Tag Archives: zacks funds

Manufacturing Data Point To Recovery: ETFs, Stocks To Consider

The U.S. manufacturing sector saw a silver lining in February after a prolonged sluggishness. This was indicated by the recent manufacturing report from the Institute for Supply Management (ISM). As per ISM, PMI was 49.5 in February (a reading of 50 or higher points to growth), beating January’s reading by 1.3 percentage points. Though the latest reading has come in below 50 for the fifth successive month, ISM talked of overall recovery. The data showed an increase for the second month in a row in February. There was stepped-up production and new orders were seen at higher levels . So far a stronger greenback, huge capex cuts by energy companies to fight back the plunge in oil prices and soft demand in the wake of global growth worries were keeping a check on the sector. Inventory accumulations also put a lid on factory activity . Also, construction spending jumped to the highest level since 2007 in January. Plus, solid consumer spending, a healing labor market and improving industrial production point to the fact that the U.S. economic growth probably has legs, and that the recession fear is overblown. ISM noted that out of the 18 manufacturing sectors under coverage, nine witnessed growth in February. Needless to say, the upbeat data points once again sparked off Fed hike talks and pushed up the benchmark Treasury bond yields by 9 bps to 1.83% on March 1. While the report prompted a risk-on movement in the overall market, specific comers like industrial and construction companies need extra attention. While almost all industrial and construction ETFs in the space experienced a rise post-upbeat data, we highlight one from each category that gained the most. ETF Picks First Trust RBA American Industrial Renaissance ETF (NASDAQ: AIRR ) This fund provides exposure to the small- and mid-cap stocks in the industrial and community banking sectors by tracking the Richard Bernstein Advisors American Industrial Renaissance Index. The portfolio results in a basket of 39 securities, which are widely spread out across components with none holding more than 4.80% of assets (read: Invest in America with These 4 ETFs ). The fund is often overlooked by investors as depicted by its AUM of $30 million and average daily volume of about 19,000 shares. The Zacks Rank #3 (Hold) fund with a High risk outlook charges 70 bps in fees per year and has lost 2.1% so far this year (as of March 1, 2016). However, AIRR was up over 2.4% on March 1, 2016. PowerShares Dynamic Build & Construction (NYSEARCA: PKB ) As far as construction companies are concerned, several homebuilding companies like ETRACS ISE Exclusively Homebuilders ETN (NYSEARCA: HOMX ), iShares U.S. Home Construction ETF (NYSEARCA: ITB ) and SPDR Homebuilders ETF (NYSEARCA: XHB ) returned better than PKB post-data release (read: Time to Buy Housing ETFs Despite Mixed D.R. Horton Earnings? ). But here we focus more on broad-based construction activities, rather than having a concentrated approach to housing companies. PKB has just 10% exposure in home builders, while engineering and construction companies take the top spot with about 23% of the fund. PKB seeks to track the performance of the Dynamic Building & Construction Intellidex Index. It holds a basket of 30 stocks and has an expense ratio of 0.63%. The product has amassed nearly $59.4 million in its asset base and trades in a light volume of around 18,000 million shares per day on average. The ETF has lost 4.2% in the year-to-date frame, but added 2.2% on March 1. It has a Zacks ETF Rank #2 with a High risk outlook. Stock Picks Many construction stocks will definitely enjoy price appreciation from recovering fundamentals. We highlight two stocks with a top Zacks Rank #1 (Strong Buy) and a Momentum Style Score of A or B (at the time of writing) that are expected to outperform their peers in the months ahead. Gibraltar Industries Inc. (NASDAQ: ROCK ) This New York-based company manufactures and distributes building products in North America, Europe, and Asia. The stock has a Growth score of ‘A’, Momentum score of ‘B’ and a Value score of ‘B’. The underlying sector of the stock is in the top 22% of the Zacks Industry Universe. ROCK is off 0.6% so far this year but added about 2.4% on March 1. AAON Inc. (NASDAQ: AAON ) This Oklahoma-based company manufactures and sells air-conditioning and heating equipment in the United States and Canada. The stock has a Growth score of ‘B’ and Momentum score of ‘A’. However, the stock does not score on value with an ‘F’. The underlying sector of the stock is in the top 5% of the Zacks Industry Universe. AAON is up 9.9% so far this year and advanced about 2.9% on March 1. Original Post

