Tag Archives: zacks funds

3 Utility Mutual Funds For Steady Returns Amid Volatility

These are trying times for the markets, with most of the benchmarks striving to finish their trading days in the green and the mutual funds are not being spared either. While most of the sectors have been failing to attract investors’ attentions since the start of this year, the safe-haven appeal of the utility sector has bucked the trend to some extent. So buying utility mutual funds with strong fundamentals could help investors avoid this negative tone in a less risky manner. According to Lipper, net outflows for all equity funds came in at around $12 billion for the week ending Jan 6, indicating the market downturn. As a result, the demand for safe haven securities – such as those from the utility sector – is growing among investors. The broader S&P 500 utility sector – the Utilities Select Sector SPDR ETF (NYSEARCA: XLU ) – has attracted nearly $294.6 million of net inflow so far this year. Though the sector is only up 0.3% in the year-to-date frame, it is the only sector among major S&P 500 domains that finished in the positive territory during this period. Meanwhile, the sector gained nearly 2.6% in the past one-month period when the other major sectors registered a minimum loss of 4%. Before suggesting the appropriate utility mutual funds for your portfolio, let’s find out what is propelling the demand of securities from the utility sector. Why Utility? Concerns over China-led global growth issues and a persistent slump in oil prices dampened investor sentiment from the start of 2016, and have dragged down the major benchmarks into negative territory. Rising expectations about the lift-off of Iranian sanctions, which happened yesterday, dragged down the energy sector, which in turn weighed on the benchmarks on Friday. While WTI crude plunged by 6.1% to a 12-year low level of $29.42 per barrel, Brent crude declined nearly 0.1% to $31.01 a barrel. The VOLATILITY S&P 500 (VIX) – an important indicator of volatility level – jumped 12.2% on Friday and surged 6.3% in the year-to-date frame. In this volatile environment, the utility sector provides safety to investors due to its higher immunity against market peaks and troughs. Though the utility sector, which requires a high level of debt, was initially affected by the rate hike, its safe haven appeal gradually offset the impact. Also, after declining significantly in 2015, utility stocks are now offering attractive entry points. Meanwhile, the sector is also popular among investors for generally offering stable and healthy yields. Additionally, demand for essential services such as those provided by utilities is believed to remain unchanged even during difficult times. This is also an important factor behind the stability of the sector even during a market downturn. 3 Mutual Funds to Buy Given the safety and yields that are latent in the sector under discussion, below we present 3 utility mutual funds that carry either a Zacks Mutual Fund Rank #1 (Strong Buy) or #2 (Buy). We expect the funds to outperform its peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify the potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund. These funds have encouraging 4-week, and 3- and 5-year annualized returns. The minimum initial investment is within $5000. These funds also have a low expense ratio. American Century Utilities Fund Investor (MUTF: BULIX ) invests a large portion of its assets in equities related to the utility industry. BULIX’s portfolio is constructed on qualitative and quantitative management techniques. In the quantitative process, stocks are ranked on their growth and valuation features. BULIX currently carries a Zacks Mutual Fund Rank #1. It boasts a 4-week return of 3.2%. The 3- and 5-year annualized returns are 9.2% and 8.6%, respectively. The annual expense ratio of 0.67% is significantly lower than the category average of 1.25%. BULIX has a yield of 2.87%. Franklin Utilities Fund A (MUTF: FKUTX ) seeks capital appreciation and current income. FKUTX invests a large chunk of its assets in common stocks of public utilities that are involved in providing electricity, natural gas, water, and communications services. FKUTX currently carries a Zacks Mutual Fund Rank #2. It has a 4-week return of 4.1%. The 3- and 5-year annualized returns are 9.2% and 10.5%, respectively. The annual expense ratio of 0.73% is also lower than the category average. FKUTX provides a yield of 2.77%. Fidelity Telecom and Utilities (MUTF: FIUIX ) focuses on acquiring common stocks, investing heavily in telecom and utility companies. FIUIX may purchase both foreign and domestic securities. FIUIX utilizes fundamental analysis to select its holdings, studying both firm-specific and broader market and economic factors. FIUIX currently carries a Zacks Mutual Fund Rank #2. It boasts a 4-week return of 3.3%. The 3- and 5-year annualized returns are a respective 7.7% and 9.2%. The annual expense ratio of 0.79% is lower than the category average. FIUIX provides a yield of 2.06%. Original Post

Can Grain ETFs Sustain The Recent Rally?

