Tag Archives: stocks

Time To Buy Casino ETF On Value?

The dark clouds of slowdown that were long settled over Macau are finally clearing. Casino operators, who have been suffering from a sluggish business scene in Macau, are again seeing glimmers of hope. Notably, Macau – a Chinese territory – is one of the largest casino gaming destinations in the world. Credit crunch in Mainland China, check on illegal money transfers especially in VIP gaming, constraints on visa and last but not the least, a broad-based slowdown in China wrecked havoc on the casino business in Macau. However, these burning issues have started to cool off. Gaming revenues declined 21.4% year over year in January, but the fall was lesser than what analysts had projected. Year-over-year declines in Macau gaming revenues may decrease further in February to 5%, as per Credit Suisse Group AG. In the last one month, the casino gaming ETF Market Vectors Gaming ETF (NYSEARCA: BJK ) was up 3.3% (as of February 12, 2016). All in all, there was a boost in sentiments in gambling companies. This makes it more important to look at casino earnings this season. Below, we highlight two key casino earnings releases: Q4 at Wynn Resorts On February 11, Wynn Resorts Ltd. (NASDAQ: WYNN ) posted mixed fourth-quarter 2015 results. Adjusted earnings of $1.03 per share decreased 14.2% but beat the Zacks Consensus Estimate of $0.74 by 39.2%. Revenues of $946.9 million missed the consensus mark of $1960 million by 1.4% and slipped 17% year over year, owing to a choppy performance in Macau. Despite the mixed performance, investors were keen on building positions in the stock as founder Steve Wynn pointed out that this January as ‘the best month in a long time’. Investors took this statement as a sign of turnaround in Macau operations, which have long been a pain for Wynn. The company surged more than 15.8% on February 12, 2016 following the earnings report. Notably, Wynn Macau revenues plummeted 27% year over year to $555.7 million in the quarter, owing to lower revenues at the VIP and the mass market segments, while Wynn Resorts’ revenues from Las Vegas operations increased 3.8% year over year to $391.2 million supported by higher non-casino revenues. WYNN has a Zacks Rank #3 with a value style score of ‘B’. The underlying industry of the company is in top 25% segment of the Zacks Universe. Q4 at Las Vegas Sands Las Vegas Sands’ (NYSE: LVS ) fourth-quarter 2015 earnings of $0.62 – announced on Jan. 27 – missed the Zacks Consensus Estimate of $0.64 by 3.1%. Earnings fell approximately 32.6% year over year. The downside reflects a decline in revenues, partially offset by lower expenses. Quarterly net revenue of $2.86 billion missed the Zacks Consensus Estimate of $2.92 billion by 2.1% and declined 16.2% year over year due to soft business in Macau. Since reporting earnings, the stock gained about 6% (as of February 12, 2016). LVS has a Zacks Rank #3 with a value style score of ‘B’. Casino ETF: Time to Buy? The performance at Wynn Resorts has acted as a cornerstone for the entire space as LVS also added over 9% and MGM Resorts International (NYSE: MGM ) advanced about 7% at the close on February 12, 2016. WYNN’s outsized gains gave a big push to the casino gaming ETF which was up 3.4% on February 12, but is down 0.7% since Las Vegas Sands reported its earnings. Moreover, investors should note that casino stocks have been extremely cheap in valuation after undergoing a steep sell-off. Plus, analysts are betting on a turnaround in Macau. Per analysts , the region is changing itself from being mass-centric to being VIP-oriented. Another group of analysts believes that “if the yuan and Chinese economy stabilize there’s money making opportunity in Macau.” In any case, all three companies mentioned above have found a place in the fund with a considerable share. Las Vegas Sands and Sands China – together have about 16% exposure in BJK. Wynn Resorts takes about 3.21% in the fund while MGM has about 6.2% share. The fund holds about 43 stocks in total. The product charges 66 bps in fees and has a Zacks ETF Rank #3. Original Post

Are ETFs Made Up Of CEFs Worth Owning?

