Tag Archives: setpageviewname

iShares MSCI South Korea Capped ETF: 12-Month Strategy

Summary With the exception of exports, South Korea is on track for recovery from slowed economic growth. This is reflected in the growth projection for annual GDP, retail sales, consumer spending, consumer confidence, and consumer credit. Samsung Electronics’ financial performance has been an area of concern, although valuation and conservative growth ahead slightly offset this risk; 21.52% of the fund’s assets invests into Samsung Electronics. Investing in the MSCI South Korea Capped ETF and holding for 12 months is an excellent strategy for investors to take advantage of the fund’s low valuation. Based on my investigation of South Korea’s economy, I have determined that investing in South Korea and holding for 12 months presents a strategic opportunity for investors. The iShares MSCI South Korea Capped ETF (NYSEARCA: EWY ) has had a sharp decline in price since August 2014. With the projected holistic growth ahead for South Korea, with the exception of a slight decline in exports, a rebound in the fund’s price is certainly ahead. The fund is currently trading at 51.18, a far cry from its 52-week high of 66.99 . The current valuation of the fund provides further benefits for investors, as the drop in fund price due to slowed economic growth has been sensationalized. Investors should turn their attention to the iShares MSCI South Korea Capped ETF, as its valuation is among the lowest for ETFs investing in Asia: P/E: 10 P/B: 0.97 P/S: 0.74 Further benefits of this fund include the fact the fund invests into a diverse portfolio of companies, with the top 10 holdings only accounting for 44.6% of the fund. The fund’s industry approach is also very diverse, as it invests into the following industries: Technology: 37.82% Financial Services: 14.5% Consumer Cyclical 13.54% Industrials: 11.46% Basic Materials: 8.89% Consumer Defensive 7.73% The remainder of the fund’s assets invest into the following industries: healthcare, communication services, energy, and utilities. South Korea Economic Outlook The overall outlook for Korea’s economy is very positive, and presents clear potential for investors to profit by investing now and holding until the 2nd quarter of 2016. Annual GDP growth will continue to be conservative and increase to 2.93% by the 2nd quarter of 2016. Exports will fall slightly during the next 12 months, although South Korea has the relative strength of having diverse exports and being a strong oil import country; 31% of its imports are petroleum. Consumer Spending is projected to increase by 1.5%, while growth in retail sales is projected to increase from its current level of 0.8% to 4.51%. Consumer confidence and consumer credit will also both increase by 1% and 7.4% respectively. Overall, considerable growth and recovery is ahead for South Korea, with the only concern being slowed growth in exports due to the appreciation of its currency. Investors can benefit from the drop in fund price, which has resulted from temporary slowed economic growth in South Korea. GDP growth is expected to recover, and it is clear to see that the increase in retail sales, consumer spending, consumer confidence, and consumer credit will all attribute to a recovery in the performance of the fund. Over 20% Samsung: An Ambivalent Outlook One weakness of the fund has been Samsung Electronics ( OTC:SSNLF ), which has recently had slowed growth due to its loss of its market share for smart phones in China and India . Although the outlook for South Korea is overall favorable, the fact that this company represents over 20% of the fund’s portfolio presents a threat to the fund’s performance. Past and recent performance, valuation, and future outlook for the company provide a mixed outlook. The company recently posted 2nd-quarter results for 2015 , which produced somewhat disappointing results: The company’s revenue fell by 2% quarter on quarter. The company’s operating profit fell by 15% from its level one quarter ago. The appreciation of the South Korea Won, and slowed sales of global smart phones and tablets attributed to this loss. The company’s future outlook and relative advantage in its industry make things look more favorable for the company: The company has extremely attractive valuation : its P/E is 8.75, P/S is 0.77, and P/B is 0.95. While concerns due to past performance are befitting, it is clear that the company is still undervalued, and could be a wise endeavor if coupled with recovery and growth. The following mean projections provide further insight for the future growth outlook for Samsung Electronics: Between December 2015 and 2016, sales are projected to increase by 3.3% Between December 2015 and 2016, EPS are projected to increase by 6.5% While this growth is not very substantial, and not enough to represent full recovery from past financial performance, it is clear to see that the combination of attractive valuation and moderate growth ahead will not make Samsung Electronics a threat to the portfolio’s performance. Moreover, the remaining portion of the fund’s portfolio is extremely diverse, providing diverse exposure to South Korea’s projected growth and recovery for the next 12 months. Conclusion Slowed growth and projected recovery in South Korea have both created an excellent buy opportunity. This fund has better valuation than the majority of ETFs that invest into high growth countries in Asia, such as Indonesia , the Philippines , Vietnam , and Thailand . A 12-month investment strategy is a clear ideal starting point, while a long-term hold would be more suitable for a country in Asia with higher growth; the catch is that funds with exceptionally low valuation are hard to find, unless investors are willing to consider closed-end funds . The economic stability of South Korea, growth ahead, and attractive valuation of the fund, all attribute to this being a conservative endeavor for investors. This ETF may be the best means to access South Korea’s economic growth and recovery. Investors who feel extremely confident about South Korea’s potential for recovery, may find it ideal to invest with triple the leverage, via the Direxion Daily South Korea Bull 3X ETF (NYSEARCA: KORU ). 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.

