months. The fund charges an expense ratio of 45 basis points a year. The fund holds 24 stocks and has a concentrated approach in the top ten holdings with 61.97% of the asset base invested in them. Among individual holdings, top stocks in the ETF include AT&T, Verizon, and SBA Communications with asset allocation of 11.85%, 10.40% and 5.85%, respectively. The four major sectors of this ETF include Integrated Telecom, Wireless Telecom, Alternative Carriers and Communications Equipment with asset holdings of 48.42%, 29.74%, 18.47% and 3.08% respectively. This ETF offers a dividend yield of 2.49%. Fidelity MSCI Telecommunications Services Index ETF (NYSEARCA: FCOM ) Incepted in Oct 2013, FCOM ETF tracks investment results before fees and expenses corresponds to the performance of the MSCI USA IMI Telecommunication Services 25/50 Index. The fund manages assets worth of nearly $105.6 million and an average trading volume of roughly 33,447 shares a day in the last 3 months. The fund charges an expense ratio of 12 basis points a year. The fund holds 25 stocks and has a concentrated approach in the top ten holdings with 69.86% of the asset base invested in them. Among individual holdings, top stocks in the ETF include Verizon, AT&T and CenturyLink Inc. (NYSE: CTL ), with asset allocation of 22.56%, 22.08% and 4.36%, respectively. Diversified Telecommunication Services and Wireless Telecommunication Services are the two major sectors of this ETF with asset holdings of 81.63% and 18.07%, respectively. This ETF offers a dividend yield of 3.13%. Link to the original article on Zacks.com