Tag Archives: zacks funds

4 Small-Cap ETFs For A Bumpy Japan Ride

Japan has been on an uneven recovery path with wild fluctuations seen in recent quarters. This is especially true as the country lost its momentum yet again, snapping two quarters of expansion. The economy contracted 1.6% year over year in the second quarter compared to a solid 4.5% growth in the first quarter. However, this is slightly better than the market expectation of a 1.8% decline. A drop in consumer spending, weak exports and lower private consumption continued to weigh on the growth of the world’s third-largest economy. The slump in Japan’s biggest trading partner – China – added to the woes. The slowdown seems to be a major setback for Prime Minister Shinzo Abe and his reform policy – Abenomics – which is aimed at pulling the country out of two decades of deflationary pressure and returning to growth. More Stimulus in the Cards? Sluggish growth has raised speculations of additional monetary and fiscal stimulus by the central bank later in the year to boost growth. Earlier this month, Bank of Japan (BoJ) announced that it is seeking expansion in its massive asset purchase at 80 trillion yen per year if lower oil prices continue to hold back inflation at a near-zero level. The bank recently cut its annual growth outlook to 1.7% from 2% and inflation to 0.7% from 0.8% for this year. However, many economists believe that the slowdown in the second quarter was because of temporary factors, mainly the China turmoil, and that the Japanese economy will return to growth in the ongoing quarter. According to Capital Economics, Japan will return to a modest growth in the third quarter and see 1% growth for the full year. Further, as per the survey by the Japan Center for Economic Research, 40 analysts project that growth would rebound by an average 2.5% in the third quarter. This could be easily depicted in the solid manufacturing PMI data, which showed that business activity expanded in July with broad-based improvement in output, new orders, employment and exports. Notably, the PMI index climbed to 51.2 in July from 50.1 in June. Exports recovered in July on cheap yen. This is because Japan is primarily an export-oriented economy and a weaker currency makes its exports more competitive. Rise in exports and hopes of further stimulus measures would boost the stock prices in the coming months. While the rally will likely take place across various market spectrums, small caps will benefit the most, as these are less vulnerable to China’s uncertainty or any other external threat. Below, we take a look at four ETFs, which track the small-cap segment of the Japanese stock market. All of these funds offer access to pint-sized securities in the nation. These are likely to see higher volatility yet deliver better returns if the Japanese economy trends in the right direction. WisdomTree Japan SmallCap Dividend Fund (NYSEARCA: DFJ ) This fund targets the dividend-paying small-cap stocks by tracking the WisdomTree Japan SmallCap Dividend Index. Holding 598 securities in its basket, it has a spread out exposure to various components as each firm holds less than 0.9% of total assets. From a sector look, industrials and consumer discretionary take the top two spots with one-fourth share each, while materials, financials and information technology round off the next three with double-digit allocation each. The product has amassed $335 million in its asset base while trades in a lower volume of under 36,000 shares. It charges an annual fee of 58 bps and has gained about 2.4% over the past three months. The fund has a Zacks ETF Rank of 2 or ‘Buy’ rating with a Medium risk outlook. iShares MSCI Japan Small-Cap ETF (NYSEARCA: SCJ ) This fund follows the MSCI Japan Small Cap Index and holds 798 stocks in its basket. It is widely spread out across components with none holding more than 0.86% of assets. However, about one-fourth of the portfolio is allotted to industrials, closely followed by financials (18.7%) and consumer discretionary (18.2%). The fund has managed AUM of $339 million while sees lower average daily volume of around 38,000 shares. Expense ratio came in at 0.48%. The fund has added 1.7% over the past three months and has a Zacks ETF Rank of 2 with a Medium risk outlook. SPDR Russell/Nomura Small Cap Japan ETF (NYSEARCA: JSC ) This is the illiquid and unpopular ETF in the Japanese space with AUM of $66.3 million and average daily volume of just 3,000 shares per day. It tracks the Russell/Nomura Japan Small Cap Index, charging investors 40 bps in annual fees. In total, the fund holds well-diversified 692 securities in its basket with none accounting for more than 0.61% of assets. Here again, industrials make up for the top sector at 26.1%, closely followed by consumer discretionary (21.3%). The product is up 2.6% over the trailing three-month period and has a Zacks ETF Rank of 2 with a Medium risk outlook. WisdomTree Japan Hedged SmallCap Equity Fund (NASDAQ: DXJS ) DXJS offers exposure to the Japanese small-cap stocks while at the same time provides hedge against any fall in the Japanese yen. This is easily done by tracking the WisdomTree Japan Hedged SmallCap Equity Index. The fund has accumulated $207 million in its asset base and charges 58 bps in fees per year from investors. Volume is moderate as it exchanges 61,000 shares in hand per day on average. The product holds 619 stocks in its basket with none accounting for more than 0.94% of assets. Industrials and consumer discretionary and industrials take the top two spots with at least 24% share each, while materials, finance and information technology round off the top five. The ETF gained 6.7% in the same period. Bottom Line These small cap Japan ETFs hit a new 52-week high last week and are clearly outpacing the broad fund (NYSEARCA: EWJ ). Given the China turmoil and global growth concerns, these funds seem safer choices to play the recovering Japanese economy. Original Post