While we are huge proponents of leveraging low cost and liquid ETFs for virtually every asset class ; ETFs that invest in closed-end funds (CEFS) are a different story altogether. The two funds that have garnered the most investor attention in this space are the PowerShares Closed End Fund Composite ETF (NYSEARCA: PCEF ) and the Yieldshares High Income ETF (NYSEARCA: YYY ) . Both contain a seemingly diverse array of underlying asset classes, sectors, and strategies. While both funds’ actual management expense ratio of 0.50% sounds reasonable, the issue is that you’re also paying for active management and leverage borrowing costs on an individual fund level. While that isn’t an immediate red flag, the largest issue I see with ETFs that purely invest in CEFs is that the index construction methodology doesn’t take into account the fundamental propensities of the underlying holdings. For example, these funds may have overlapping strategies spread across multiple managers, which also have varying fundamental views on portfolio strategy . Envision it this way, one manager may love a specific sector of the fixed-income market, such as emerging market bonds, another manager avoids them like the plague. So while one manager may be proven right, the other is wrong, and whatever benefit you would have received is sorely cancelled out. What’s worse is that you continue to pay both managers a fee regardless. When you sum up all the instances where that scenario happens in each individual CEF, all of the exotic portfolio management themes and talent is quickly stripped away. Meaning, your returns are doomed to plod along with the index and ultimately the mean average of the entire asset class. It’s a classic case of over-diversification. Oddly enough, that fact alone is the primary marketing tactic to attract investors to these funds; you remove individual fund risk. However, if an investor simply wants index returns from a complicated asset class they may not fully understand, CEFs are the last place I would suggest they invest in. There are multiple layers of complex derivatives, hedging, and active management strategies in play. On top of individual fund corporate actions, premium and discount analysis, and earnings reports. Lastly, probably the most dangerous element to CEF investing flies under the radar: leverage. Instead, it is my opinion that investors should equip themselves with basic knowledge on evaluating the attractiveness of a group of closed-end funds, and build a cohesive portfolio made of equities and fixed-income. They will have inherent diversification at the fund level, and probably build a better knowledge of how CEFs work in the process. They also stand the chance for better performance and paying lower fees overall. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Amazon Customers Confirm: Cloud Transition Still Biggest Trend

After tracking down top tech execs of 10 Amazon Web Services customers and nine AWS “premier consulting partners” for interviews, Deutsche Bank analysts came away convinced that the migration to the cloud is still “the biggest and most disruptive trend in the enterprise IT market today.” Aside from “assessing macroeconomic risks to 2016 IT budgets (as) the topic du jour,” many tech execs are slowing their IT spending as they prepare to move their enterprises to the cloud, said Deutsche Bank analyst Karl Keirstead in a research note Tuesday. Keirstead questioned whether the macro headwinds that many blame for the current softness in tech spending are really at fault. “Even Tableau Software ( DATA ) cited this phenomenon,” he wrote. Tableau stock notoriously gapped down 49.5% Feb. 5, spooking investors and dragging many software stocks with it, after offering 2016 guidance that missed Wall Street expectations. Tableau stock, down a fraction, near 40, in afternoon trading in the stock market today , is more than 50% off its Feb. 4 close and 70% below its all-time high above 131 set last July. Amazon ( AMZN ) stock was up 2.5% in afternoon trading Tuesday, near 520 and 25% off its all-time high of 696.44 set in December. The runway is still enormous for cloud migration. Amazon’s AWS, Microsoft’s ( MSFT ) Azure and Alphabet’s ( GOOGL ) Google Cloud Platform combined have grown revenue to about $10 billion annually, a “tiny penetration” of the $500 billion to $1 trillion spent annually on tech services and products, Keirstead said. “The trend to AWS is clear … as more and more large enterprises are shuttering private data centers in a quest to become ‘data center independent’ and younger and smaller customers are piggy-backing on AWS as a faster and cheaper way to scale up in new geographies,” he wrote. Neutral Toward Oracle, Security Vendors The big legacy IT infrastructure vendors are feeling the brunt of the migration, he said. Those interviewed were “cautious” toward managed hosting and colocation data center vendors, neutral toward enterprise software developer Oracle ( ORCL ) and neutral (not negative)  toward security vendors because “most” customers won’t rely only on AWS security, Keirstead says. “It was a mixed  bag for Red Hat ( RHT ), as several of the ‘all-in’ customers seemed content to move to Amazon’s own Linux distribution,” he wrote. He said feedback was “bullish” on software-as-a-service companies  Salesforce.com ( CRM ) and Workday ( WDAY ). “We now wonder if AWS is creating a tailwind for the SaaS (Software as a Service) vendors … and if the IT services vendors could get a lift as enterprises look to move or re-platform workloads to make them more cloud-friendly,” Keirstead mused. Deutsche Bank maintains buy ratings on Microsoft, Salesforce and Amazon.  Salesforce is expected after the close Feb. 24 to report earnings up 36% for the January quarter. Salesforce stock was down a fraction Tuesday afternoon, near 59 and 29% off a Nov. 19 all-time high at 82.90. Rival Workday stock was up 2.5% Tuesday afternoon, near 50.50, still 48% off nearly two-year high set in October 2014. It’s scheduled Feb. 29 to report an adjusted loss of 4 cents per share for its fiscal Q4 ended in January, vs. 6 cents lost in Q4 a year earlier. Keirstead said he doesn’t doubt that macro pressure is “keeping a lid on infrastructure IT spending,” but big legacy players Cisco Systems ( CSCO ), IBM ( IBM ) and EMC ( EMC ) “have cited a ‘tough macro’ seemingly every quarter for 12-plus months, he says. “It is entirely plausible that the ongoing weakness in technology capex, private data center build-outs and hardware refresh activity is also due to ongoing structural shifts as large enterprises rethink their IT infrastructures to prepare for a transition to the public cloud model.”