Tag Archives: zacks funds

Direxion To Close Down 3 Leveraged ETFs

The Direxion Shares ETF Trust has decided to cease trading three of its leveraged products after the closing session on October 20, 2015. The decision, based on the recommendation of the funds’ sponsor Rafferty Asset Management, LLC, was taken due to the funds’ inability to attract sufficient investment assets. We believe strong competition in the asset class and pitfalls of investing in leveraged ETFs in this turbulent time with high volatility might have kept investors away from these funds. Leveraged ETFs are designed to magnify returns of the underlying index. However, these products lose their asset value during a highly volatile market environment, particularly in the long term. Further, their performances could vary significantly from the actual performance of their underlying index over a longer period when compared to a shorter period (such as, weeks or months) (read: Understanding Leveraged ETFs ). Let’s discuss the three products, serving divergent interests, which are about to be closed down (see all Leveraged Equity ETFs here). Direxion Daily 7-10 Year Treasury Bull 2X Shares ETF (NYSEARCA: SYTL ) SYTL tracks the NYSE 7-10 Year Treasury Bond Index, which is a multiple-security fixed income index that aims to track the total returns of the intermediate 7 to 10 year maturity range of the U.S. Treasury bond market. This product provides two times (2x) exposure to the daily performance of the underlying index. The fund has been overlooked by investors as it has garnered only $4.5 million in assets since its inception in July last year. It charges 60 bps in annual fees from investors. However, the product gained 3.8% so far this year. The closure of this ETF seems unfortunate at a time when investors are flocking toward bond ETFs due to global stock market instability and Fed’s reluctance to raise interest rates in the near term, as lower rates push the yields down, boosting the prices for the bonds. Investors still interested to play the leveraged Treasury bond ETF category could consider the more popular ProShares Ultra 7-10 Year Treasury ETF (NYSEARCA: UST ) , which provides two times exposure to the Barclays Capital U.S. 7-10 Year Treasury Index. This product has roughly $95 million in AUM and charges 95 bps in fees. The fund returned 4.8% in the year-to-date timeframe. Direxion Daily Mid Cap Bull 2X Shares ETF (NYSEARCA: MDLL ) MDLL follows the S&P Mid Cap 400 Index, measuring the performance of the mid-cap segment of the U.S. equity universe. It seeks daily investment results of 200% of the performance of the benchmark index. The fund is almost neglected gathering a meager $1.5 million in assets since its inception in July last year. It charges 60 bps in fees from investors and was down 15.7% in the year-to-date period. The closure of this fund doesn’t look good either at a time when mid-cap funds are favored by investors due to their potential to move higher in difficult times, especially if political issues or financial instability creep into the picture. Investors still interested in leveraged mid-cap ETFs could consider the Direxion Daily Mid Cap Bull 3x Shares ETF (NYSEARCA: MIDU ) by the same issuer. The fund seeks investment results of 300% of the price performance of the S&P Mid Cap 400 Index. It has $54 million in AUM and charges 95 bps in fees. The fund lost 5.9% so far this year. Direxion Daily Basic Materials Bull 3X Shares ETF (NYSEARCA: MATL ) MATL tracks the Materials Select Sector Index, which includes companies from the chemicals, metals & mining, paper & forest products, containers & packaging, and construction materials industries. It provides three times (3x) exposure to the daily performance of the underlying index. The fund was hardly noticed by investors as it has accumulated only $2.2 million in assets since its launch in June 2011. It charges 95 bps in annual fees from investors. The basic materials sector has been dragged down by weak agricultural fundamentals, sluggish demand in energy markets and persistent slowdown in China – the world’s second largest consumer of raw materials. This might have made the fund an unpopular choice among investors. The product lost 32.5% in the year-to-date timeframe. Link to the original post on Zacks.com

Dollar Weakens; Time For Large-Cap Value ETFs?

