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Wall Street Celebrates Amazon Q2: ETFs To Benefit

After two technology giants – Apple (NASDAQ: AAPL ) and Microsoft (NASDAQ: MSFT ) – disappointed investors early in the week, Amazon (NASDAQ: AMZN ) came up with blockbuster second-quarter results after the closing bell on Thursday. This injected fresh optimism into Wall Street. The online e-commerce behemoth reported a huge earnings beat of over 200% with a bullish outlook on the third quarter. The company earned 19 cents compared to the Zacks Consensus Estimate of loss of 15 cents per share. This represents the third consecutive quarterly earnings beat for Amazon. Moreover, the company swung back to earnings from the loss of 27 cents reported in the year-ago quarter. Revenues climbed 20% year over year to $23.2 billion and were well ahead of the Zacks Consensus Estimate of $22.3 billion. Incredible performances were primarily driven by accelerating growth in the North American market, continued strength in cloud computing business and new initiatives to lure customers to fend off competition. Notably, revenues in North America grew 26% year over year while cloud computing revenue jumped 81%. The company projects revenue growth of 13-16% for the ongoing third quarter to $23.3-$25.5 billion, the midpoint is much higher than our current estimate of $23.77 billion. The guidance includes record Prime Day sales last week. Amazon also expects operating loss of $480 million to income of $70 million compared with a loss of $544 million in the same period last year. Market Impact Based on solid results and an optimistic outlook, shares of AMZN spiked as much as 19% to a new all-time high in after marker hours. This has pushed Amazon’s market cap higher to $262.7 billion, more than the market cap of $233.5 billion of the world’s largest retailer Wal-Mart (NYSE: WMT ). Including the after-market gains, the stock is up about 82% from a year-to-date look. In addition, the stock surged 22% in the pre-market session today. Impressed by Amazon’s stellar Q2 result, many analysts revised their target prices upward on the stock. Amazon, which turned 20 on July 16, has a Zacks Rank #2 (Buy) and a solid Industry rank (in the top 40%) at the time of writing as per the Zacks Industry Rank, suggesting significant upside for the stock over the coming days. Further, the stock has a Momentum Style Score of ‘A’. The smooth trading in the stock will definitely spread into the ETF world, especially the funds with the highest allocation to this Internet giant. Below we have highlighted some of these that would be in focus in the coming days: Market Vectors Retail ETF (NYSEARCA: RTH ) This fund provides exposure to the 26 largest retail firms by tracking the Market Vectors U.S. Listed Retail 25 Index. Of these, AMZN takes the top position in the basket with 10.8% share. The ETF has a certain tilt toward specialty retail, which accounts for 30% share while hypermarkets (13%), drug stores (13%) and department stores (12%) round off to the next three spots. The product has amassed $221.6 million in its asset base and charges 35 bps in annual fees. Volume is moderate as it exchanges nearly 92,000 shares per day. RTH has gained 8.6% in the year-to-date time frame and has a Zacks ETF Rank of 1 or ‘Strong Buy’ rating with a Medium risk outlook. First Trust DJ Internet Index ETF (NYSEARCA: FDN ) This is one of the most popular and liquid ETFs in the broad technology space with AUM of $3.4 billion and average daily volume of more than 320,000 shares. The fund tracks the Dow Jones Internet Composite Index and charges 54 bps in fees per year. In total, the fund holds 43 stocks with Amazon taking the second spot at 9.7%. From a sector look, Internet mobile applications account for nearly three-fifths of the portfolio while Internet retail makes up for 26%. The ETF has surged 17.4% so far this year and has a Zacks ETF Rank of 3 or ‘Hold’ rating with a High risk outlook. P owerShares NASDAQ Internet Portfolio ETF (NASDAQ: PNQI ) This fund follows the Nasdaq Internet Index, giving