Tag Archives: zacks funds

Health Of Eurozone Recovers: ETFs To Watch

The eurozone is showing signs of a speedy recovery, as evident from the four and a half year high expansion in its business activity for the month of November. According to a flash estimate by data firm Markit, the eurozone purchasing managers’ index inched up to 54.4 this month from 53.9 in October . This surpassed the threshold score of 50, which hints at an expansion in activity. The growth profile has weakened in recent times in the eurozone, failing rounds of monetary easing. The bloc recorded 0.3% growth in Q3, declining from a 0.4% rise in Q2 and falling short of market expectation. The growth rate in Q3 was the softest in a year as development cooled down in the eurozone’s heavyweights Germany and Italy. In such a backdrop, the news of fast-expanding business activity spread optimism among investors. New business growth was noticed in both service and manufacturing sectors. Germany turned up a super performer as companies experienced “their strongest monthly gains in new business orders for two years”. The boost has come at an opportune moment, when the ECB is mulling over further easing in policies to boost inflation and economic growth. The European Central Bank (ECB) president, Mario Draghi, reassured of a more intensified and protracted QE measure, if need be. He reaffirmed the evaluation of the monetary policy by the end of this year based on a volley of economic data. However, the latest upbeat data raises confusion over the ECB’s potential altruism in the December meeting, forcing some to believe that further easing may not be as generous as thought previously. But a stubbornly low inflation profile, thanks to the commodity market rout, gives all reasons to expect further monetary easing from the ECB. Overall, the chief economist at Markit indicated that the eurozone was “on course for one of its best quarterly performances over the past four and a half years.” Based on this data, he expects the euro bloc to post 0.4% economic growth in the final quarter of the year. Meanwhile, Greece received a bailout loan from the euro area member states as the former agreed to enact the stated austerity measures. ETFs to Watch Below, we highlight three European ETFs that could be tapped to play the latest uptick in business sentiments. To do this, we land up on currency-hedged ETFs, as this is the most-watched investing technique currently, thanks to opposing monetary policies in the U.S. and the eurozone. While the greenback is strengthening on a looming rate hike in the U.S., the euro is sliding on accommodative policies by the ECB (read: Guide to Currency Hedging ETFs ). WisdomTree Germany Hedged Equity ETF (NASDAQ: DXGE ) Since Germany was the main driver of the latest surge in business activity, German ETFs warrant a look. This German ETF holds 75 securities in its basket. It has a slight tilt toward the consumer discretionary sector, with 21.7% share, followed by double-digit exposure each in financials, industrials, materials and healthcare. It has managed assets worth $286 million, and trades in good volume of 165,000 shares a day, on average. The fund charges 48 bps in annual fees, and is up 9.6% so far this year (as of November 23, 2015). DXGE has a Zacks ETF Rank of 2 with a Medium risk outlook. WisdomTree Europe Hedged Equity ETF (NYSEARCA: HEDJ ) This fund can be viewed as a replica of the broad-based European growth. The fund appears rich, with AUM of nearly $21.3 billion. Its expense ratio comes in at 0.58%. Holding 130 securities in its basket, the product is pretty well spread out across components, with no firm making up for more than 6.19% of its assets. Consumer staples, industrial, consumer discretionary, financials and healthcare each have double-digit weight in the fund. In terms of country allocations, Germany and France are leading with 26.1% and 24.2% share, respectively, followed by the Netherlands (17.2%) and Spain (16.5%). The Zacks Rank #3 (Hold) fund is up 11.2% so far this year (as of November 23, 2015). WisdomTree Europe Hedged SmallCap Equity ETF (NYSEARCA: EUSC ) Since small-caps companies tend to pick up more when an economy improves, a look at the small-cap European companies seems justified. The fund provides exposure to close to 237 of the smallest European companies. This ETF has amassed about $245.7 million. The product is highly diversified, with no stock accounting for more than 2.06% of the portfolio. Sector-wise, industrials get the maximum exposure, at 25.9% of the portfolio. Financials and consumer discretionary also get double-digit allocation each, while energy gets the least exposure, at only 2.35% of the basket. As far as country exposure is concerned, Italy (21.1%), Germany (17.2%), France (16.4%) and Finland (13.1%) get top priority. The fund charges 58 bps in fees, and is up about 1.6% so far this year. Original Post

How To Invest ‘Fossil-Free’ With This New ETF?

