Tag Archives: zacks funds

4 REIT ETFs To Buy After The Weak Jobs Report

Real estate investment trusts or REITs certainly have reasons to cheer. The disappointing U.S. jobs data for September has pushed the possibility of a rate hike in the near term further into the dark. Headline job gains for September came in at 142,000 versus estimates of 200,000. Further, average hourly earnings in the month moved south. According to the CME FedWatch Tool , there is now a negligible 6% possibility of a rate hike at the October 28 meeting and a 39% probability at the December 16 meeting, down from 44% before the release of the weak jobs data. This means that REITs will continue to draw leverage from the near zero interest rate in nearly a decade for refinancing their debts. Lower interest rates lead to a lower borrowing cost for the REITs on which they are highly dependent for acquisitions, development and redevelopment activities. Till September this year, REITs raised $49 billion in initial capital, debt and equity capital offerings (IPOs – $1.4 billion, Secondary Common – $20.3 billion, Secondary Preferred – $2.1 billion and Secondary Debt – $25.3 billion). Apart from ultra low interest rates, the capability to generate higher dividend yields makes the investment case for REITs very strong. This is especially true when treasury yields are hovering near its lowest level since April and is down from its peak of 2.5% in June. The U.S. law requires REITs to distribute 90% of their annual taxable income in the form of dividends. This has been one of the biggest enticements for investment in REITs amid global uncertainties, both in the money and commodities markets. In fact, dividend yield of REITs came in better than the market. As of September 30, 2015, the dividend yield of the FTSE NAREIT All REITs Index was 4.44% while the yield of the FTSE NAREIT All Equity REITs Index was 3.97%. With this, REITs outstripped the 2.28% dividend yield offered by the S&P 500 (read: REIT ETFs for Income and Diversification ). ETFs in Focus In the backdrop of weak jobs report, it looks like it’s the right time to bet on the sector through ETFs, so as to reap the benefits in a safer way. We have picked four ETFs that have posted handsome gains in the past five days as well as in the past one month (see all Real Estate ETFs here). iShares U.S. Real Estate ETF (NYSEARCA: IYR ) Launched in 2000, IYR follows the Dow Jones U.S. Real Estate Index that measures the performance of the real estate industry of the U.S. equity market. The fund comprises 119 stocks with Simon Property Group Inc. (NYSE: SPG ), American Tower Corporation (NYSE: AMT ) and Public Storage (NYSE: PSA ) as the top holdings. IYR has garnered more than $4 billion assets and trades in a solid volume of nearly 10 million shares per day. The fund charges 43 bps in fees and has a dividend yield of 3.4%. It has returned 4.2% in the past five days and 5.8% over the last one month (as of October 7, 2015). It has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook. SPDR Dow Jones REIT ETF (NYSEARCA: RWR ) Functioning since 2001, RWR seeks investment results of the Dow Jones U.S. Select REIT Index. The fund consists of 98 stocks that have equity ownership and operate commercial real estate, with the top holdings being Simon Property Group Inc., Public Storage and Equity Residential (NYSE: EQR ). The ETF has amassed nearly $3 billion in assets and trades in a volume of 334,000 shares each day. It charges 25 bps in fees from investors per year and has a dividend yield of 3.3%. RWR gained 4% in the past five days and 7.8% in the past one month. It carries a Zacks ETF Rank #3 with a Medium risk outlook. Schwab U.S. REIT ETF (NYSEARCA: SCHH ) This fund debuted in 2011 and tracks the total return of the Dow Jones U.S. Select REIT Index. The fund consists of 99 stocks that own and operate commercial real estates. The top three holdings are Simon Property Group Inc., Public Storage and Equity Residential. SCHH has gathered $1.6 billion in assets and trades in an average volume of 386,000 shares. It charges a meager 7 bps in fees and has a distribution yield of 2.4%. The fund gained 4.1% in the past five days and 8.2% in the past one month. It holds a Zacks ETF Rank #3 with a Medium risk outlook. PowerShares KBW Premium Yield Equity REIT Portfolio ETF (NYSEARCA: KBWY ) Introduced in 2010, the fund follows the BW Nasdaq Premium Yield Equity REIT Index that measures the performance of 24 to 40 small- and mid-cap equity REITs in the U.S. It consists of 30 stocks with Government Properties Income Trust (NYSE: GOV ), Senior Housing Properties Trust (NYSE: SNH ) and STAG Industrial Inc. (NYSE: STAG ) being the top three holdings. The fund has roughly $107 million in AUM and trades in a volume of 21,000 shares per day. It charges 35 bps in annual fees and offers a robust dividend yield of 5.6%. KBWY returned 4.5% in the last five days and 7.6% in the past one month. It carries a Zacks ETF Rank #3 with a Medium risk outlook. Link to the original post on Zacks.com

