Tag Archives: zacks funds

Japan ETFs To Buy On Negative Interest Rates

Finally, Bank of Japan (BoJ) has also followed the ECB’s suit by pushing interest rates on excess reserves into negative territory. While the investing world was expecting further monetary easing from the BoJ as the region’s growth picture is still dull and the inflationary environment is slackening substantially, hardly did any one hope for the launch of a negative interest rate. However, dissimilar to the single negative rate applied by the ECB, the Japanese central bank resorted to tiered measures exercised by the Swiss National Bank. Under this method, “the outstanding balance of each financial institution’s current account at the BoJ will be divided into three tiers , to each of which a positive interest rate, a zero interest rate, or a negative interest rate will be applied, respectively.” At its January-end meeting, BoJ set its benchmark interest rate at negative 0.1%, higher than ECB’s deposit rate of negative 0.3%. However, the BoJ hinted at further cuts in interest rates if the economy fails to improve desirably. Prior to this, in December 2015, Japan’s central bank announced a number of cautious changes without expanding the volume of its annual asset purchasing program it has been following for about the last three years. The bank opted for raising the Japanese government bonds’ (JGBs) average maturity from 7-10 years to 7-12 years. The bank also revealed its plan of purchasing all JGBs to be issued in 2016 and announced that it will allocate 300 billion yen of assets annually in purchasing ETFs that seek to follow the JPX-Nikkei Index 400. Reason Behind This Dovishness Investors should note that massive monetary easing to move closer to the target inflation rate of 2%, a flexible fiscal policy and structural reforms made Japan a rising star in 2013. However, the economy started to lose ground since 2014, slipping into recession in Q2 and Q3. Though the BoJ reacted to this slowdown by enhancing its asset-buying program to 80 trillion yen a year from the previous rate of 60-70 trillion yen in late October 2014, the response was not favorable. Experiencing a spurt in the first quarter of 2015, the Japanese economy shrank in Q2 and barely escaped a technical recession in Q3 (having expanded 0.3% q/q in Q3 compared with an initial reading of a 0.2% contraction). Meanwhile, consumer prices in Japan increased 0.2% y/y in December 2015, down from 0.3% growth in the previous month. The recent inflation trend shows that the level is far behind the BoJ’s goal of 2%. The central bank, on January 28, stretched out its timeline to attain the inflation goal to the first half of 2017, the third deferment in less than a year . Market Impact While this flush of liquidity gave the equities a solid boost, the Japanese yen fell against the U.S. dollar. This is true given the Fed’s policy tightening stance and the resultant ascent of the U.S. dollar. The CurrencyShares Japanese Yen Trust ETF (NYSEARCA: FXY ) lost 2.2% in the last five trading sessions (as of January 29, 2016). This proved vital for investors seeking a Japanese flavor in their portfolio, yet looking to hedge against a falling currency. The move also lowered Japanese government bond yields boosting the Japanese government bond ETFs. The DB 3x Japanese Govt Bond Futures ETN (NYSEARCA: JGBT ) – a triple leverage JGB ETF – added 2.4% on January 29 and hit a 52-week high. Below we highlight a number of top-ranked (Zacks ETF Rank #2 (Buy) currency-hedged Japan ETFs which are likely to soar in 2016 given the supportive BoJ. WisdomTree Japan Hedged SmallCap Equity ETF (NASDAQ: DXJS ) DXJS offers exposure to the Japanese small cap stocks while at the same time provides a hedge against any fall in the Japanese yen. Since small-cap stocks better reflect the economy’s inherent strength. This ETF appears to be a strong bet in the current perspective. This is truer given the global growth worries which weighed on Japan’s export sector. The ETF charges 58 bps in fees and gained 6.6% in the last five trading sessions (as of January 29, 2016). iShares Currency Hedged MSCI Japan ETF (NYSEARCA: HEWJ ) This is another currency hedged option to play the Japanese equity and is a hedged version of the popular fund (NYSEARCA: EWJ ). The expense ratio comes in at 0.48%. The fund gained 5.9% in the last five trading sessions (as of January 29, 2016). WisdomTree Japan Hedged Dividend Growth ETF (NYSEARCA: JHDG ) The ETF follows the WisdomTree Japan Hedged Dividend Growth Index and measures the performance of dividend-paying common stocks with growth characteristics selected from the WisdomTree DEFA Index while at the same time neutralizing exposure to fluctuations between the yen and the U.S. dollar. JHDG charges 43 bps in fees and was up 6.3% in the last five trading sessions. WisdomTree Japan Hedged Equity ETF (NYSEARCA: DXJ ) DXJ also looks to offer investors a way to gain exposure to the Japanese shares devoid of currency risks. This ultra-popular Japan ETF charges 48 bps in fees. The fund advanced 4.6% in the last five trading sessions. Original Post