Pollution and global warming are now blazing issues, raising panic alarms from pole to pole. The louder the moan of panic, the faster the human awareness toward protecting the environment wakes up. The tendency to save the environment and be socially responsive seems to be an order of the day. The financial world also appears to be embracing the theme, which is why a surge in eco-friendly and socially conscious ETFs are now prevalent. One can have a fair understanding of this intention looking at the different areas of the ETF industry. There are clean-energy ETFs, low-carbon ETFs and even environment-oriented ETFs at investors’ disposal. Most recently, the market has received a new environment-pro ETF namely Etho Climate Leadership U.S. ETF (NYSEARCA: ETHO ) from the investment management company Etho Capital in partnership with Factor Advisors. How Does ETHO Work? ETHO follows “an equally weighted all-cap equity index that selects the most carbon-efficient companies across industries. The index is completely divested of fossil fuel companies, as well as those in tobacco, weapons and gambling, and undergoes rigorous screening with expertise from global NGO partners and based on ESG (environmental, social and governances) performance data,” as per the issuer . To accomplish the objective, the index studies total greenhouse gas emissions from over 5,000 equities to choose ‘climate leaders’ in each industry. The index rules out all companies operating in the field of oil, natural gas and coal. Any industry with weak ESG standards does not get an entry to the index followed by ETHO. To add to this, experts’ views related to socially responsible investing are also considered in the stock selection. This results in a 400-stock portfolio having a carbon emissions profile that is 50-70% lower per dollar invested than a conventional broad-based benchmark. No stock accounts for more than 0.56% of the basket. Netflix (NASDAQ: NFLX ), M&T Bank Corp. (NYSE: MTB ) and Energy Recovery Inc. (NASDAQ: ERII ) are top three holdings of the fund, which charges 75 bps in fees. How Could it Fit in a Portfolio? Building a ‘low-carbon’ economy and fighting global warming have become a common theme among the most developed and emerging nations. Recently, China announced that it intends to build a pollution-free environment. And, as part of this mission, the president of China and the U.S. president Barack Obama struck a deal to lessen carbon emissions. The agreement calls for carbon emission reductions by 26% to 28% in the U.S. by 2025. It also includes the first-ever commitment by China to stop emissions from growing by 2030. President Obama has always been active in cleaning up carbon pollution. A proposed Environmental Protection Agency rule seeks to reduce 30% carbon emission from power plants by 2030, compared to the levels in 2005. As per ETHO press release , in September 2015, it was declared that institutions and individuals managing over $2.6 trillion in assets under management are to divest fossil fuel. This figure is likely to go up, as 84% of the millennials support the ESG theme in investing, and close to $41 trillion will move to millennials from baby boomers in the coming 35 years, per the issuer. In short, this ETF can be a great tool to invest in amid the fast-growing awareness of clean energy. In any case, the overall energy sector has been in a lull lately on steeply declining prices, giving investors one more reason to bet on this new ETF. President Obama’s refusal to the planned Keystone XL pipeline and the New York attorney general’s new investigation of Exxon Mobil (NYSE: XOM ) for confusing the public about the impact of climate change also hint at the underlying risks associated with fuel-related investing, per the issuer. By investing in ETHO, investors can also avoid such threats. Competition The competition in this space is negligible with a handful of products sharing the carbon-efficiency theme. There are two low-carbon funds in the market namely The SPDR MSCI ACWI Low Carbon Target ETF (NYSEARCA: LOWC ) and iShares MSCI ACWI Low Carbon Target ETF (NYSEARCA: CRBN ). The nature of these two funds is not exact to ETHO as the duo has global footprint, while the newbie revolves around U.S.-based companies. Since the operating methodology of ETHO is a little different to both low-carbon ETFs, ETHO should not face direct competition from them. However, the duo charges just 20 bps in fees, much lesser than ETHO, which could be a deterrent in amassing investors’ assets for the latter. Original post .

