Tag Archives: zacks funds

New Dow-Based Dividend ETF For Yield-Hungry Investors

There have been some concerns over dividend ETFs lately, thanks to the Fed liftoff in December and the possibility at least four more hikes throughout 2016. Yet is still plenty of interest in income ETFs. And with the long-term U.S. treasury yields not budging much even after the Fed rate hike, some have started to believe that lower rates are here for a bit longer, suggesting that dividend ETFs may be solid plays. There is surely a plethora of options in the dividend field, but newer approaches are always welcomed. Probably, this is why Guggenheim recently launched a new income fund, namely the Guggenheim Dow Jones Industrial Average Dividend ETF (NYSEARCA: DJD ). DJD In Focus This new ETF looks to give investors a way to target higher-income-producing securities in the U.S. market. This is done by tracking the Dow Jones Industrial Average Yield Weighted index, which is price weighted. The ETF will charge 30 basis points a year in fees for the exposure. In total, the ETF will hold 30 stocks in its basket. The stocks are selected on a yield-weighted technique. Only companies having a history of steady dividend payment in the last 12 months get an entry into the index. The portfolio of the ETF is focused on industrials (18.4%), information technology (18.1%), healthcare (12.89%), consumer staples (1211.59%) and energy (10.7%) while the top holdings include Chevron (NYSE: CVX ) (6.44%), Verizon (NYSE: VZ ) (5.11%) and General Electric (NYSE: GE ) (4.79%). The index also has a pretty decent yield of 3.01% and so looks to be a good income destination. How Does It Fit In A Portfolio? This ETF is an intriguing choice for investors seeking a new take on income investing. Investors should note that the Dow Jones index is under pressure lately on oil price worries. The only silver lining in the index is its dividend-rich nature. Plus, among the dividend-loaded stocks, a focus on the top-yielding could be better trading options. This technique is often known as the Dogs of the Dow investing theme, which considers the top 10 dividend-paying blue-chip stocks of the Dow Jones Industrial Average (DJIA). Investors should also note that the “Dogs of the Dow” technique has historically outpaced DJIA several times. ETF Competition Needless to say, the divided ETF investing area is packed with products. So, from that perspective, the newbie is likely to face tough times ahead. However, we believe that the Guggenheim Dow Jones Industrial Average Dividend ETF’s real competition will be with other ETFs following the Dow Jones Industrial Average index. There is already an exchange-traded product revolving around the “Dogs of the Dow” theme, namely ELEMENTS DJ High Yield Select 10 ETN (NYSEARCA: DOD ) . The product provides investors pure play to the 10 highest dividend-yielding securities in DJIA in equal proportions and charges 75 bps in annual fees. So, from the expense ratio point of view, the newly launched fund enjoys greater advantage. Notably, the regular Dow-based fund SPDR Dow Jones Industrial Average ETF (NYSEARCA: DIA ) lost 1.2% in the last one year (as of January 4, 2015) and 3.1% in the last six months while the yield-heavy fund DOD advanced over 1.5% in the last one year and over 2.1% in the last six months. These data clearly explain the need and the expected success of the newly launched ETF. Original post