U.S. Treasury Bond Funds Unscathed After China Cuts Stake

Many had the belief that the U.S. would be vulnerable to China’s quirks when the latter’s holdings of U.S. treasuries peaked to $1.65 trillion in 2014. China has chopped its holdings of U.S. treasuries by nearly $180 billion, but that sparked hardly any reaction from the treasury markets. Recent data from the Treasury Department showed benchmark 10-year yields dropped 0.6 percentage points despite the biggest foreign holder of U.S. debt chopping its holding between March 2014 and May 2015. China’s Holdings China has not reinvested the proceeds from maturing securities back into the treasuries; leading to a lower stake of nearly $180 billion from its peak. According to the latest Treasury data, China has $1.47 trillion of treasuries. This also includes $200 billion held through Belgium. Nomura has said that several Chinese custodial accounts are located in Belgium. Foreign buyers had played a key role in helping the treasury market boom to $12.7 trillion when the U.S. was trying to finance stimulus programs to come out of recession. China had been an active participant, reflected in the gigantic jump in holdings from less than $350 billion held previously. China is retreating as it looks to raise money to counter the dismal economic growth conditions and the recent market rout. Alternative Buyers Fill the Gap New regulations to avoid another financial collapse have made banks and such firms to buy highly-rated assets. Investors’ cash moved from bank deposits that have record low interest rates into mutual funds; which in turn have accumulated government debt. According to Fed data, stakes in treasuries and debt from federal agencies held by U.S. commercial banks have increased by nearly $300 billion since March 2014 to more than $2.1 trillion. Indirect bidders won 55% of the $1.2 trillion of notes and bonds that have been sold in 2015, up from 2014’s 43%. These indirect bidders include foreign investors and mutual funds. U.S. Treasury Mutual Funds to Buy China’s reduced holdings failed to have any negative impact on U.S. treasuries. It is evident that the alternatives stepped in; wherein many mutual funds too stockpiled substantial holdings. On that note, let’s look at mutual funds that have substantial U.S. treasuries holdings. The following funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or Zacks Mutual Fund Rank #2 (Buy). Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but the likely future success of the fund. These funds have strong 1-year returns. The 3-year and 5-year annualized returns are also encouraging. T. Rowe Price U.S. Treasury Long-Term (MUTF: PRULX ) invests a major portion of its assets in government affiliated U.S. treasury securities. The rest of the assets are invested in other government-backed instruments. It has a maturity between 15-20 years and may also vary from 10-30 years. PRULX carries a Zacks Mutual Fund Rank #1 and has returned 7.3% over the last 1 year. The 3- and 5-year annualized returns are 2.1% and 6%. The annual expense ratio of 0.51% is lower than the category average of 0.61%. Dreyfus U.S. Treasury Long-Term (MUTF: DRGBX ) seeks total return with capital growth and current income. DRGBX invests a majority of its assets in U.S. treasury instruments. DRGBX may also invest in other instruments which are approved by the domestic government or issued by its entities. DRGBX generally has a duration of more than or equal to 7.5 years and minimum of 10 years of weighted duration of maturity. DRGBX carries a Zacks Mutual Fund Rank #1 and has returned 7.3% over the last 1 year. The 3- and 5-year annualized returns are 2% and 6%. The annual expense ratio of 0.65% is however higher than the category average of 0.61%. Wasatch-Hoisington US Treasury (MUTF: WHOSX ) seeks return that beats inflation with an emphasis on both capital growth and current income. WHOSX invests a lion’s share of its assets in U.S. treasury securities and also in repurchase agreements backed by such securities. WHOSX carries a Zacks Mutual Fund Rank #2 and has returned 10.8% over the last 1 year. The 3- and 5-year annualized returns are 2.8% and 8%. The annual expense ratio of 0.70% is however higher than the category average of 0.61%. Fidelity Spartan Long-Term Treasury Bond Index Fund Fidelity Advantage (MUTF: FLBAX ) invests most of its assets in securities listed in Barclays U.S. Long Treasury Bond Index. The fund tries to replicate the performance of Barclays U.S. Long Treasury Bond Index by using statistical sampling techniques on the back of interest rate sensitivity and maturity among others. FLBAX carries a Zacks Mutual Fund Rank #2 and has returned 8.6% over the last 1 year. The 3- and 5-year annualized returns are 2.9% and 6.7%. The annual expense ratio of 0.1% is lower than the category average of 0.61%. Vanguard Long-Term Treasury Investor (MUTF: VUSTX ) invests a major portion of its assets in long-term bonds whose interest and principal payments are backed by the full faith and credit of the U.S. government. At least 65% of VUSTX’s assets will always be invested in U.S. treasury securities. VUSTX maintains a dollar-weighted average maturity of between 15 and 30 years. VUSTX carries a Zacks Mutual Fund Rank #2 and has returned 8.4% over the last 1 year. The 3- and 5-year annualized returns are 2.8% and 6.6%. The annual expense ratio of 0.2% is lower than the category average of 0.61%. Original Post