Cold Snap Warms Up Natural Gas ETFs

Natural gas prices were thwarted by sluggish trends with the energy market rout and a milder winter so far this year. Among the issues hurting the broader energy space, ample supplies and falling demand on global growth worries are primary. This, along with considerably warmer temperature in December (due to a protracted and stronger El Nino) played foul, taking natural gas futures to a 14-year low (read: No Winter Cheer for Natural Gas ETFs?). As a result, most of the exchange traded products tracking natural gas are in red this year defying seasonal strength. Normally, Arctic Chills give life to this commodity every winter. The cold snap boosts electricity demand across the region putting natural gas in focus. In fact, in 2014, the Polar Vortex caused natural gas prices to jump over 50%. Winter Storm Jonas to Rescue This year, the winter storm Jonas recently salvaged this besieged commodity. The whiteout struck on the East Coast, with icy temperatures and a snow emergency bolstering demand for natural gas for a valid reason. As almost 50% of Americans use natural gas for heating purposes, withdrawals in natural gas supplies push up the commodity’s prices. The U.S. Energy Information Administration also gave same cues on Thursday when it declared the largest weekly drawdown of gas from storage this winter, as per Wall Street Journal. Natural-gas prices went ‘above $5 per million British thermal units in parts of the Northeast for the first time since last winter’, as indicated by Wall Street Journal. If such sub-zero temperatures continue even after the snow storm, it will bring a great deal of luck for natural gas, albeit for the short term. ETF Impact In fact, an ETF tracking the natural gas futures – United States Natural Gas ETF (NYSEARCA: UNG ) -added about 0.13% on January 22. Investors should note that natural gas equities, such as First Trust ISE-Revere Natural Gas Index Fund (NYSEARCA: FCG ), were the real winner that added 5.2% on January 22. Below we highlight a couple of natural gas ETFs that investors could use to play if the U.S. economy remains snowed in the near term (see all Energy ETFs here). iPath Dow Jones-UBS Natural Gas ETN (NYSEARCA: GAZ ) This is an ETN option for natural gas investors. It delivers returns through an unleveraged investment in the natural gas futures contract plus the rate of interest on specified T-Bills. The product follows the Dow Jones-UBS Natural Gas Total Return Sub-Index. The note is less popular with AUM of $4.9 million. It is a high-cost choice, charging 75 bps in annual fees. GAZ is down 30.6% in the year-to-date frame and gained about 2% on January 22, 2016. FCG in Focus This product offers exposure to the U.S. stocks that derive a substantial portion of their revenues from the exploration and production of natural gas. It follows ISE-REVERE Natural Gas Index and holds 30 stocks in its basket, which are well spread out across components (read: 5 ETFs Losing Half or More of Their Value in 2015 ). Southwestern Energy Company, Antero Resources Corporation and Gulfport Energy Corporation occupy the top three positions in the portfolio with a combined 16% of total assets. This indicates that no single company dominates the fund’s returns, preventing heavy concentration. The fund has a blended style and is diversified across various market cap levels with 53% in small caps, 31% in mid caps and the rest in large caps. The product has amassed $132.7 million in its asset base while sees solid volume of nearly 2.5 million shares per day. It charges 60 bps in annual fees from investors and has a Zacks ETF Rank of 3 (Hold) with a High risk outlook. The fund is down 13.7% so far this year (as of January 22, 2016). Bottom Line Though there have been some incredible price increases lately in the natural gas market despite weak demand-supply fundamentals, the commodity is due for a price reversal. The weather will likely warm up across the country with the advent of spring and natural gas demand will trip up then. This is truer in the light of the fact that present stockpiles are pretty higher than the five-year average and the year-ago level. So, investors solely relying on a weather play might proceed with a short-term notion. Original Post