5 Best Performing High Yield Mutual Funds Of 2015

Investors were lured to invest in high yield bond mutual funds following the financial crisis. And why not, as these funds were a better investment destination since there weren’t enough opportunities elsewhere to seek high yields. These funds provided better returns than those investing in securities with higher ratings, including government and corporate bonds. Also, due to their higher yield feature, these funds were less susceptible to interest rate fluctuations. High yield bond mutual funds provide the best choice for those looking to invest in below investment-grade bonds, also known as junk bonds. Talking of junk bonds, it surged an incredible 85% in 2011 since its Great Recession low and continued its winning run. However, in 2015, U.S. junk bonds registered their worst performance since 2008. Rate hike apprehensions throughout the year and finally the lift-off in December dealt a severe blow to these funds. Meanwhile, the weak Chinese economy raised concerns about future demand for oil, eventually dragging global oil prices down. This decline in oil prices also adversely affected junk bond funds. Activist shareholder, Carl Ichan, has tweeted: “Unfortunately I believe the meltdown in High Yield is just beginning.” Under such circumstances, investors may choose to stay away from high-yield mutual funds. Granted that the outlook is bleak, but still if you are a junk bond investor, we have presented those funds that have turned out to be the best gainers in 2015 despite several bottlenecks. These funds also possess a favorable Zacks Rank that should help these funds to continue gaining in 2016 as well. What Went Wrong for High-Yield Mutual Funds? In 2015, the high yield funds category lost an average 4.1%. Anticipation of a rate hike for the first time in nearly a decade and finally the Fed hiking its benchmark interest rates in December had a negative impact on the junk bond market. The Federal Reserve’s easy monetary policy for the last several years, which kept interest rates at record low, had been a boon for the junk bond market. Investors had flocked to this market in search of bigger payoffs. Following the Fed rate hike, net outflows from high-yield bond funds were $3.8 billion in the week ending Dec 16. It marked the third largest outflow on record and the largest since 2014, according to Lipper. During December, net outflows totaled $6.29 billion, higher than November’s net outflow of $3.3 billion. With this outflow, total outflow of high yield bond funds for 2015 came to $13.88 billion, with high-yield funds posting a negative flow in 7 out of 12 months of 2015. The adverse effect could easily be spotted when New York-based Third Avenue Management blocked investors from redeeming money from the near $1 billion Third Avenue Focused Credit Fund (MUTF: TFCVX ) last December. The failure and the embargo on investors on withdrawals also highlighted the concerns related to liquidity in corporate bond markets. The continuous slide in commodity prices also affected junk bond funds. Decline in commodity prices means that energy and material companies may soon have trouble repaying their debts, as they constitute a major portion of the high-yield bond market. Fears about economic slowdown and market volatility in China were instrumental in the plunge in commodity prices. Fed Rate Hike Through 2015, Fed rate hike expectation kept high-yield funds under pressure. Ultimately, on Dec 16, the Fed raised its key interest rate for the first time in nearly a decade. The Fed increased its short-term borrowing rate to a range of 0.25% to 0.50%. Meanwhile, the Fed stressed that the pace of rate hikes will be ‘gradual’ in nature. The junk bond market had been a strong beneficiary of low interest rate and capital had flowed strongly into the debt sector. However, the lift-off spooked investors and they started exiting junk bond positions. Weak Chinese Economy and Oil Price Slump China’s economy and financial markets suffered for a large part of 2015. Economic data remained weak through the year though markets soared during the first half of 2015. Ultimately, markets crashed over a two and a half month period, erasing nearly $5 trillion in value terms. A bubble had built up steadily and valuations had hit levels which were difficult to justify. Weak Chinese economic data raised concerns about decelerating growth in the world’s second largest consumer of oil, which eventually dragged oil prices down. Additionally, persistent supply glut and a stronger dollar also adversely affected oil prices. Price of a barrel of U.S. crude was down more than 30% in 2015 from year-ago levels. Meanwhile, the U.S. economy hardly helped high yield funds in 2015. For the first three months, it expanded at an annual rate of 0.6%. The growth was mostly affected by harsh winter weather and disruptions in West Coast ports. However, the economy picked up pace in the second quarter, gaining 3.9%, but slowed down to a gain of 2% in the third quarter. Best Performing High-Yield Mutual Funds in 2015 In 2015, the junk bond market had a torrid ride due to decreasing liquidity within and rising borrowing costs. Moreover, concerns about junk-rated energy and material companies’ ability to repay debts due to fall in commodity prices continued to weigh on junk bonds. As declines outweighed gains, the funds finishing in the green could post only modest gains. Below we present the best-performing high yield mutual funds of 2015, which are under Zacks Mutual Fund coverage. We have considered those funds that have a minimum initial investment of $5000 and net assets over $50 million. From the above list, we present the top five best-performing high yield mutual funds of last year. These funds also possess a relatively low expense ratio and boast a Zacks Mutual Fund Rank #1 (Strong Buy). The Aquila Three Peaks High Income Y (MUTF: ATPYX ) seeks high current income. ATPYX invests a large portion of its assets in income-producing securities. Its portfolio includes high-yield/high-risk securities rated below investment grade. ATPYX currently carries a Zacks Mutual Fund Rank #1. ATPYX’s 3-year and 5-year annualized returns are 3.6% and 4.8%, respectively. Annual expense ratio of 0.94% is lower than the category average of 1.06%. The Buffalo High-Yield Fund (MUTF: BUFHX ) invests a major portion of its net assets in higher yielding, higher-risk fixed income securities. BUFHX currently carries a Zacks Mutual Fund Rank #1. BUFHX’s 3-year and 5-year annualized returns are 4.1% and 5.2%, respectively. Annual expense ratio of 1.02% is lower than the category average of 1.06%. The Credit Suisse Floating Rate High Income Fund (MUTF: CHIAX ) seeks high current income. CHIAX invests in a diversified portfolio of high yield and high risk fixed income securities (junk bonds). CHIAX currently carries a Zacks Mutual Fund Rank #1. CHIAX’s 3-year and 5-year annualized returns are 2.3% and 4%, respectively. Annual expense ratio of 0.95% is lower than the category average of 1.07%. The Wells Fargo Short-Term High Yield Bond Fund (MUTF: SSTHX ) seeks total return and invests primarily in medium and lower quality corporate debt obligations. SSTHX currently carries a Zacks Mutual Fund Rank #1. SSTHX’s 3-year and 5-year annualized returns are 1.9% and 3.1%, respectively. Annual expense ratio of 0.81% is lower than the category average of 1.06%. The MassMutual Premier High Yield Fund (MUTF: MPHZX ) seeks to achieve a high level of total return and mostly invests in high yield debt and related securities. MPHZX currently carries a Zacks Mutual Fund Rank #1. MPHZX’s 3-year and 5-year annualized returns are 3.8% and 10.1%, respectively. Annual expense ratio of 0.55% is lower than the category average of 1.06%. Link to the original post on Zacks.com

China ETF Investing: Will It Buoy Up Or Dip Down In 2016?

