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5 Strong Buy Technology Mutual Funds To Bet On

More often than not the technology sector is likely to report above-par earnings than other sectors, as the demand for technology and innovation remains high. However, technology stocks are considered to be more volatile than other sector-specific stocks in the short run. In order to minimize this short-term volatility almost all tech funds adopt a growth management style with a focus on strong fundamentals and a relatively higher investment horizon. Investors having an above-par appetite for risk and fairly longer investment horizon should park their savings in these funds. Below, we will share with you 5 top-rated technology mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect these mutual funds to outperform their peers in the future. Fidelity Select Software & Comp Portfolio (MUTF: FSCSX ) seeks capital growth. The fund invests a lion’s share of its assets in companies whose primary operations are related to software or information-based services. Investments are made in both domestic and foreign companies. The fund uses fundamental analysis to select companies for investment purposes. The non-diversified technology mutual fund has a one year return of 10.5%. This fund has an expense ratio of 0.78% as compared to category average of 1.55%. T. Rowe Price Science & Technology Advisor (MUTF: PASTX ) invests a large portion of its assets throughout the world in the common stocks of companies that benefit from the development and use of technology. It may sell securities in order to secure gains, curtail losses and reinvest assets. The technology mutual fund has a one year return of 14%. Kennard W. Allen is the fund manager and has managed the fund since 2009. Columbia Global Technology Growth A (MUTF: CTCAX ) seeks capital growth. The fund invests a major share of its assets in companies from the technology sector that benefit from advancement and the development of technology. It invests a minimum of 40% of its assets in foreign companies. It may invest in companies irrespective of their market capitalizations. The non-diversified technology mutual fund has a one-year return of 19.8%. As of October 2014, this fund held 123 issues with 5.52% invested in Apple Inc. (NASDAQ: AAPL ) Fidelity Advisor Electronics A (MUTF: FELAX ) invests heavily in companies involved in manufacturing, designing and distribution of electronic components. The fund invests in firms throughout the world. Factors such as financial strength and economic conditions are considered for investment decisions. The non-diversified technology mutual fund has a one-year return of 40.3%. Stephen Barwikowski is the fund manager and has managed the fund since 2009. Columbia Seligman Communications & Information A (MUTF: SLMCX ) seeks capital growth over the long run. The fund invests a lion’s share of its assets in companies engaged in operations related to communications and information sector. It may also invest in sectors such as information technology and media. It invests a maximum of 25% of its assets in non-U.S. companies. The non-diversified technology mutual fund has a one-year return of 29.6%. This fund has an expense ratio of 1.41% as compared to category average of 1.55%. Now that you’ve read this, are you Bullish or Bearish on ? Bullish Bearish Sentiment on ( ) Thanks for sharing your thoughts. Why are you ? Submit & View Results Skip to results » Share this article with a colleague