6 Quality Dividend ETFs For Safety And Income

Though U.S. stocks logged in the first weekly gains in a month after a tumultuous ride buoyed up by an incredible rebound in oil price and hopes of additional stimulus in Europe and Japan, a long list of worries kept the stock market returns at risk. This is especially true given the weak international fundamentals, especially in China and its global repercussions that could put a pause on the slowly recovering U.S. economy. Additionally, bleak oil demand/supply trends, weak Q4 corporate earnings, and uncertain timing of the next rate hike are making investors cautious. Notably, corporate profits seem to be in recession with fourth-quarter earnings expected to decline 6.6% as per the Zacks Earnings Trends . This would mark the third consecutive quarter of decline in earnings. Accounting for the weekly gain, the major benchmarks were down 6.5% or more from a year-to-date look and are still in the correction territory having lost more than 10% from their 52-week high price. As per BMO Capital, “the S&P 500 is currently on pace to record its worst monthly decline since January 2009 and 11th worst month during the post war era.” This sluggish backdrop has rekindled investors’ faith in products that provide stability and safety in a rocky market. Nothing seems a better strategy than picking quality dividend stocks in this sort of an environment. Why Quality Dividend? Quality dividend stocks offer safety and stability in a choppy stock market as they ensure regular income to investors in the form of dividends. At the same time, they also have the potential for capital appreciation when the market is on an upswing. Investors should note that these stocks are mature companies, which are less volatile to the large swings in the stock prices, and therefore are well protected than others in a tumbling market, which we have seen several times this year. In a nutshell, quality dividend stocks have a long track of profitability, history of raising dividend year over year with prospects of further increases, good liquidity, and some value characteristics. As a result, a basket of quality dividend stocks offer dividend growth opportunities when compared to other products in the space but might not necessarily have the highest yields. These products provide a nice combination of dividend growth and capital appreciation opportunity and are mainly suitable for the risk-averse, long-term investors. For them, we have highlighted some ETFs that could be excellent choices irrespective of the stock market directions. FlexShares Quality Dividend Index ETF (NYSEARCA: QDF ) This fund uses a proprietary model that includes factors like profitability, solid management and reliable cash flow. Then, the firms are selected based on expected dividend payments, resulting in a basket of 185 securities. The product is widely diversified across components with none of the securities holding more than 3.6% of assets. Further, it is well spread out across sectors with financials taking the top spot at 17.5% followed by information technology (16.8%), consumer discretionary (14.3%) and healthcare (11.9%). The fund has amassed $672.4 million in its asset base and trades in a moderate volume of nearly 71,000 shares. It charges 37 bps in fees per year and pays a dividend yield of 3.24% annually. The fund is down 6.2% in the year-to-date time frame. Schwab U.S. Dividend Equity ETF (NYSEARCA: SCHD ) With an AUM of $2.9 billion, this product offers exposure to the 111 high dividend-yielding U.S. companies that have a record of consistent dividend payments supported by fundamental strength based on financial ratios and ample liquidity. This can be easily done by tracking the Dow Jones U.S. Dividend 100 Index. The fund is well spread across single security with none holding more than 4.8% of assets. However, it is slightly tilted toward the consumer staples sector with 23% share while information technology, industrials, healthcare and energy rounded off the top five. The fund trades in solid volume of more than 667,000 shares a day and is one of the low-cost choices in the dividend space, charging 7 bps in fees per year. The ETF has shed about 5.1% so far this year and yields 3.13% in annual dividends. WisdomTree LargeCap Dividend ETF (NYSEARCA: DLN ) This ETF tracks the WisdomTree LargeCap Dividend Index, which is dividend weighted annually to reflect the proportional share of cash dividend that each company is expected to pay in the coming year. The fund has been able to manage assets of $1.6 billion and trades in good volume of 105,000 shares a day on average. Expense ratio came in at 0.28%. Holding 298 stocks in its basket, the product is widely diversified across each component as none of these hold more than 3.5% of assets. Sector-wise, it also has spread-out exposure with none of the sector making up for more than 15.4% share. The fund has an annual dividend yield of 2.96% and has lost 5.5% so far this year. ProShares S&P 500 Dividend Aristocrats ETF (NYSEARCA: NOBL ) This product provides exposure to 51 companies that raised dividend payments annually for at least 25 years by tracking the S&P 500 Dividend Aristocrats. It is widely diversified across various securities as each account for less than 3% share. From a sector look, more than one-fourth of the portfolio is dominated by consumer staples, followed by healthcare (15.2%), industrials (14.9%), consumer discretionary (12.1%), and financials (11.6%). The fund has an impressive level of AUM of $984.1 million and has an annual dividend yield of 2.13%. Expense ratio is 0.35% while average daily volume is good at 177,000 shares. NOBL has lost 5.3% so far this year. WisdomTree U.S. Dividend Growth ETF (NASDAQ: DGRW ) This fund tracks the WisdomTree U.S. Quality Dividend Growth Index and offers diversified exposure to U.S. dividend-paying stocks with both growth and quality characteristics like long-term earnings growth expectations, and three-year historical averages for return on equity and return on assets. It has gathered $594.5 million in its asset base and trades in good volume of nearly 171,000 shares per day. The ETF charges 28 bps in fees per year from investors and holds 296 securities in its basket, with each holding less than 4.3% share. From a sector look, it provides double-digit allocation to consumer discretionary, information technology, industrials, consumer staples, and healthcare. The fund has lost 5.9% in the year-to-date time frame. First Trust NASDAQ Rising Dividend Achievers ETF (NASDAQ: RDVY ) This fund provides exposure to 50 U.S. stocks with a history of rising dividends and that are expected to continue doing so in the future. In addition, it also screens for stocks with rising earnings per share and cash-to-debt ratio greater than 50%. This can be done by tracking the NASDAQ Rising Dividend Achievers Index. All the securities are well spread out with each accounting for less than 2.2% of total assets. However, the product has a certain tilt toward financials with 27.6% share, closely followed by information technology (23.6%). The ETF has accumulated $36.2 million in its asset base and sees a paltry volume of 20,000 shares a day on average. Expense ratio came in at 0.50%. The fund has shed 8.5% so far this year. Original post