Oil ETFs Head To Head: USO Vs. DBO

No doubt, oil has been the hottest and most volatile commodity so far this year. It is again showing large swings in its prices. This is especially true as oil broke its near-term trading range and regained momentum, indicating that the worst might be over for the commodity. Notably, WTI crude surged near $50 per barrel mark on Tuesday’s trading, while Brent jumped to more than $53 per barrel. However, the prices retreated over 1% in Wednesday’s trading session. With this, both WTI and Brent are up more than 6% since the start of October. Oil Rebound in the Cards? The latest boost came amid signs of dwindling supply, improving demand and an increased willingness by major oil producers to support the prolonged slump in the market. The weakness seen in the dollar, a declining rig count and better demand/supply balance added to the strength. In particular, U.S. production dropped by 120,000 barrels per day to a one-year low of 9 million barrels in September from the earlier month. The Energy Information Administration (EIA) expects a dramatic drop in U.S. production through the middle of next year, before the momentum is resumed in late 2016. Oil output is expected to decline from 9.25 million barrels per day (bpd) 2015 to 8.86 million bpd in 2016. On the other hand, the agency expects global oil demand for 2016 to increase at the fastest pace in six years, suggesting that oversupply is easing faster than expected. It also raised the Chinese demand outlook from 11.41 million bpd to 11.48 million bpd for the next year. However, the latest inventory storage report from the EIA showed that U.S. crude stockpiles rose 3.1 million barrels in the week (ending October 2), much higher than the market expectation of a 2.2 million barrel build. Total inventory was 461 million barrels, still near the highest level in at least 80 years. Despite the bearish inventory data, the oil price rally seems to have legs – it is likely to continue for the coming weeks as the oil market begins to tighten. Given the renewed optimism and improving demand/supply fundamentals, many oil ETFs and ETNs have seen smooth trading over the past week. While the ETNs are leading, investors should look at the ETF options, which are more liquid, transparent and tax-efficient. That being said, the two popular oil ETFs – the United States Oil ETF (NYSEARCA: USO ) and the PowerShares DB Oil ETF (NYSEARCA: DBO ) – that provide exposure to WTI oil gained more than 6% in the past five trading days. Though the duo might appear similar at a glance, there are a number of key differences between the two that are detailed below: USO This is the largest and most actively traded ETF in the oil space, with AUM of $2.6 billion and average daily volume of around 24.9 million shares. The fund provides investors with exposure to front-month oil futures contract traded on the NYMEX. The expense ratio came in at 0.45%. As traders need to roll from one futures contract to another in order to avoid delivery, the fund is susceptible to roll yield. Notably, roll yield is positive when the futures market is in backwardation and negative when the futures market is in contango. Basically, if the price of the near-month contract is higher than the next-month futures contract, this is backwardation, and the opposite holds true for contango. DBO Unlike USO, this ETF follows the DBIQ Optimum Yield Crude Oil Index Excess Return plus the interest income from the fund’s holdings of primarily US Treasury securities. The Index employs the rules-based approach when rolling from one futures contract to another, in order to minimize the effect of contango. Instead of automatically rolling into the near-month oil futures contract, the benchmark selects the futures contract with a delivery month within the next 13 months, when the best possible “implied roll yield” is generated. As a result, DBO potentially maximizes the roll benefits in backwardated markets and minimizes the losses from rolling in contangoed markets (see: all the energy ETFs here ). The fund has amassed nearly $508 million in its asset base, while it charges 78 bps in annual fees. It trades in a good volume of 367,000 shares a day, on average. In Conclusion While DBO has better roll strategies with higher potential returns, it lagged USO in terms of investor preference. First, DBO charges a 33 bps higher initial fee. Second, it has some hidden costs in the form of bid/ask spread, as the ETF trades in lower volume than USO. Further, the construction of the ETF is a bit complex and requires the systematic study of many futures contracts. Original Post

