Apple (AAPL), Facebook (FB) and Twitter (TWTR) were three of the most actively traded tech stocks today. Let’s take a look at why. It’s seeming more and more like Apple is making a move into the augmented reality space. Piper Jaffray’s Gene Munster noted in a client report Monday that the tech giant has hired a lead engineer from Microsoft’s (MSFT) HoloLens Project. Shares closed the session down 0.5% as the overall market sold off, though they
PureFunds introduces new big data-focused ETF, tracking the ISE big data index. A deeper look at the index reveals social media networks, credit data providers, and Internet companies in the ETFs’ top holdings. Investors should look under the hood of non-trivial sector-focused ETFs. ETF provider PureFunds is a relatively new player in the ETF market, competing fiercely with financial giants that dominate the ETF market, like Vanguard, Blackrock’s (NYSE: BLK ) iShares, State Street’s (NYSE: STT ) SPDR, etc. PureFunds is familiar to most investors as the provider of the Cyber Security ETF (NYSEARCA: HACK ) that was launched in November 2014, which attempts to provide a passive investment vehicle into the emerging cybersecurity market. Since its inception, HACK yielded a 10% return, providing a modest return for the $1.1B in net assets that were invested in the ETF. As shown in Chart 1 below, HACK’s return is much lower than the leading cyber security stocks, but it also offers a passive investment vehicle into the industry that allows investors to invest in this emerging industry without cherry-picking particular stocks. Since PureFunds introduced the HACK ETF, the firm released three more ETFs: the PureFunds ISE Junior Silver ETF (NYSEARCA: SILJ ), the PureFunds ISE Mobile Payments ETF ( IPAY ), and the PureFunds ISE Big Data ETF ( BDAT ). As a strong believer in the growth potential of the big data industry and its leading players, I cover many big data topics, both in Seeking Alpha and in my firm, from industry trends through earnings reviews to extensive long/short investment thesis and ad-hoc analyses. There are so many public companies involved in the big data industry including analytics, visualization, Hadoop integration, and IaaS/PaaS services that I was pretty excited when I first heard of Purefunds Big Data ETF. However, as the title implies, I was very disappointed by the outcome. The general idea of Purefunds to launch investment vehicles that invest in emerging sectors, such as big data, mobile payments, and cyber security, is great, and I think there is a demand for such vehicles. However, an ETF is a passive investment tool that tracks a third party index – in BDAT’s case, it is the ISE Big Data™ Index. Looking at the component eligibility requirements in the index methodology guide unveils a wider definition of a big data company as shown in the excerpt below. According to the document, there are two types of companies that are entitled to join the index: either a big data product developer/service provider or a company that aggregates massive data sets. While the first part makes sense-this is a big-data index and should include big-data companies-the second part (bullet ii above) basically paves the way for any large Internet company to join the index, whether it has some connection to the big-data market or not. Let’s look at ETF’s top 10 holdings, as presented below in an excerpt from the fact sheet, and see how many big-data companies are there. Out of the top 10 holdings, five companies have very weak links to the big-data industry and are included in the ETF just because of bullet point ii above-Facebook (NASDAQ: FB ), Twitter (NYSE: TWTR ), Thomson Reuters (NYSE: TRI ), Nielsen (NYSE: NLSN ), and Yahoo (NASDAQ: YHOO )-while the other five have stronger links to big data, but it is absolutely not their core business nor the main impact on their financials. Going down the list of holdings (31 in total) will also reveal LinkedIn (NYSE: LNKD ) and Dun & Bradstreet (NYSE: DNB ), which also have a weak link to the big-data industry. I agree that it might be difficult to find 30 companies that are big data focused, but if the criteria are widened, I believe Amazon (NASDAQ: AMZN ), Rackspace (NYSE: RAX ), and EMC (NYSE: EMC ) will be found to have more to do with big data than the social media companies introduced in the index and ETF. In my opinion, this is a big deal. A big data ETF should include big data pure-play companies or companies that directly relate to that industry; having Facebook and Twitter in the top 10 holdings is missing the point. If ISE and PureFunds couldn’t find enough suitable companies to be included in the big data ETF, I would have suggested for them to include prominent SaaS, IaaS, and PaaS providers, rather than social media networks and credit/business data providers, as they have stronger links to the industry and are strongly impacted by it. For now, as BDAT does not provide pure big data exposure, I suggest investors to avoid using this ETF as an investment vehicle into the big data industry. Once PureFunds/ ISE have adjusted their ETF holdings/Index criteria, I will revise the avoid recommendation above, and if another big data ETF is introduced, I will perform the same due diligence again. 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. Additional disclosure: The information provided in this article is for informational purposes only and should not be regarded as investment advice or a recommendation regarding any particular security or course of action. This information is the writer’s opinion about the companies mentioned in the article. Investors should conduct their due diligence and consult with a registered financial adviser before making any investment decision. Lior Ronen and Finro are not registered financial advisers and shall not have any liability for any damages of any kind whatsoever relating to this material. By accepting this material, you acknowledge, understand and accept the foregoing.