How You Can Beat The Market With Dividend Aristocrat ETFs

With stocks down across the board to start the year, many investors are scrambling to find better selections for today’s more uncertain market environment. While utilities and consumer staples are becoming more popular thanks to this sentiment, there are also non sector-specific ways to improve performance relative to the market. One outperforming strategy has been to focus on higher quality dividend-paying companies. Stocks in this area haven’t seen incredible returns, but they have done far better than the broad market over the past few months. But not just any dividend-paying stock will do, as a focus on the so-called ‘dividend aristocrats’ should be a go-to strategy for investors in this market environment. What is a Dividend Aristocrat? A dividend aristocrat stock is a company that has a long track record of increasing dividend payments year after year. The number of years required varies depending on who you ask, but at least ten consecutive years of dividend increases is usually required to get into this select bunch. A company that fits this bill is a rare breed since it has been able to boost payments no matter what is happening in the broader economy. This shows an impressive ability to manage capital effectively, while also taking care of shareholders too. How to Invest While you can find a few specific stocks that are in the dividend aristocracy, an easier way to play this trend might be with ETFs. There are actually a few funds tracking this corner of the market, and all have been outperforming the broad S&P 500 in this recent rough patch. That’s right, the SPDR S&P Dividend ETF (NYSEARCA: SDY ) , the ProShares S&P 500 Aristocrats (NYSEARCA: NOBL ) , and the Vanguard Dividend Appreciation ETF (NYSEARCA: VIG ) have all easily outperformed the SPDR S&P 500 Trust ETF (NYSEARCA: SPY ) over the past three months, while the trio are also outperforming from a one-year outlook as well. Clearly, a focus on quality has been the way to go in this uncertain market environment. What’s The Difference? While all three have managed to beat out broad markets, investors have to be wondering what are the key differences between the three main dividend aristocrat ETFs? Well, for the most part, the key difference is how exclusive of a club the funds make the aristocrats. VIG is the least exclusive, as it allows companies to join its benchmark after raising dividends each year for at least one decade. SDY is the next in line with a similar policy, but for two decades, while NOBL is the most exclusive, only holding companies that have raised dividends every year for at least a quarter century. As you might be able to guess, the higher the barrier to entry, the fewer the companies that pass the screen. As such, NOBL has the fewest number of securities at 50, followed by about 100 for SDY and roughly 175 for VIG. All three do a pretty good job of spreading out assets, but actually VIG is the most concentrated thanks to its cap-weighted focus. Meanwhile, NOBL is the least concentrated thanks to its equal weighted focus, which puts the same amount in each stock, while SDY takes a different approach, weighting by dividend yield. Either way, consumer and industrial stocks are top holdings in each of the three, while all of them have little in the energy sector, largely thanks to the recent sector downturn. And while all three are extremely tradable, there are some expense differences to note as well. VIG is the cheapest – as is usually the case with Vanguard products – and comes in at 10 basis points a year compared to 35 for the other two. While none are really that expensive, it is certainly a big difference on a relative basis, and something to consider for cost-focused investors out there. Key Caveat While all three might have a dividend focus, it is important to remember that they zero in on companies that are growing dividends at a constant rate, not necessarily those that are paying out the most in terms of yield. In fact, while all three beat out the broad market in terms of their 30-Day SEC yield, none top three percent either. So while they are modest income destinations, investors who are just seeking yield will likely be disappointed by the dividend aristocrat family. Bottom Line The dividend aristocrat space is often overlooked by investors in favor of ‘sexier’ or more enticing market segments. However, over the past few months, stability and rock solid companies have been in vogue instead. This trend has allowed the dividend aristocrat ETFs of VIG, SDY, and NOBL to beat out the market and provide investors with a bit more stability in this uncertain time too. Just remember, none of these aristocrat funds are going to pay you a huge yield, but in turbulent economic times their outperformance makes the aristocrat funds the nobility of the investing world, and definitely worth consideration for your portfolio. Original Post