Taking the market by surprise, grain prices and the related investments popped lately. This is perhaps the sole good news in the investing world to start 2016 as the broader market has seen choppy trading so far. And as far as commodities are concerned, nobody knows when and where their prolonged rout will end. Lower estimates for U.S. crops showered these unexpected gains on grains. Lately, USDA reduced its numbers for the 2015 corn and soybean harvests and sharply cut winter wheat planted acreage to 36.61 million acres, which was “the smallest winter crop in six years.” The figure exceeded analysts’ expectation of a decline of 141,000 acres. Per USDA, corn harvest is presently at 13.6 billion bushels, lower than USDA’s December reading of 13.654 billion. The soybean produce was recorded at 3.93 billion while USDA’s latest reading was similar to the 2014 levels. While many agricultural commodities advanced, wheat prices soared the most in two months. As a result, the Teucrium Wheat ETF (NYSEARCA: WEAT ) , the iPath DJ-UBS Grains Total Return Sub-Index ETN (NYSEARCA: JJG ) , the Teucrium Soybean Fund (NYSEARCA: SOYB ) and the Teucrium Corn ETF (NYSEARCA: CORN ) added about 2.1%, 1.8%, 1.4% and 1%, respectively, on January 12 (read: Invest in America with These 4 ETFs ). Can the Positive Momentum Sustain? Per Bloomberg, while U.S. output may moderate, global supplies of wheat remain ample thanks to solid output in Russia, Pakistan and the European Union. On the other hand, the demand scenario is as sluggish as it has been in recent times. Global growth worries mainly in most of the developed economies and in some emerging economies too resulted in softer demand for food. USDA also pointed to this issue with “a small reduction in domestic usage and a cut to exports.” USDA lowered the export numbers for corn and soybean to 1.7 billion bushels from its previous 1.75 billion and to 1.69 billion from 1.715 billion, respectively. Still, there are a few agro-based products which could deliver decent gains to investors despite the broad-based gloom. Below we highlight those products in detail (read: 3 Commodity ETFs Defying Weakness in 2015 ). iPath Dow Jones-UBS Sugar Total Return Sub-Index ETN (NYSEARCA: SGG ) The sugar prices are expected to remain steady though most of the other commodities are finding the going tough. This is because; supply glut is an easing issue in the global market due to adverse weather. SGG tracks the Dow Jones-UBS Sugar Subindex Total Return Index, which provides returns that are in an investment in the futures contracts on the commodity of sugar. The note has garnered nearly $53.2 million in assets. It charges 75 bps in annual fees. The note was up 1.1% in the last five days (as of January 13, 2016). iPath Dow Jones-UBS Cotton Total Return Sub-Index ETN (BAL Notably, cotton price is also showing hopes on higher purchase from the spinners and exporters. Also, in India, a key grower of cotton, the central government’s move to intervene in the pricing of cotton might help in shoring up the commodity. The product has amassed about $17 million in assets and charges 75 bps in fees. BAL gained 1% in the last five days (as of January 13, 2015). iPath Dow Jones-UBS Softs Total Return Sub-Index ETN (NYSEARCA: JJS ) The note looks to provide the returns that are available through an investment in the futures contracts on the softs sector of the commodity world. Components currently include sugar, coffee, and cotton. This $2.6-million ETF charges 75 bps in fees. Though the product lost 2% in the last five days, it added about 1.5% on January 13. Link to the original article on Zacks.com

More Pain Ahead For Basic Materials ETFs In 2016?

It’s been years since basic materials ETFs last saw their days of glory. As for the last few years, the space has been an area of concern, thanks to a surging greenback, massive crash in oil prices and hard landing fears in China. Moreover, supply glut has been a long-lasting issue for this space. Things were fragile for long in China given the protracted slowdown in the domestic manufacturing sector, credit crunch concerns and a property market slowdown. As a result, the Chinese economy has been undergoing a tumultuous phase for the last few months. To shore up the ailing economy and the turbulent market, the Chinese government took several measures; but nothing could really heal the pain. Since the Chinese economy accounts for about half of the global consumption of industrial commodities and is the second biggest purchaser of oil, a further slowdown in the Chinese economy would mean weaker demand for commodities. In any case, most developed economies are presently in a state of slowdown and thus require lesser commodities for weak demand. Also, the strength in the greenback owing to Fed policy tightening marred the broader commodity prices as most of these materials are priced in the U.S. dollar. Also, a hike in interest rates tends to boost investors’ interest in income-generating assets and thus hurts the investment demand for non-yielding commodities. So, all in all, fears of softening demand amid abundant supplies have led to a broad-based meltdown in commodities prices. Commodities at Multi-Year Lows Copper prices have already plunged to a new six-year low on Chinese economic issues. Events in China are major contributors as the country is the world’s biggest consumer of this industrial metal, making up roughly 40% of global copper demand. Thus, a prolonged manufacturing slowdown in the world’s second largest economy cast a dark cloud over the red metal. Iron ore fell to a five-and-a-half year low in December 2015 and analysts predict that the rout can deepen further as ” Chinese steel mills rebuild the inventory.” Nickel prices plummeted to a 12-year low on low demand from “the stainless steel sector , the dominant source of demand for nickel.” Most agricultural commodities are also in the red. The oil price rout is getting more and more acute lately with Brent crude having slipped to a 12-year low and WTI crude falling to a seven-year low. Analysts expect the pressure to remain in place. ETFs to Lose More in 2016 iShares U.S. Basic Materials ETF (NYSEARCA: IYM ) – Down 20% in the last one year (as of January 12, 2016) and about 9.6% year to date. The fund is the most exposed to chemicals though steel, gold and aluminum take about 10% of the fund. SPDR Materials Select Sector Fund (NYSEARCA: XLB ) – Down 16.4% in the last one year (as of January 12, 2016) and about 9.2% year to date. The fund puts 73.8% off its assets in the chemical sector followed by 9.5% of assets in the metals & mining sector, and 8.7% in containers and packaging sector. The fund is heavy on Du Pont (NYSE: DD ) (11.4%) and Dow Chemical (NYSE: DOW ) (11.2%). SPDR S&P Metals & Mining ETF (NYSEARCA: XME ) – Down 53.9% in the last one year (as of January 12, 2016) and about 15% year to date. Steel occupies almost half of the portfolio followed by 10% in aluminum, diversified metals and gold each. iShares MSCI Global Metals & Mining Producers ETF (NYSEARCA: PICK ) – Down 50.4% in the last one year (as of January 12, 2016) and about 15.8% year to date. Materials hold about the entire fund though consumer services and consumer durables take a slight portion of the ETF. The fund’s main focus is on companies like BHP Billiton (NYSE: BHP ), Rio Tinto (NYSE: RIO ) and Glencore ( OTCPK:GLNCY ). Bottom Line With the operating backdrop in 2016 expected to be no different than 2015, the basic materials sector will replay the same pattern that we saw in the recent past. At Zacks, we have most of the materials ETFs as Sell-rated at the time of writing. Original Post