investors exposure to the broad Internet industry. The fund holds about 97 stocks in its basket with AUM of $224.4 million while charging 60 bps in fees per year. It trades in light volume of around 28,000 shares a day. Amazon occupies the third position with an 8.9% allocation. In terms of industrial exposure, Internet software and services makes up for 60% share in the basket, followed by Internet retail (36.1%). PNQI is up 16.1% in the year-to-date timeframe and has a Zacks ETF Rank of 4 or ‘Sell’ rating with a High risk outlook. Consumer Discretionary Select Sector SPDR ETF (NYSEARCA: XLY ) This product offers exposure to the broad consumer discretionary space by tracking the S&P Consumer Discretionary Select Sector Index. It is the largest and the most popular product in this space with AUM of nearly $11.3 billion and average daily volume of roughly 5.7 million shares. Holding 87 securities in its basket, Amazon takes the top spot with 7.7% of assets. Media dominates more than one-fourth of the portfolio while specialty retail, hotels restaurants and leisure, and Internet retail rounding off the next three spots with a double-digit allocation each. The fund has gained about 10% so far in the year and has a Zacks ETF Rank of 2 or ‘Buy’ rating with a Medium risk outlook. Link to the original post on Zacks.com

Mutual Funds In Focus Ahead Of Q2 Earnings Season

The first quarter earnings season was not very encouraging and the official commencement of the second quarter earnings season too had a dismal start. After beating bottom-line estimates for four consecutive quarters, aluminum giant Alcoa (NYSE: AA ) finally missed the earnings estimates. To add to the disappointment, the second quarter estimates have been moving lower. Management has consistently provided lower guidance. On that note, it can be said that under promising is a good thing to come out with outperforming results. The declining trend in second quarter earnings is not unique this time though. Also, the magnitude of lower revisions this time is lower compared to the trend ahead of the first quarter. The spotlight is already on the second quarter earnings, and the action heightens starting next week. Before we brace ourselves for a very busy next couple of weeks, let’s look at some buy-ranked mutual funds that boast high average EPS growth. Q2 Earnings Expectations Earnings for the S&P 500 components are projected to decline 6.7% year on year while revenues may drop 6%. Growth is projected to suffer across 9 out of 16 sectors. These 9 sectors may incur earnings decline. Again, the energy sector might be the biggest laggard as earnings for the sector may slump 64% with a decline of 41.5% in revenues. Finance sector however is expected to see 2.6% higher earnings, though sales may drop 5%. Technology on the other hand may incur a 1.6% drop in earnings, but revenues will improve 0.8%. Meanwhile, taking the energy sector out, total earnings for the S&P 500 may edge up 0.5% with 0.3% decline in revenues. Despite negative revisions, and as mentioned earlier, the magnitude of revisions downward in second quarter is lower than first quarter. For the second quarter, the magnitude of negative revision is 3.1%. This compares favorably with 8.3% lower revisions in first quarter 2015 and 5.9% in first quarter 2014. Run Up to the Second Quarter The first quarter had major headwinds to deal with. The GDP numbers were not so impressive and companies had a lot to worry about stronger dollar. Strength in the U.S. dollar had a huge impact on the trade deficit over the first quarter. While a stronger dollar dragged down the export demand in the first quarter, it also boosted import demand as it made foreign goods cheaper. The ‘dollar scapegoating’ was a theme in reading the first quarter results. Weakness in first quarter earnings numbers was attributed to the strength of the dollar. The large-cap S&P 500 companies earn about 40% of their revenues from outside the US. Total first quarter earnings for the 498 S&P 500 members were up 2.4% on 3.3% lower revenues. Only 62% could beat EPS estimates and only 42.4% outperformed revenue expectations. This time however, the dollar should be of greater importance. In the run up to the second quarter, markets were mostly worried about the Greece debt deal crisis. However, this should not affect the US multinationals. Also, the economy has been promising this time, with quality data from housing and retail sectors. 