Retail ETFs On Fire After Robust Results, Upbeat View

As the Q4 earnings season is winding down, the retail sector is grabbing attention with releases from its major players last week. Most of the retailers managed to beat our earnings and revenue estimates amid a slowing global economy, a stronger U.S. dollar and weakness in oil. In particular, better-than-expected earnings from retailers like J.C. Penney (NYSE: JCP ), Macy’s (NYSE: M ), Best Buy (NYSE: BBY ) and Home Depot (NYSE: HD ), and upbeat guidance from Target (NYSE: TGT ) and Lowe’s (NYSE: LOW ) spread optimism into the whole sector, and drove the stocks higher. However, disappointing results from Nordstrom (NYSE: JWN ) and Wal-Mart (NYSE: WMT ) weighed on the sector’s performance. Let’s dig into the details of the earnings releases: Retail Stocks Springing Surprises One of the leading department store retailers, J.C. Penney , emerged as the real champion in the Q4 earnings season as the stock popped up 14.7% and hit a new 52-week high of $9.7 1 following blockbuster fourth-quarter fiscal 20 15 results on February 25 after the market closed. The company came up with a huge beat of 77.3% on earnings and a mild beat of 0.02% on revenues. Additionally, J.C. Penney expects to post its first annual profit in five years in 20 16 (read: Retail ETFs to Watch Ahead of Q4 Results ). The big-box retailer, Target , also hit a new 52-week high of $78.97 in the last trading session, while its shares have jumped 6% since its fiscal fourth-quarter 20 15 earnings announcement on February 24. Though the retailer lagged our estimates for earnings by a couple of cents and for revenues by $0. 157 billion, it impressed investors with its upbeat guidance for the current fiscal year. The company guided earnings per share in the range of $ 1. 15-$ 1.25 for the ongoing fiscal first quarter and $5.20-$5.40 for fiscal 20 16. The mid-points were ahead of the Zacks Consensus Estimate of $ 1.2 1 for the first quarter and $5. 16 for the full fiscal at the time of the earnings release. The second-largest department store retailer, Macy’s , has seen share price appreciation of 5.8% to date post its earnings announcement on February 23. The company reported earnings per share of $2.09 and revenues of $8.869 billion that outpaced our estimates by 23 cents and $0.092 billion, respectively. For fiscal 20 16, the company guided earnings per share of $3.80-$3.90, the lower end of which was much above the Zacks Consensus Estimate of $3.72 at the time of the earnings release. Home Depot , the world’s largest home improvement retailer, cheered investors with better-than-expected fiscal Q4 results thanks to mild weather and an improving housing market. The company beat on earnings by 7 cents and on revenues by $0.6 19 billion. For fiscal 20 16, Home Depot expects earnings per share to increase 12%- 13% to $6. 12-$6. 18 and revenues to grow 5. 1%-6%, with same-store sales growth of 3.7%-4.5%. Driven by solid results, the company also raised its quarterly dividend by 17% to 69 cents per share and announced a $5 billion share buyback plan. The stock has gained nearly 2.7% to-date post its earnings announcement on February 23. The second-largest home improvement retailer, Lowe’s , reported in-line fourth-quarter fiscal 20 15 earnings but beat on revenues by $0. 182 billion. Moreover, the company provided an upbeat guidance for fiscal 20 16. The company expects sales to grow 6%, with 4% growth in comparable sales and earnings per share of $4.00. The stock has added 1.8% to-date since its earnings release on February 24. The largest U.S. electronics chain, Best Buy , topped our fourth-quarter fiscal 20 16 earnings estimate by 13 cents, but fell short of our revenue estimate by $0.049 billion. For the ongoing first quarter of fiscal 20 17, the company expects earnings per share in the range of 3 1-35 cents. Shares of BBY has gained 0.5% since its earnings announcement on February 25. The Real Dampeners The specialty retailer, Nordstrom , is the major loser as the stock has tumbled nearly 6.7% following lackluster fourth-quarter fiscal 20 15 results. The company missed the Zacks Consensus Estimate for earnings by a nickel and for revenues by $0.09 1 billion. In addition, the company issued disappointing earnings per share guidance of $3. 