5 Top-Rated Global ETF Picks For Q4

The global markets went berserk in the third quarter with selling pressure hitting the ceiling. Back-to-back issues like the Chinese market crash, slowdown in the Japanese economy, return of deflationary fears in the Euro zone in spite of stimulus measure and slouching commodities bulldozed the market. Though the situation recovered a little to start Q4, odds remain as evident from the latest growth forecast cut by IMF. The organization slashed the global growth forecast (on October 6) for 2015 to 3.1% from 3.3% projected earlier. Slowing emerging market growth and the commodity market slump were held responsible for this sluggishness. The forecast for 2016 was reduced to 3.6% from 3.8% expected in July (read: 2 Winning Commodity ETFs for the Worst Q3 ). As per Reuters , the key industrial economies cut the rates to almost zero and shelled out around $7 trillion in quantitative easing programs in the seven years since the global financial crisis. But this huge influx of funding could not perk up growth, investment and consumer demand as anticipated and instead raised a cautionary flag over global growth (read: Expect Volatility in Q4? Try These ETF Ideas ). Still, the bulls can ride beyond the U.S. border. After all, most of the developed economies are thriving on easy money and thus act as lucrative investment propositions. Even at home, the hyper-active discussion over the Fed lift-off has taken a back seat after somber job data. Now the prospective timeline has shifted to the end of 2015 or early 2016, provided the economy gains momentum. Though cheap money inflows set the stage for bulls globally, investors need to be selective while playing this field, given the heightened uncertainty. How to Pick Right ETFs? First, fundamentals need to be favorable, and then investors can look at our Zacks ETF Rank. This ranking system looks to find the best funds in a given market segment based on a number fundamental and technical factors about them and the Zacks forecast for the underlying industry or asset class. Following this technique, we at Zacks revised our ETF ranks recently and found out that five global ETFs have been upgraded from #3 (Hold) #2 (Buy). We have also taken diversified exposure into our consideration, given the ongoing volatility in the country-specific exposure, and zeroed in on five global ETFs that are worth considering (see: Our Zacks ETF Rank Guide ): SPDR MSCI ACWI IMI ETF (NYSEARCA: ACIM ) This fund tracks the MSCI ACWI IMI Index. Though the ETF provides exposure to stocks across the developed and emerging markets, U.S. accounts for more than half of the asset base. Apart from this, Japan and UK take the next spots with about 8.1% and 7.3% exposure, respectively. In total, the fund holds about 800 stocks with each accounting for no more than 1.32% of assets. Financials, IT, Consumer Discretionary, Industrials and Health Care are the top five sectors with double-digit allocation each. The product has managed an asset base of $36.5 million and trades in good volume of more than 6,500 shares a day. It charges 25 bps in annual fees and was up 1.2% in the last one month. JPMorgan Diversified Return Global Equity ETF (NYSEARCA: JPGE ) The fund seeks to track the FTSE Developed Diversified Factor Index, following the “Smart Beta” strategy, to provide developed market equity exposure. The fund combines the two approaches under a single umbrella – a top down risk allocation framework and a bottom up multi-factor stock ranking process. The bottom up approach results in selecting stocks based on four factors: value, size, momentum and low volatility, while the top down approach results in an equal-weighted portfolio of stocks selected across 40 different regional sectors. This approach results in the fund holding a portfolio of 488 stocks from the developed markets with the U.S. taking one-fourth share. The fund charges 38 bps in fees and advanced over 2% in the last one month. This fund also has low risk quotient. SPDR MSCI World Quality Mix ETF (NYSEARCA: QWLD ) The fund looks to track the MSCI World Quality Mix Index to provide exposure to 24 developed economies focusing on matrices like value, low volatility and quality. This $6 million-ETF comprises 1,021 stocks. Sector-wise, Financials, IT, Health Care and Consumers get maximum exposure. Despite being a global equity ETF, the U.S. dominates the portfolio followed by Japan (8.24%), UK (8.1%) and Switzerland (4.1%). It charges 30 bps in fees for this exposure. The fund nudged up 0.6% in the last one month and has a Medium risk outlook. FlexShares STOXX Global Broad Infrastructure Index ETF (NYSEARCA: NFRA ) This ETF could be appropriate for investors seeking a play on the booming infrastructural activities worldwide. With slow global economic revival, spending on infrastructural activities has been picking up. This was truer in the developing regions rather than developed zones. Investors should also note that infrastructure is an interest rate sensitive sector, usually with strong yields. With a low rate environment prevalent across the globe, infrastructure looks attractive in the near term. NFRA looks to track the STOXX Global Broad Infrastructure Index. No stock accounts for more than 4.43% of the fund. The ETF presently holds 150 securities with total assets of $414.2 million. However, investors looking for heavy international exposure might be a little disappointed with this product, as close to half the portfolio is in the U.S. followed by 25% focus in Europe and the rest spread across the Asia-Pacific (15%), Asia (3%), Latin America (2%) and Asia (1%). The fund charges investors 47 basis points and has a yield of 2.40% per year. NFRA was up 1.3% in the last one month. The fund has a low risk profile. ALPS Workplace Equality ETF (NYSEARCA: EQLT ) The socially responsible fund looks to track the companies that have ‘progressive workplace policies that treat lesbian, gay, bisexual and transgender ( LGBT ) individuals equally and respectfully among all employees’. This produces a portfolio that has about 160 companies in its basket, while it has a slight tilt toward smaller companies, at least when compared to the S&P 500 index. It follows an equal-weight approach, so no single security makes up an outsized portion of the basket. The fund has double-digit exposure in sectors like consumer discretionary, financials, technology and industrials. EQLT charges 75 bps in fees and was almost flat in the last one month. The product has a low risk outlook. Link to the original post on Zacks.com