Pioneer Municipal High Income Looks Attractive Here

Summary High tax exempt yield of nearly 7%. Very low leverage cost using auction rate preferreds. 7% discount to NAV for a fund that often trades at a premium. It looks like the Federal Reserve is getting ready to raise the short-term Fed Funds rates before the end of this year. Currently the Fed keeps the target rate in a range from zero to 25 basis points, or an average of 0.125%. Most likely the initial rate increase will be quite modest. There are several ways the Fed can increase the rate. Some possible options are: – Eliminate the range concept and set the new target interest rate at 0.25%. (average increase of 0.125%) -Bump up the range slightly to 0.125%-0.375%. (average increase of 0.125%) -Bump up in the range by 25 basis points to 0.25%-0.50%. I don’t think any of these rate increase options would surprise the market, and it is quite likely that the more important longer-term rates (like the 10-year Treasury rate) have already discounted any Fed rate increase. It wouldn’t surprise me to see a drop in longer-term rates once the uncertainty about the first Fed rate hike has passed. The 10-year yield in the US is now about 40 basis points higher than the 10-year yields in Spain and Italy, so there is plenty of room for a drop here. In years since 2008, there have been major changes in the financing of muni bond CEFs. The CEF auction rate preferred (e.g., ARP) market basically froze up in early 2008. There has been no new ARP financing since then. There was about $60 in billion in ARP financing outstanding in 2008, but most of this has been redeemed since then. A number of new leveraging options to replace ARP financing have been developed for muni bond CEFs, but these newer financing tools are currently more expensive than ARP financing by 50 basis points or more. The muni CEFs that have replaced ARP financing with these newer forms of leverage have lower earnings than before, which leads to lower sustainable dividends. Funds that have kept their ARP financing deserve to sell at a premium, or at least a lower discount to NAV. The Pioneer Municipal High Income Fund (NYSE: MHI ) is a leveraged national municipal bond fund. It seeks high current income exempt from regular Federal income tax with capital appreciation through investment in investment grade US tax exempt municipal securities. I have discussed various factors below, which I use to evaluate municipal bond closed-end funds. Note: Data below is sourced from the Pioneer Investments web site unless otherwise stated. Factor #1: What is the distribution rate? MHI currently has a high distribution yield of 6.91%. It pays a regular monthly dividend of $0.07 per share or an annual distribution of $0.84. Factor #2: What is the likelihood the fund can raise its monthly dividend? To determine this, I look at the Average Earnings/Current Dividend Ratio. This ratio tells you whether or not a fund is earning its current dividend. If the value is well above 100%, it means the fund can easily afford to raise its distribution rate. For MHI, the average earnings for April, 2015 was $0.0712, so the latest Average Earnings/Current Dividend ratio = 101.7%. This factor is a slight positive, since MHI over-earned its last distribution. There is a large positive value for “Undistributed Net Investment Income” or UNII Balance of +0.1622, which means that MHI has over two months of interest in reserve, which can cover future monthly shortfalls that may develop for quite some time. Factor #3: What is the Expense Ratio? I look at the Baseline expense ratio, which does not include leverage costs. MHI has a baseline expense ratio of 1.03%, which is reasonable for a fund with attractive low cost leverage. Factor #4: What is the discount to NAV? MHI is currently selling at a -7.46% discount to NAV. The 6-month average premium is 1.75%. The one year Z statistic is -1.94. So on a one-year basis, the discount is nearly two standard deviations below average. Overall, this factor is a big positive for MHI. Source: cefanalyzer Factor #5: How much leverage is used, and what is the borrowing cost? In the last annual report, the fund reported that 25% of the total managed assets were financed by leverage obtained through ARP financing. The maximum rate for each series is 125% of the 7 day commercial paper rate or adjusted Kenny rate. Dividend rates on APS ranged from 0.088% to 0.261% during the year ended April 30, 2015. This leverage is highly favorable and is a major positive factor for MHI. Factor #6: What is the AMT exposure? The fund did not provide recent AMT data, but up to 25% of the fund may be invested in securities subject to AMT. For this reason, this fund may not be ideal for investors with heavy AMT exposure. Factor #7: What is the credit quality? This is the S&P ratings quality breakdown for MHI as of 6/30/2015: AAA 6.82% AA 21.22% A 5.85% BBB 18.88% BB 8.51% B 8.32% CCC 2.35% Not Rated 26.52% MHI has medium to high credit risk with an average credit rating around BB+. Factor #8: What is the interest rate exposure? MHI has a weighted average life of 7.85 years and a duration of 9.17 years (leverage adjusted = 12.28). This is a little above average. I prefer funds with an average adjusted duration of 10.0 or less. Factor #9: What is the call exposure? Here is a table with the call exposure as of June 30, 2015: Under 5 years 48.8% 5-9.99 years 30.7% Over 10 years 1.0% Other 4.2%% Non-Callable 15.3% MHI has moderate call risk over the next few years if interest rates fall. For most investors, this is not a major concern, since they are worried more about higher interest rates than lower interest rates. Morningstar computes the average coupon rate of its bonds at 6% with an average price of 106. Given the high level of the UNII balance, there is only limited short-term risk to the monthly dividend even if interest rates fall more than expected. Factor #10: For a national fund, what is the breakdown by state? Top 5 States Texas 11.59% Illinois 11.40% New York 8.08% California 6.61% Washington 6.01% There is currently no exposure to Puerto Rico. Source: Morningstar Factor #11: How good is the trading liquidity? MHI has an average daily volume of 102,000 shares, and an average dollar volume of $1.25 million. Factor #12: What percent of the portfolio is in Housing-Multifamily bonds? I like to avoid funds where the Housing Multi-Family sector is above 10%. MHI has no exposure to housing bonds. Factor #13: Fund Management MHI is managed by David J. Eurkus and Jonathan Chirunga. Mr. Eurkus has more than 40 years of investment experience and has been the portfolio manager of the fund since inception. Mr. Chirunga joined Pioneer in 2011 and has been an investment professional since 1996. Based on the above 13 factors, I am currently quite positive on MHI. It is an attractive fund because of its high relative discount to NAV, very low leverage costs and reasonable expense ratio. Disclosure: I am/we are long MHI. (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.