By Tom Roseen During the fund-flows week ended August 26 world markets were whipsawed by concerns of slowing global growth, the devaluation of the Chinese yuan, fears about China’s slowing economy, and the continuing plunge of commodity prices. Oil prices slid below $40/barrel for the first time since February 2009 as a result of a decline in global demand and a glut in oil supply. An early measure of China’s factory activity declined to a six-and-half-year low in August, putting additional pressure on the market. As a result the CBOE Volatility Index (VIX) jumped almost 99%-from 15.25 on Wednesday, August 19, to 30.32 on Wednesday, August 26 (but down from a closing high of 40.74 on Monday, August 24), after the main indices posted their largest weekly declines in four years. During the week the U.S. broad-based indices were down at least 10% from their recent market highs, entering what many define as a market correction. At one point on Monday the Dow Jones Industrial Average declined more than 1,000 points before bouncing back slightly, but it still closed down 588.47 points (3.6%) for the day (its largest one-day percentage decline since August 2011). Despite the People’s Bank of China’s cutting its benchmark interest rate 0.5 percentage point on Tuesday and injecting 150 billion yuan into the financial system to prop up China’s market, the Shanghai composite lost 22.85% during the flows week. Nonetheless, on Wednesday U.S. stocks broke a six-day losing streak and witnessed their largest one-day gain in nearly four years as investors pushed stocks higher on news of the PBOC’s new easing efforts, better-than-expected economic news, and comments by New York Fed President William Dudley that the case for a rate hike in September is less compelling, given the volatility in global markets. As one might expect, given the meltdown in the global markets, fund investors were net redeemers of fund assets (including those of conventional funds and exchange-traded funds [ETFs]); however, they redeemed only a net $5.5 billion for the fund-flows week ended August 26, 2015. Investors redeemed some $17.8 billion from equity funds, $2.6 billion from taxable bond funds, and $345 million from municipal bond funds, but they were net purchasers of money market funds, injecting $15.2 billion for the week. For the first week in three equity ETFs witnessed net outflows, handing back $15.2 billion (their largest amount since the week ended August 6, 2014). With concerns about a slowing global economy, authorized participants (APs) were net redeemers of domestic equity funds (-$10.4 billion), withdrawing money from the group for a sixth consecutive week. They also redeemed money from nondomestic equity funds (-$4.9 billion) for the first week in four. Given the selloff in domestic equities, APs turned their attention to the beleaguered small-cap space and safe-haven plays, with the iShares Russell 2000 ETF (NYSEARCA: IWM ) (+$467 million), the iShares MSCI USA Minimum Volatility ETF (NYSEARCA: USMV ) (+$342 million), and the SPDR Gold Trust ETF (NYSEARCA: GLD ) (+$333 million) attracting the largest amounts of net new money of all individual ETFs. At the other end of the spectrum the SPDR S&P 500 Trust ETF (NYSEARCA: SPY ) (-$4.3 billion) once again experienced the largest net redemptions, while the SPDR Dow Jones Industrial Average ETF (NYSEARCA: DIA ) (-$1.0 billion) suffered the second largest redemptions for the week. For the second consecutive week conventional fund (ex-ETF) investors were net redeemers of equity funds, redeeming $2.6 billion from the group. Domestic equity funds, handing back $1.4 billion, witnessed their seventh consecutive week of net outflows. Meanwhile, their nondomestic equity fund counterparts witnessed $1.2 billion of net outflows-handing back money for the first week in six. On the domestic side investors lightened up on mid- and large-cap funds, redeeming a net $0.5 billion and $0.4 billion, respectively, for the week, while equity income funds attracted some $0.7 billion of net inflows. On the nondomestic side international equity funds witnessed $1.0 billion of net outflows, while global equity funds handed back $0.2 billion. For the fifth week in a row taxable bond funds (ex-ETFs) witnessed net outflows, handing back a little less than $4.7 billion (their largest weekly outflows since the week ended August 5, 2014). Corporate investment-grade debt funds suffered the largest net redemptions, witnessing net outflows of $2.2 billion (for their fifth consecutive week of redemptions), while government-mortgage and government-Treasury & mortgage funds were the only fixed income groups attracting net new money for the week, taking in $452 million and $270 million, respectively. For the fourth week in five municipal debt funds (ex-ETFs) witnessed net outflows, giving back $406 million this past week.