The economic outlook looks misted up yet again by undesirable global events. The Chinese economy is striving to ease a hard landing; Japan is also seeing deceleration in its growth pace; European markets are far from steady despite a QE policy; capitals are gushing out of emerging markets and most importantly, recent reports out of the lone star in the developed market pack, the U.S. economy, aren’t quite favorable thanks to a soft labor market. Added to this, heightened speculations about the Fed lift-off have taken a backseat. While muted inflation and global growth worries had held back the Fed from ratifying a rate hike in its September meeting, a slowdown in the labor market over the last three months have almost killed the possibility of a hike at the December Fed meeting, guarantying cheap money inflows throughout this year. As a result, equities jumped and the greenback dived. And the case for large-cap ETF investing had never been stronger than now. Investors should note that a subdued greenback sets the stage of large-cap stocks’ outperformance as this group of companies has considerable exposure in the international market. So, foreign profits are curtailed in a stronger dollar environment when repatriating back home. That being said, we would like to note that levels of uncertainty have flared up in the investing world. This is truer given the fact that the IMF recently slashed its global growth forecast for 2015 and 2016. Back home, the Fed also cut the expectation for 2016 real GDP growth to 2.1─2.8% from 2.3─3.0% though the same for 2015 was upgraded to 1.9─2.5% from 1.7─2.3% projected in June. The Fed also lowered its 2015 projection for personal consumer expenditure inflation to 0.3─1.0% from 0.6─1.0% guided in June. The earnings picture looks equally gloomy as the S&P 500 earnings and revenues are expected to decline 5.7% each in the third quarter. This does not leave the U.S. market without doubts and mean that some investors might want to look at large caps for the vast majority of their exposure, and especially so in the value space. While one can do this with individual securities, there are a number of value-focused large cap ETFs that can be better choices. Below, we highlight four of such large-cap value ETFs which delivered smart returns in the last one-month frame and could be intriguing choices ahead should the market forces remain the same. First Trust Morningstar Dividend Leaders Index ETF (NYSEARCA: FDL ) This fund follows the Morningstar Dividend Leaders Index with AUM of $810 million in its asset base. In total, the fund holds 99 stocks. From a sector look, consumer staples, utilities, telecom, energy and industrials each take a double-digit allocation in the basket (read: 5 Investor-Friendly Dow Dog ETFs for 2015 ). Expense ratio comes in at 0.45%. The fund added over 5.8% in the last one month (as of October 12, 2015) and has a dividend yield of 3.60% annually. The fund has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook. iShares Core High Dividend ETF (NYSEARCA: HDV ) This product provides exposure to 74 dividend stocks by tracking the Morningstar Dividend Yield Focus Index. From a sector look, the fund is well spread out with double-digit exposure to Energy, Consumer Staples, Health Care, Telecom and Information Technology. This Zacks Rank #3 fund is among the largest ETF in the large cap space with AUM of about $4.17 billion. It charges 12 bps in fees per year and gained over 5.1% in the last one year. The fund has an annual dividend yield of 3.86%. First Trust Value Line Dividend ETF (NYSEARCA: FVD ) This ETF tracks the Value Line Dividend Index, giving investors exposure to about 209 companies that have a Value Line Safety Ranking of #1 or #2. Value Line selects those companies that have higher-than-average dividend yield as compared with the indicated dividend yield of the Standard & Poor’s 500 Composite Stock Price Index. This results in an equal weight approach for individual securities. Utilities takes the top spot at 22.7% of assets, followed by Financials (18%), Industrials (14.9%) and Consumer Staples (12%) (read: 5 Smart Beta ETFs to Beat the Choppy Market ). The Zacks Rank #3-fund is a bit pricier than many other products in the dividend space, charging investors 70 bps a year in fees. It has accumulated $1.4 million in its asset base. SPDR Dividend ETF (NYSEARCA: SDY ) This ultra-popular fund provides exposure to the 101 U.S. stocks that have been consistently increasing their dividend every year for at least 25 years. It follows the S&P High Yield Dividend Aristocrats Index and has amassed $12.6 billion in AUM. Expense ratio comes in at 0.35%. The product is widely diversified across components as each security accounts for less than 2.82% of total assets. Financials is the top sector taking up one-fourth of the portfolio while consumer staples (15.1%), industrials (13.7%), utilities (11.6%) and materials (11.2%) round off the next four spots. The fund was up nearly 4.6% in the last one-month and has a Zacks ETF Rank of 3. Link to the original post on Zacks.com