What a terrible start to the year 2016 for Chinese securities! After what the Chinese economy and securities went through in 2015, everyone thought that the New Year would unfold somewhat better days. But no one had predicted a trading halt on the key Chinese bourses, with the indexes diving 7%, to start the New Year. The decline was the worst single-day performance since the 8.5% decline on August 24, 2015, which was the root of the global market rout last summer (read: 5 China ETFs Up At Least 20% in Q4 ). The most recent massacre is being blamed on hints of further shrinkage in the Chinese manufacturing sector in December. The Caixin/Markit purchasing managers’ index declined to 48.2 in December, representing the 10th successive month of factory output contraction. The data was much worse than 48.6 in November and well below the market’s expectation for 48.9. To complicate the global trading scene, news of Saudi Arabia cutting off diplomatic ties with Iran joined China-led worries to start the year. Needless to say, global stocks followed the downing trend and volatility and safe haven assets like gold rose on January 4. Investors should note that this was the first trading halt on the Chinese indexes after the Chinese securities regulators introduced a “circuit breaker ” to calm the jittery market. Per the rule, a 5% one-day gain or loss in the CSI300 index (before 2:30 p.m.) will close trading in the country’s all equity indices for 30 minutes. Shifts of 7% plus would result in closed trade for the rest of the day. What’s in Store for 2016? China may be leaving no stone unturned to shore up its market and the economy, but there are a number of headwinds still facing the Chinese economy, including shadow-banking activities, credit crunch and money laundering from mainland China to other peripheral destinations like Macau (read: Should You Short China ETFs Despite Rate Cuts? ). A group of economists believe that the government’s excessive focus on anti-corruption activities may hold back GDP growth. This along with a weak domestic market and global growth worries hurting the export profile took investors’ worries over the Chinese economy to a delirious pitch. With no let-up in the downbeat data flows from the Chinese economy, investors have now started to doubt its ability to deliver above-par growth numbers. Most analysts are not hopeful of the Chinese market. UBS stayed very cautious on China and believes that “China’s stock markets will see no gain in 2016.” UBS expects the Chinese economy to contract from 2015’s projected growth of 6.9-7% to 6.2% in 2016. Weak corporate earnings as depicted by the worst earnings in the third quarter of 2015 in almost five years, deteriorating property construction, and overcapacity in industrial and mining sectors will drag down China’s economy and the markets, per barrons.com. In the third quarter, the decline in profits was pronounced in the energy (down 58%), material (down 34%) and transportation (down 10%) sectors. Per Credit Suisse, Chinese companies’ credit worthiness is also deteriorating. Coming to the savior circuit breaker, Deutsche Bank (NYSE: DB ) does not approve of this system and believes that this method will simply increase volatility in the market resulting in a liquidity crunch. Yet another brokerage house Goldman (NYSE: GS ) also sees no respite “after China New Year sell-off.” If this is not enough, analysts expect further sell-off ahead due to the looming expiry of a six-month lockup period on share sales by big shareholders. Notably, to arrest the market crash, the Chinese government banned investors with over 5% stake, from abandoning their shares for six months. Now these shareholders may start running out of Chinese stocks when the embargo is lifted on Friday, per BBC . Goldman Sachs expects this lockup to account for about 5.8% of the total A-share free-float market cap. ETFs Thrashed in New Year Almost the entire Chinese market was in the red on January 4 led by the Market Vectors ChinaAMC SME-ChiNext ETF (NYSEARCA: CNXT ) (down 12.11%), the db X-trackers Harvest CSI 500 China-A Shares Small Cap Fund (NYSEARCA: ASHS ) (down 9.89%), the Market Vectors China ETF ( PEK ) (down 8.87%), the db X-trackers Harvest CSI 300 China A-Shares Fund ( ASHR ) (down 8.5%) and the Golden Dragon Halter USX China Portfolio (NYSEARCA: PGJ ) (down 4.62%). Is There Any Way to Win the Slump? All in all, China investing is full of risks. But it’s not that there is no silver lining. After all, the Chinese currency yuan received a privileged reserve currency status from IMF recently and joined the league of the major currencies, namely the U.S. dollar, pound, euro and yen. The GDP growth rate, though tapered from earlier years, is still way better than many emerging and developed economies. Plus, the economy is shifting mode from export-driven to consumption-oriented to ward off foreign issues. It’s just that the transition has been anything but smooth. China has not yet embarked on any outright policy easing. So, policymakers still have ways to check further weakening of the economy. Yes, these are all long-term phenomena. Over the short term, the market is expected to remain rocky. So, investors can have an inverse exposure to the Chinese market via the Direxion Daily CSI 300 China A Share Bear ETF (NYSEARCA: CHAD ) (up 8.76% on January 4), the ProShares UltraShort FTSE China 25 ETF (NYSEARCA: FXP ) (up 6.7%) and the ProShares Short FTSE China 50 ETF (NYSEARCA: YXI ) (up 3.5%). Link to the original post on Zacks.com