ValueShares Launches Global Version Of Quantitative Value ETF

Not too long ago, ValueShares launched its active value ETF in the U.S. market, namely the U.S. Quantitative Value ETF (BATS: QVAL ) . The product has seen decent success so far having amassed about $21 million in assets within just 1.5 months. Probably encouraged by this strong response, the issuer has introduced another value based ETF targeting the international market on December 17, 2014. Below we have highlighted the fund in greater detail for investors seeking a new way to play value stocks in international markets: The ValueShares International Quantitative Value ETF (BATS: IVAL ) in Focus The newly launched ETF is actively managed in nature. The fund provides exposure to about 50 international stocks with strong value characteristics. As such, the fund provides an opportunity to invest in some of the cheapest and quality stocks of abroad on long-term valuation metrics. To do so, the issuer uses a systematic technique. The fund manager initially selects a group of mid-to-large cap international stocks, then analyses financial statements and finally identifies stocks which boast lower enterprise values with respect to operating earnings as well as dirt cheap valuations before considering those as investment targets. The fund charges 99 bps in fees for this exposure. How Could it Fit in a Portfolio? The fund could be a good choice for value investors targeting the international market. In fact, value investing has become extremely necessary for investors with a global market focus given deflationary concerns in the Euro zone, Japan and the world’s second largest economy China. A recent boost to Japan’s already accommodative policies, QE talks in the Euro zone and expectations for further easing in Chinese monetary policy in the wake a prolonged downbeat business environment triggered the need for value investing in the foreign markets. So, it is almost certain that volatility will remain high in the coming months. In such a scenario, value products like IVAL should protect investors from market volatility. Notably, a value investing strategy gives investors exposure to stocks that are trading below their intrinsic values and are considered cheaper than other stocks. Value stocks usually have low price-to-earnings ratios, low price-to-book ratios and high dividend yields, as compared to their growth counterparts. Can it Succeed? The road ahead should not be easy for the newly launched fund as there are quite a number of funds already prevalent in the global value equities space. Vanguard FTSE All-World ex US Index Fund (NYSEARCA: VEU ) dominates the global equities ETF space with assets worth $12.0 billion. The fund has a value focus too with a dividend yield of 3.57% (as of December 18, 2014). The fund gives investors exposure to a basket of 2,460 stocks of more than 45 countries, from both developed and emerging markets around the world. The fund charges 15 basis points as fees. There are several other quality and value ETFs in the global equities space namely the FlexShares International Quality Dividend Index Fund (NYSEARCA: IQDF ) , FlexShares International Quality Dividend Defensive Index Fund (NYSEARCA: IQDE ) , MSCI International Quality Dividend ETF (NYSEARCA: QDXU ) , Cambria Global Value ETF (NYSEARCA: GVAL ) and lots more. Investors should note that IVAL is costlier than most of the well-known funds in this space. The product’s actively managed nature might have led to such hefty fees. So, to amass investors’ money in the long run, we believe that IVAL needs to sell its actively managed nature and methodical stock-selection technique, and show some level of outperformance when compared to ETFs built on relatively on relatively similar themes in this space that do not cost as much.