5 Mutual Funds with the Best Average EPS Growth Below we present 5 mutual funds that currently have the best average EPS growth. These funds carry either a carry a Zacks Mutual Fund Rank #1 (Strong Buy) or Zacks Mutual Fund Rank #2 (Buy). Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but the likely future success of the fund. The minimum initial investment is within $5000. These funds are not only in the green so far this year, but have positive total return over the last 1, 3 and 5 year periods. Fidelity Select Medical Delivery Portfolio (MUTF: FSHCX ) seeks long-term capital growth. FSHCX invests a major portion of its assets mainly involved in operations related to hospitals, nursing homes and other organizations engaged in providing health care services. FSHCX primarily focuses on acquiring common stocks of companies throughout the globe. FSHCX currently carries a Zacks Mutual Fund Rank #2. The year-to-date and 1-year gains are 13.3% and 30.8%. Meanwhile, the 3 and 5 year annualized returns are 24.4% and 22.3%. The annual expense ratio of 0.79% is lower than the category average of 1.37%. The average EPS growth is 22.4%. Among the top five holdings, UnitedHealth Group (NYSEARCA: UHN ), McKesson (NYSE: MCK ), Cigna (NYSE: CI ) and Cardinal Health (NYSE: CAH ) have average earnings surprise for the past four quarters of 8.3%, 6.4%, 5.5% and 4.1%. Rydex S&P SmallCap 600 Pure Growth Fund (MUTF: RYSGX ) seeks results that are at par (excluding fees and expenses) with the S&P SmallCap 600 Pure Growth Index’s performance. A lion’s share of its assets is invested in the common stock of companies listed on the underlying index. RYSGX currently carries a Zacks Mutual Fund Rank #2. The year-to-date and 1-year gains are 9.3% and 9.6%. Meanwhile, the 3 and 5 year annualized returns are 16.4% and 17.2%. The annual expense ratio of 1.51% is however higher than the category average of 1.35%. The average EPS growth is 19.5%. Among the top five holdings, Lannett (NYSE: LCI ), Skechers USA (NYSE: SKX ), Taser International (NASDAQ: TASR ), Gentherm (NASDAQ: THRM ) and Take-Two Interactive Software (NASDAQ: TTWO ) have average earnings surprise for the past four quarters of 4.7%, 22.5%, 50.6%, 27.5% and 88.9%. Fidelity Independence Fund (MUTF: FDFFX ) invests primarily in common stocks of domestic and foreign issuers. FDFFX realizes capital gains without considering the tax consequences to shareholders. The management is not constrained by any particular investment style and may invest in either ‘growth’ stocks or ‘value’ stocks or both. FDFFX currently carries a Zacks Mutual Fund Rank #2. The year-to-date and 1-year gains are 3% and 4.7%. Meanwhile, the 3 and 5 year annualized returns are 20.7% and 17%. The annual expense ratio of 0.73% is lower than the category average of 1.19%. The average EPS growth is 19.4%. Among the top five holdings, Apple (NASDAQ: AAPL ), Gilead Sciences (NASDAQ: GILD ), Medivation (NASDAQ: MDVN ), Celgene (NASDAQ: CELG ) and American Airlines Group (NASDAQ: AAL ) have average earnings surprise for the past four quarters of 9.6%, 15.5%, 23.2%, 4.2% and 1.6%. Fidelity Select Leisure Portfolio (MUTF: FDLSX ) seeks capital growth. FDLSX invests at least 80% of assets in common stocks of companies principally engaged in the design, production, or distribution of goods or services in the leisure industries. FDLSX currently carries a Zacks Mutual Fund Rank #1. The year-to-date and 1-year gains are 7.2% and 13.4%. Meanwhile, the 3 and 5 year annualized returns are 19.7% and 19.6%. The annual expense ratio of 0.8% is lower than the category average of 1.48%. The average EPS growth is 18.3%. Among the top five holdings, Starbucks (NASDAQ: SBUX ), Yum! Brands (NYSE: YUM ), Chipotle Mexican Grill Inc (NYSE: CMG ) and Wyndham Worldwide (NYSE: WYN ) have average earnings surprise for the past four quarters of 0.8%, 1.5%, 7.8% and 5.1%. Janus Forty Fund (MUTF: JDCAX ) invests in a group of 20-40 common stocks that have growth potential. JDCAX may invest in companies of all sizes, ranging from prominent firms to smaller and emerging growth firms. JDCAX currently carries a Zacks Mutual Fund Rank #1. The year-to-date and 1-year gains are 6.3% and 15.8%. Meanwhile, the 3 and 5 year annualized returns are 17.9% and 15.1%. The annual expense ratio of 0.92% is lower than the category average of 1.19%. The average EPS growth is 17.7%. Among the top five holdings, Lowe’s Companies (NYSE: LOW ), Delphi Automotive PLC (NYSE: DLPH ), Valeant Pharmaceuticals International (NYSE: VRX ) and Endo International PLC (NASDAQ: ENDP ) have average earnings surprise for the past four quarters of 0.7%, 4.2%, 80.4% and 6.6%. Link to the original article on Zacks.com

Inside ALPS’ New Sector Leaders’ ETF

Probably, every investor dreams of beating the benchmark index. And to fulfill this investor desire, issuers are increasingly resorting to smart-beta or unique approaches. After all, with the industry presently sporting close to 1,745 products and sitting on an asset base of $2.13 trillion, it is tough to wait out competition with a product that lacks novelty. To serve the need of the hour, ALPS recently launched an ETF, which does not focus on a specific sector or style like most, but uses the equal-weighted strategy as its winning mantra. To do so, the issuer targets the U.S. market itself, which is sitting pretty right now amid global market gloom spread by ‘Grexit’ worries and the Chinese equities sell-off. Below we give the details of this ETF. ALPS Sector Leaders ETF (NYSEARCA: SLDR ) in Focus The fund looks to track the S-Network Sector Leaders Index which is a benchmark of the U.S. large cap equities with equally weighted sector exposure. The index starts screening stocks from the S&P 500 index emphasizing high quality and growth scores. From every nine sectors of the S&P 500, five securities with the highest growth criteria are chosen. The fund charges 40 bps in fees. Investors should also note that the product uses an equal-weight methodology both in terms of individual securities and sectors. As a result, each company takes up about 2% of the total while each of the sectors has a roughly 11% weighting. Cigna Corp (CT) (2.64%), Alexion Pharma (NASDAQ: ALXN ) (2.45%) and Edward Lifesciences (NYSE: EW ) (2.39%) are top three holdings of the fund. How Does it Fit in a Portfolio? This ETF could be an interesting fit for investors who want a slight smart-beta approach, but want to stay invested in the broad markets. The product could also be an intriguing addition for those seeking an equal-weight strategy. The ETF is a fairly priced option as the fees on this product is in line with the average expense ratio of the U.S. large-cap blend equities ETFs. However, costs are roughly 4.5 times higher than what the biggest U.S. large-cap blend ETF – the SPDR S&P 500 Trust ETF (NYSEARCA: SPY ) – charges. The fund’s strategic approach might have caused it to charge higher than the plain vanilla market-cap oriented funds like SPY, the iShares Core S&P 500 ETF (NYSEARCA: IVV ) and the Vanguard S&P 500 ETF (NYSEARCA: VOO ) . In a nutshell, the fund offers huge diversification benefits with lower volatility as it provides meaningful exposure to every sector of the market. None of the sectors dominates the fund’s returns, thereby preventing the portfolio from heavy concentration. ETF Competition While SLDR may have a lucrative investment objective, the ETF will be facing some stiff competition for assets from some of the players in the U.S. large-cap blend equities ETFs. Among these, the Guggenheim S&P Equal Weight ETF (NYSEARCA: RSP ) , the PowerShares Russell 1000 Equal Weight Portfolio ETF (NYSEARCA: EQAL ) and the ALPS Equal Sector Weight ETF (NYSEARCA: EQL ) seem to be the top contenders. Link to the original article on Zacks.com