The Dirt Cheap Value Portfolio: Extreme Hate Selling Translates Into Opportunity

Crashing a whopping 7% versus the Dow’s 2% loss, is downright scary. Luby’s extreme spike in volume is intriguing. Institutional 13F purchases are encouraging! FSYS wins contract to supply natural gas refueling stations in Italy. 80% of the portfolio are prime takeover candidates. Being a contrarian is not all that it is cracked up to be. Going against the crowd and buying when everyone else is selling is not easy, but the rewards can be enormous. There is absolutely no doubt the last few weeks have resulted in a chock full of pain for the holders of the “DCVP”- its relative strength was worse than horrible, falling three times more than the Dow’s 2.2% drop. In fact, the portfolio dropped a dubious 7%, from $39.47 to $36.72, in comparison to the Dow’s drop of 2%, from 18,086 to 17,690. Fear and panic are at epic proportions, but so is the opportunity. It is time to be greedy when others are fearful, especially when the companies you are buying have solid balance sheets and are selling for less than intrinsic value. The combination of an exceptional balance sheet and a bargain price, infers that these companies are also susceptible as takeover targets- a very good thing for investors. The only winner of the bunch was Coffee Holdings Inc. (NASDAQ: JVA ), with a token 2% rise. The losers were Bridgford Foods (NASDAQ: BRID ), at the top of the list taking a 15% beating, followed by Fuel Systems Solutions (NASDAQ: FSYS ) at 8%. Rounding out the red ink was Luby’s (NYSE: LUB ) loss of 5%, and Pep Boys’ (NYSE: PBY ) red ink of 3%. The good news is that these losses, can quickly translate into gains, for those opportunists that pounce on these overly hated securities. Easy to say, but hard to do. The lineup: Pep Boys: If the auto parts seller isn’t acquired by next month’s second quarter earnings results, its latest report card could propel its shares further into orbit. The company is expected to earn 8 cents versus breakeven results, on just a 1% increase in sales to $531 million. Those low expectations, should be relatively simple to surpass, especially when you consider the benefits of lower gasoline prices and increased summer driving. Luby’s Inc.: the cafeteria chain is still three months off from reporting its fourth quarter results, but things are beginning to show signs of improvement, as both debt and overhead costs have been chopped. The eatery is slated to pick up a few fresh culinary service contracts, a handful of franchisee locations and a couple new company owned Fuddrucker’s sites by the close of its fiscal year. Wall Street seems to be finally warming up to the company’s turnaround efforts, as evidenced by its Motley Fool Cap’s superb rating, of five stars. There has been an interesting pick up in volume too, as there were two sessions in the past month, that generated 20 times average daily volume. There is an old saying on Wall Street, that volume always precedes price- maybe a price spike is just around the corner. Checking the latest 13f filings (deadline for 2nd quarter is 8/15) it was revealed Ancora Advisors was a big buyer, taking an initial 135,000 share position. With Luby’s shares still near historic lows, I would not be surprised to see its Board of Directors, authorize a $10 million stock repurchase program to take advantage, of its seemingly compelling value. The CEO isn’t waiting, and is taking matters into his own hands. He’s been buying the shares in the open market, like there is no tomorrow. Does he know something the rest of us don’t know? Of course he does. Always follow the smart money. Price target: $8.50 Fuel Systems Solutions: The shares continue their trend of destruction, creating a new historical low despite a nice contract announcement that will be providing compressor and related equipment to a company, that plans to build up to 30 European CNG refueling stations per year. In addition, Ancora Advisors took an initial 134,847 shares position, while Grace & White upped their stake 6.7% to 785,662 shares. This Thursday before the market open, the alternative fuel supplier will be reporting its second quarter results. Analysts are estimating a dismal 10 cent loss, on a top line of $74 million. These “down in the gutter estimates” should be a breeze to surpass, and could spur a short squeeze scenario. Recent 13f filings show that Ancora Advisors purchased a 75,000 share stake and Grace & White pressed their bet another 103,000 shares, to 759,000 shares. Price target: $14 Bridgford Foods: is set to release its third quarter results near the end of August, and a big improvement is in the works. Last year’s quarter produced a loss of 26 cents, on sales of $27.9 million. Lower commodity costs along with a an improved cost structure, should put its bottom line firmly back in the black. It is worth noting, the California Public Employees Retirement System has recently acquired a small position on the shares. Price target: $11 Coffee Holdings Inc.: management is finally getting hot and heavy about promoting the stock-first with its hiring of the Liolios Group (they were contracted by Diedrich Coffee and just one short year later, Diedrich was acquired by Keurig Green Mountain (NASDAQ: GMCR ) at thirty times the price). In fact, next month JVA will present at the Gateway Conference with the aid of the Liolios Group. I wonder if Liolios can repeat their magic again, and get JVA’s shareholder’s a “thirty bagger” too. Heck at this point, I’d be content with a one bagger. Its stock buyback allotment nearly exhausted: the coffee purveyor has nearly gone through its $1 million share buyback commitment. Look for another $1 million of purchases to be authorized, when it reports its third quarter results next month. Last, but not least, Seeking Alpha author “Dutch Trader” recently wrote a flattering piece , which stressed the company’s progress with its Café Caribe brand and its withdrawal from its commodity trading endeavors. Price target: $8 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. Disclosure: I am/we are long FSYS,LUB,PBY,BRID AND JVA. (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.