Homebuilding ETFs In Focus Following U.S. Home Resale Data

The recent home resale data from National Association of Realtors (“NAR”) indicated that the U.S. homebuilding sector still faces weaknesses. The data showed a 3.4% decline in existing home sales in the U.S. to an annual rate of 5.36 million units in October from 5.55 million units in September. The decline is blamed on the shortage of properties that pushed up prices and discouraged buyers of existing homes. Per NAR, the number of unsold homes for October ebbed 2.3% over the previous month to 2.14 million units. Unsold homes inventory was down 4.5% from the prior year. The tight inventory caused median home price to increase 5.8% from the year-ago level to $219,600, marking the 44th straight month of a year-over-year rise (read: Homebuilder Stocks and ETFs Gain on Solid Data ). Last week, U.S. Commerce Department also revealed disappointing housing starts data for October. Groundbreaking dipped 11% to a seasonally adjusted annual pace of 1.06 million units during the month, the lowest level in the past 7 months. The decline was attributed to slowdown in the construction of multi-family homes. Groundbreaking data for the largest housing market segment indicated a 2.4% fall in single-family home projects for October. Much of the decline has been contributed by a 6.9% downfall in groundbreaking activity in the South, the most active region for the homebuilding sector. Meanwhile, housing starts for the multi-family segment slumped 25.1% to the annual pace of 338,000 units. Notably, new single-family home sales in the U.S. tumbled 11.5% to a seasonally adjusted annual rate of 468,000 units in September from August. This has led to 5.8 months’ supply of new homes in September, the highest since July last year. The U.S. homebuilding sector already faces a major threat from the strong possibility of an interest rate hike by Fed in December. A higher interest rate environment heavily weighs on the affordability of homes. On the other hand, it raises the mortgage rates that could fend off existing homeowners from upgrading to luxury and expensive homes (read: Is it the Right Time for Homebuilder ETFs? ). However, some have predicted that the decline in housing activities during October could be short-lived, particularly when the labor market is improving and the broader market is recovering. Further, industry experts argue that Fed’s lift-off could send a positive signal about the economy and boost consumer confidence. ETFs in Focus The depressing homebuilding reports for October turns our attention to the ETFs tracking the performance of the sector. Although the two major homebuilding ETFs (discussed below) delivered good performance both in the one-month and year-to-date time frames, investors should remain cautious about them given the adverse developments and the threat of an impending rate hike by the Fed (read: Two Homebuilder ETFs & Stocks Set to Soar ). iShares U.S. Home Construction ETF (NYSEARCA: ITB ) This most popular homebuilding fund provides a pure play on the home construction sector by tracking the Dow Jones US Select Home Builders Index. It holds a basket of 41 stocks, with double-digit allocation going to both D.R. Horton (NYSE: DHI ) and Lennar Corp. (NYSE: LEN ). The product has amassed more than $2 billion in its asset base and trades in heavy volume of more than 3.7 million shares per day, on average. The ETF charges 43 bps in annual fees, and has added about 2.9% in the past one month and 10.4% in the year-to-date period (as of November 24, 2015). It has a Zacks ETF Rank #2 (Buy) with a High risk outlook. SPDR S&P Homebuilders ETF (NYSEARCA: XHB ) XHB follows the S&P Homebuilders Select Industry Index, representing the homebuilding sub-industry portion of the S&P Total Markets Index. The fund holds 36 securities in its basket, with none accounting for more than 3.87% of the assets. It has garnered about $1.9 billion in its asset base and exchanges a heavy volume of roughly 3.4 million shares per day, on average. XHB charges 35 bps in annual fees and returned 0.6% in the last one-month and 6.9% so far this year. It has a Zacks ETF Rank #2 with a High risk outlook. Original Post