5 Large-Cap Blend Funds For Growth And Value Investing

Blend funds are a type of equity mutual fund which holds in its portfolio a mix of value and growth stocks. Blend funds are also known as “hybrid funds”. Blend funds aim for value appreciation by capital gains. It owes its origin to a graphical representation of a fund’s equity style box. In addition to diversification, blend funds are great picks for investors looking for a mix of growth and value investment. Meanwhile, large-cap funds usually provide a safer option for risk-averse investors, when compared to small-cap and mid-cap funds. These funds have exposure to large-cap stocks, providing long-term performance history and assuring more stability than what mid-cap or small-caps offer. Below we will share with you 5 buy-ranked large-cap blend mutual funds. Each has earned a Zacks Mutual Fund Rank #2 (Buy) as we expect these mutual funds to outperform their peers in the future. Deutsche Core Equity S (MUTF: SCDGX ) seeks capital appreciation along with current income and income growth. A lion’s share of its assets is invested in equities or mostly in common stocks. SCDGX invests mostly in large US firms, but is not restricted by market capitalization limitations. The Deutsche Core Equity S fund has returned 13.6% over the past one year. SCDGX has an expense ratio of 0.59% as compared to category average of 1.04%. PNC Large Cap Core C (MUTF: PLECX ) invests in broad range of US equities of large-cap firms, including American Depositary Receipts, preferred stocks, warrants and rights. A lion’s share of PLECX’s assets is invested in firms with at least $3 billion worth of market cap. The PNC Large Cap Core C fund has returned 12.5% over the past one year. Douglas J. Roman is the fund manager and has managed PLECX since 2009. Northern Large Cap Equity (MUTF: NOGEX ) seeks to provide long-term capital appreciation. NOGEX invests a majority of its assets in large-cap firms. These companies will have a market capital, at the time of purchase, within the range of those listed in the S&P 500 Index. Northern Large Cap Equity fund has returned 10.3% over the past one year. As of June 2015, NOGEX held 57 issues, with 5.21% of its total assets invested in Apple Inc (NASDAQ: AAPL ). JPMorgan US Equity R5 (MUTF: JUSRX ) aims to provide high total return. JUSRX invests a lion’s share of its assets in domestic companies. JUSRX mostly invests in common stocks of mid-to-large-cap domestic firms. It may also invest a maximum of 20% of its assets in foreign companies. JPMorgan US Equity R5 fund has returned 10.2% over the past one year. JUSRX has an expense ratio of 0.59% as compared to category average of 1.04% Vanguard Growth & Income Investor (MUTF: VQNPX ) invests in a diversified group of stocks chosen with the help of sophisticated computer models. VQNPX seeks stocks that appear to be undervalued by the market and that, as a group, appear likely to provide higher returns than the unmanaged Standard & Poor’s 500 Composite Stock Price Index while having similar risk characteristics. Vanguard Growth & Income Investor has returned 9.9% over the past one year. Philip W. Kearns is the fund manager and has managed VQNPX since 2014. Original Post