10-$3.35 for fiscal 20 16, the upper-end of which was well below the Zacks Consensus Estimate of $3.45 at the time of the earnings release. Nordstrom expects sales to increase 3.5%-5.5% and comps to grow in a flat to 2% growth range. The stock is modestly down 0.4% since the earnings announcement on February 18 after-market close. Shares of Wal-Mart , the world’s largest retailer, fell about 3% after the company missed on revenues by $0.687 billion for the fourth quarter of fiscal 20 16 and issued a weak revenue outlook, pointing to continued struggle with lower traffic and decelerating e-commerce. The company lowered its revenue growth projection for fiscal 20 17 from 3%-4% projected earlier to relatively flat. It also provided earnings per share guidance of $4.00-$4.30 for the full fiscal and 80-95 cents for fiscal first quarter of 20 17 (read: Consumer ETFs in Focus as Wal-Mart Disappoints ). The Zacks Consensus Estimate for the full year and the ongoing quarter were $4.56 and 88 cents, respectively, at the time of the earnings release. However, earnings per share came in at $ 1.49 for the fiscal fourth quarter, above the Zacks Consensus Estimate by 3 cents. The stock is up 0.6% to-date post earnings results on February 18. ETFs in Focus Robust performances and bullish guidance from most retailers offset the handful of weak earnings releases, leading to a rally in retail ETFs over the past 10 days. Investors seeking to take advantage of the ongoing rally in the space could consider the following three ETFs given the power-packed earnings releases. Any of these could be excellent choices given that these have a Zacks ETF Rank of 1 (Strong Buy) or 2 (Buy), suggesting their continued outperformance in the months ahead. SPDR S&P Retail ETF (NYSEARCA: XRT ) This product tracks the S&P Retail Select Industry Index, holding 100 securities in its basket. It is widely spread across each component as each of these holds less than 1.6% of total assets. Small cap stocks dominate nearly three-fifth of the portfolio while the rest have been split between the other two market cap levels. In terms of sector holdings, apparel retail takes the top spot at one-fourth share while specialty stores, automotive retail and Internet retail have a double-digit allocation each. XRT is the most popular and actively traded ETF in the retail space with AUM of about $667.9 million and average daily volume of more than 4.3 million shares. It charges 35 bps in annual fees and gained 12.8% over the past 10 days. The fund has a Zacks ETF Rank of 1. Market Vectors Retail ETF (NYSEARCA: RTH ) This fund tracks the Market Vectors US Listed Retail 25 Index and holds about 26 stocks in its basket. It is a largecap-centric fund and is heavily concentrated on the top 10 holdings with 64. 1% of assets. The largest allocations go to Amazon.com (NASDAQ: AMZN ), Home Depot and Wal-Mart (read: ETFs to Watch Post Amazon’s Big Earnings Miss ). Sector-wise, specialty retail occupies the top position with less than one-third share, followed by double-digit allocations each to Internet and catalog retail, hypermarkets, drug stores, departmental stores and healthcare services. The fund has amassed $ 149.6 million in its asset base while average daily volume is moderate at about 77,000 shares. Expense ratio came in at 0.35%. The product added 8.2% in the same period and has a Zacks ETF Rank of 2. PowerShares Retail Fund (NYSEARCA: PMR ) This retail fund provides a diversified exposure across various market caps with 45% in large caps, 43% in small caps and the rest in mid caps. This is easily done by tracking the Dynamic Retail Intellidex Index. The fund has accumulated just $22.8 million in its asset base while trades in a light volume of under 5,000 shares a day. The ETF charges 63 bps in fees per year. In total, the product holds 29 securities with none accounting for more than 5.88% of assets. In terms of industrial exposure, specialty retail takes the top spot at 48%, while food retail ( 19%) and drug stores ( 12%) round off the top three positions. PMR is up 8.5% in the past 10 days and has a Zacks ETF Rank of 2. Bottom Line The string of earnings and revenue beat has allowed retail ETFs to surpass the broader market fund by wide margins in the same period. This is likely to continue given the solid trends in the space. This is especially true as consumer spending has started regaining momentum on a slow but recovering economy, better job and wage prospects, and low oil prices. Original Post