ACIM Appears To Have Incredibly Low Risk, But That’s Inaccurate

Summary I’m taking a look at ACIM as a candidate for inclusion in my ETF portfolio. The correlation appears to be very low, but the low liquidity caused days with no trades. The same liquidity issues might have improved the standard deviation of returns. The premium to NAV makes it look like a potential short candidate. I’m not assessing any tax impacts. Investors should check their own situation for tax exposure. Investors should be seeking to improve their risk adjusted returns. I’m a big fan of using ETFs to achieve the risk adjusted returns relative to the portfolios that a normal investor can generate for themselves after trading costs. I’m working on building a new portfolio and I’m going to be analyzing several of the ETFs that I am considering for my personal portfolio. One of the funds that I’m considering is the SPDR® MSCI ACWI IMI ETF (NYSEARCA: ACIM ). I’ll be performing a substantial portion of my analysis along the lines of modern portfolio theory, so my goal is to find ways to minimize costs while achieving diversification to reduce my risk level. What does ACIM do? ACIM attempts to track the total return of the MSCI ACWI IMI Index. At least 80% of funds are invested in companies that are part of the index, or in ADRs (American Depositary Receipts). ACIM falls under the category of “World Stock”. Does ACIM provide diversification benefits to a portfolio? Each investor may hold a different portfolio, but I use (NYSEARCA: SPY ) as the basis for my analysis. I believe SPY, or another large cap U.S. fund with similar properties, represents the reasonable first step for many investors designing an ETF portfolio. Therefore, I start my diversification analysis by seeing how it works with SPY. I start with an ANOVA table: (click to enlarge) The correlation is an absurdly low 40%. If an investor stopped here, they would be dramatically misinformed about the risks of ACIM. The correlation is very low as a statistical measure, but the metric is being substantially enhanced by a lack of liquidity in the stock which caused several days to report no change in the price of securities. Standard deviation of daily returns (dividend adjusted, measured since March 2012) The standard deviation is excellent for the international exposure. For ACIM it is .9981%. For SPY, it is 0.7419% for the same period. SPY usually beats other ETFs in this regard, so having a lower standard deviation is excellent. Frequent readers should be aware that I have measured returns from March 2012 instead of my normal starting point of January 2012. I can’t measure values until the ETF is trading and Yahoo is tracking the dividend adjusted close values. Unfortunately, the standard deviation may appear substantially smaller than it should because several days (especially in 2012) reported no change in price. When no sales are reported, the price is not changed and it looks like a low standard deviation of returns. Investors should be aware that there is substantial liquidity risk. The average volume for the last 10 days is only 6,837. Mixing it with SPY I also run comparisons on the standard deviation of daily returns for the portfolio assuming that the portfolio is combined with the S&P 500. For research, I assume daily rebalancing because it dramatically simplifies the math. With a 50/50 weighting in a portfolio holding only SPY and ACIM, the standard deviation of daily returns across the entire portfolio is 0.7320%. If an investor wanted to use ACIM as a supplement to their portfolio, the standard deviation across the portfolio with 95% in SPY and 5% in ACIM would have been .7263%. However, due to the very low correlation, a position of 80% SPY combined with 20% ACIM results in a standard deviation for the portfolio of only .6982%. Investors hoping to capitalize on this low standard deviation of returns would need to have a relatively low need for liquidity since the price stability only works if no large sell orders are being introduced. Why I use standard deviation of daily returns I don’t believe historical returns have predictive power for future returns, but I do believe historical values for standard deviations of returns relative to other ETFs have some predictive power on future risks and correlations. Yield & Taxes The distribution yield is 1.84%. The yield is almost high enough for a retiring investor, in my opinion. Generally, I want to see yields over 2% when considering an ETF for retirement planning. This is close enough that I could still consider it from the perspective of a retiree, but only if the retiree was certain they did not have liquidity needs. I’m not a CPA or CFP, so I’m not assessing any tax impacts. Expense Ratio The ETF is posting .25% for an expense ratio. I want diversification, I want stability, and I don’t want to pay for them. The expense ratio on this fund is higher than I want to pay, but isn’t unbearable for the incredible diversification. Market to NAV The ETF is at a 1.85% premium to NAV currently. Premiums or discounts to NAV can change very quickly so investors should check prior to putting in an order. I wouldn’t want to pay a premium greater than .1% when investing in an ETF. There might be some situations where I would pay .2%, but you won’t see me agreeing to pay that premium. Not happening. If I took a position in this ETF it would be with a carefully monitored limit buy order that adjusted for the premium. If sell orders dropped it to my price, great, if not, I’d rather avoid the ETF entirely than pay that premium. Largest Holdings ACIM has great diversification when you look at the percent in each asset, but the top of the portfolio still has a huge tilt towards the U.S. economy. (click to enlarge) These aren’t bad stocks to hold, but I can get them by holding any of several major ETFs that hold major U.S. companies. The appeal of a world portfolio is having substantial exposure to other markets to help balance out the geographic risks of a U.S. based portfolio. This collection of top holdings supports my belief that the correlation is understated because favorable impacts from days where reported closing price did not change. If ACIM drops to trade at a discount to NAV, I may become very interested in it. Otherwise, regardless of the statistics, I’m not interested in paying a premium for an ETF that holds several of the same companies I can acquire without the premium. Conclusion I’m currently screening a large volume of ETFs for my own portfolio. The portfolio I’m building is through Schwab, so I’m able to trade ACIM with no commissions. I have a strong preference for researching ETFs that are free to trade in my account, so most of my research will be on ETFs that fall under the “ETF OneSource” program. I think the statistics for the ETF are misleading and premium to NAV looks like a poor bet for future returns. When this ETF trades near NAV, it may have some value to investors. I may take a deeper look at it in the future, but for now I think the low liquidity and premium NAV present a real challenge to including it in my portfolio. Due to low liquidity and the potential need to execute a trade over multiple days to create or sell a reasonable position, I would not consider this ETF at all from any account that was required to pay trading commissions on the ETF. If I can short ETFs that are overpriced (without commission), it might become appealing to initiate shorts on the ETF when it is trading over book value if I can own substantially the same securities through other ETFs without paying a premium to acquire them. Additional disclosure: Information in this article represents the opinion of the analyst. All statements are represented as opinions, rather than facts, and should not be construed as advice to buy or sell a security. Ratings of “outperform” and “underperform” reflect the analyst’s estimation of a divergence between the market value for a security and the price that would be appropriate given the potential for risks and returns relative to other securities. The analyst does not know your particular objectives for returns or constraints upon investing. All investors are encouraged to do their own research before making any investment decision. Information is regularly obtained from Yahoo Finance, Google Finance, and SEC Database. If Yahoo, Google, or the SEC database contained faulty or old information it could be incorporated into my analysis. The analyst holds a diversified portfolio including mutual funds or index funds which may include a small long exposure to the stock.