Guide To Middle East ETF Investing

Investing in the Middle East stock market might look to be daunting at this moment when the price of crude oil, which accounts for the lion’s share of the region’s revenues, continues to plunge and is currently trading near its six-year low. Geopolitical tension and depleting foreign reserves are some of the other issues disturbing the investment climate in the region. However, there is a potential upside to this dismal economic environment. Tumbling oil price has in fact led to the development of the non-oil sector in the Middle East, such as agriculture, banking, finance and tourism. If we look at the Purchasing Managers’ (“PMI”) Indices of two prominent Middle East economies – Saudi Arabia and United Arab Emirates – non-oil business activity in the region actually looks robust. The PMI index measures the performance of the non-oil private sector and is derived from a survey of 400 companies, including manufacturing, services, construction and retail. PMI in Saudi Arabia increased to 58.7% in August from 57.7% in July, while PMI in United Arab Emirates rose to 57.1% from 55.8% in July. Notably, both are higher than the PMI of 53.1% in the U.S. in the same month. According to an insight from Standard Chartered Bank, the long-term growth outlook for oil-rich regions in the Middle East remains positive. This is largely due to the higher emphasis laid by the governments of the region on long-term development objectives achieved through diversification. The insight highlights demographics and the rapid expansion of trade corridors as the two key factors driving growth in the region, particularly in banking and financial services. The International Monetary Fund (IMF) expects population in the 25 years age bracket to rise to 720 million from 445 million in 2000 in the Middle East and North Africa (“MENA”) region during the next five years. Coming to the question of trading partnerships, Saudi Arabia is currently the largest market for U.S. exports in the Middle East while the U.S. is the largest trading partner of Saudi Arabia, according to Saudi Arabian General Investment Authority (“SAGIA”). According to Standard Chartered Bank, the Middle East enjoys a tripartite trading relationship with Africa and India, which is currently valued at $200 billion and is anticipated to increase manifold to $2.7 trillion by 2030. In the midst of these positive developments, it seems reasonable to capitalize on the growing non-oil sector in the Middle East through ETF investing, as it is difficult to access the market when most of the businesses in the region are state-owned. Although Saudi Arabia – the biggest stock market in the Arab world and the largest among the Gulf States – opened up its door to foreign direct investment a few months back, ETF investing always remains a safer route as it helps investors to mitigate one company’s average performance with stellar results from other companies. Below we highlight three ETFs, which offer higher exposure to the non-oil sector in the Middle East as well as to organizations holding the key to future growth. WisdomTree Middle East Dividend ETF (NASDAQ: GULF ) Launched in July 2008, this ETF follows the WisdomTree Middle East Dividend Index, which measures the performance of the companies that pay regular cash dividends. It holds a basket of 74 stocks with the largest exposure to the top three firms – Qatar National Bank, First Gulf Bank and Industries Qatar – which collectively make up for more than 23%. This resulted in financials dominating the fund’s portfolio at 62.6% while telecom and industrials round off the top three with 16.7% and 13% allocation, respectively. The oil sector accounts for a meager 2% of the fund. The fund has amassed nearly $26 million in its asset base while trading in a small volume of roughly 10,000 shares a day. It charges 88 bps in fees from investors per year. The product has, however, lost 10.9% so far in the year and has a Zacks ETF Rank of 3 or ‘Hold’ rating with a Medium risk outlook. iShares MSCI UAE Capped (NASDAQ: UAE ) Launched in April last year, this ETF follows the MSCI All UAE Capped Index, which measures the performance of large, mid or small-capitalization companies in UAE. Having a portfolio of 31 stocks, the fund’s top three holdings include Emaar Properties (16%), Abu Dhabi Commercial Bank (9.5%) and DP World (8.4%). Again, this ETF is heavily biased toward financials with 70% allocation, while industrials and healthcare have allocations of 17.3% and 5.3%, respectively. Energy has a very low exposure in the fund with only 3.6% share. The ETF has garnered around $30 million in assets and trades in an average volume of roughly 15,000 shares. It charges 62 bps in fees and was down 7.6% in the year-to-date time frame. The fund carries a Zacks Rank #3 with a High risk outlook. iShares MSCI Saudi Arabia Capped (NYSEARCA: KSA ) Launched only last month, this ETF tracks the MSCI Saudi Arabia Investable Market Index 25/50 Index, which measures the performance of the large, mid and small cap segments of the Saudi Arabia market. With a portfolio of 58 stocks, KSA’s top three holdings are Saudi Basic Industries (18.8%), Saudi Telecom (9.1%) and National Commercial Bank (7.8%). Notably, Saudi Basic Industries is one of the largest chemical companies in the world and Saudi Telecom is the largest telecommunications company in the Middle East and Africa (“MEA”) region. This ETF is not as heavily exposed to financials as the other two funds with 33.3% share. Materials and telecom sectors occupy the next two spots with 30.1% and 11.1% shares, respectively. It has minimum exposure to the energy sector (1.3%). Being a new entrant, the fund has gathered only around $4 million in assets and trades in a paltry volume of 2,000 shares. It charges 74 bps in fees per year and was up 3.8% in the last five days. Original Post