Tag Archives: zacks funds

5 Successful ETF Launches Of Q2

The ETF industry has gained immense popularity within just over 20 years. Total market cap hit a record of over $3 trillion at the end of May 2015, though it recently slipped to over $2.12 trillion (up 6.10% year to date), with contribution from about 1,745 ETFs. To make the most of this appeal, issuers have lately been extremely proactive in launching products. In the second quarter itself, 61 ETFs entered the market. While existing issuers are diversifying their ETF offerings on varied themes, others are joining the league hoping to capitalize on the opportunities. Among the new products, active funds, smart-beta ETFs, high yield options and hedged international products were appreciated by investors. Below, we have highlighted five ETFs launched in Q2 that scooped up assets within a short time span on the market, and look to be big winners for their issuers down the road: Pacer Trendpilot 750 ETF (BATS: PTLC ) This ETF seeks to track the Pacer Wilshire US Large Cap Trendpilot Index. Currently, the fund offers pure equity exposure with a basket of 748 securities that are widely spread out across components. The fund has generated about $125 million within just one month of its launch. The strategy makes it a winner as the product follows a rules-based methodology to apply a systematic trend that directs exposure (i) 100% to Wilshire US Large-Cap Index, (ii) 50% to Wilshire Large-Cap & 50% to 3-Month US T-Bills or (iii) 100% to 3-Month US T-Bills, depending on relative performance of the Wilshire US Large-Cap TR Index and its 200-business day historical simple moving average. Each security holds less than 3.9% share, and information technology, financials and health care are the top three sectors with a nice mix. The fund charges 60 bps in annual fees and expenses. Innovator IBD 50 Fund (NYSEARCA: FFTY ) Having debuted in April, this active product has managed to secure about $68 million so far. The new fund looks to be a comprehensive route to invest in the top 50 growth names based on the IBD (Investor’s Business Daily) proprietary estimation. This estimation is focused on the ‘CAN SLIM’ method clubbing the top fundamentals with relative price strength. The IBD 50 targets companies with exceptional bottom-line growth, outsized revenue gains and superior return on equity. This approach provides exposure to the small cap segment of the broad U.S. stock market and results in a diversified portfolio with none of the securities accounting for more than 3.61% of assets. From a sector look, technology takes the top spot at 40% while health care and consumer discretionary round off the top three with double-digit exposure. Its active management forces the issuer to charge a higher expense ratio of 0.80%. PowerShares Europe Currency Hedged Low Volatility Portfolio (NYSEARCA: FXEU ) What can be a better way to invest in a foreign land than trying out a currency-hedged low volatile Europe ETF? Having entered the market in May, the fund has amassed about $58 million in assets. Europe has been hitting headlines the world over since the beginning of this year on the launch of the QE measure to ward off deflationary fears. While the measure proved great as evident by 0.4% growth recorded by the Euro zone in the first quarter, quandaries are refusing to leave the continent. The latest round of crisis caused by ‘Grexit’ worries made the case for a low volatility play (on Europe) stronger. The fund looks to track the S&P Eurozone Low Volatility USD Hedged Index. The index has exposure to at least 80 least volatile stocks that obey a definite liquidity bar. The fund charges 25 bps in fees. Pacer Trendpilot 450 ETF (BATS: PTMC ) Pacer Financial has also seen success for PTMC which targets the mid cap segment of the broad U.S. equity market but revolves around the same rule-based methodology, discussed earlier. The fund looks to track the Pacer Wilshire US Mid-Cap Trendpilot Index. The fund has accumulated over $50 million in assets within such a short span. Currently, it holds a basket of 450 securities with none holding more than 0.61% of assets. Consumer discretionary and industrials take the top two spots with 16% share each. The ETF has annual expense ratio of 0.60%. PowerShares S&P 500 ex-Rate Sensitive Low Volatility Portfolio (NYSEARCA: XRLV ) This three-month old ETF has already amassed over $50 million in assets. The rising rate concerns have caused some upheaval in the market and are expected to make things pretty volatile once the Fed actually hikes rates. This is why PowerShares’ low volatility ex-Rate sensitive product is already a hit. The product is pretty spread-out among its 100 holdings. No stock takes more than 1.46% of the basket. The fund charges 25 bps in fees. Financials is the top sector holding one-third of the basket. Original Post

3 ETFs To Profit From The M&A Boom

M&A activity is booming this year as companies rush to beat competitors in the race to become bigger and better. As organic growth has been hard to come by, companies are trying to grow, improve margins and achieve greater synergies by taking over rivals. At current pace, 2015 appears to be on track to be the biggest year ever for M&A. Per Dealogic , US-targeted M&A reached a half-year record high of $1.03 trillion in the first half of this year, with 21 $10 billion plus deals announced so far. Global M&A volume reached $2.19 trillion in 1H 2015 – second-highest half-year volume on record, even though deal activity has remained sluggish in Europe, with weak economic growth and concerns related to political problems in Greece. Healthcare has been the most targeted sector in the US with $293.6 billion in deals – the highest half-year volume in record and up 73% from the same period last year. Technology ranks second, with $143.8 billion in deals – highest since the first half of 2000. Improving economy, ultra-low interest rates, and growing cash piles on companies’ balance sheets are the main reasons for the surging interest in acquisitions. Potential cost savings through mergers are further fueling the urge to merge in the current ultra-competitive environment. Many companies want to stay ahead in the takeover game by bulking up in order to avoid becoming targets of their rivals. As the rate hikes by the Fed are expected to be very gradual and subject to further improvement in the economy, corporate enthusiasm for deals remains high, signaling a strong second half for M&A. Below, we have highlighted three ETFs that are likely to benefit from the continued surge in M&A. Index IQ Merger Arbitrage ETF (NYSEARCA: MNA ) Merger arbitrage strategy basically aims to exploit the spread between target stock’s price after the announcement of the deal and the final takeover price. Due to the risk that an announced deal may not go through for some reason, target usually trades at a lower price until the takeover is complete. Regulatory hurdles often complicate the prospects of execution of deals, leading to the uncertainty. There are many hedge funds that play this strategy. For individual investors, the option is available through ETFs. MNA invests in companies for which takeovers have been announced and goes short on broader global equities index. It charges an annual fee of 0.76%. The product currently holds 31 companies, with Salix Pharma, Hospira and Baker Hughes being the top holdings. Looking at the performance – the product has returned 3.3% this year and 16.8% over the past three years, with very low volatility. Investors should remember that these are “hedged” or somewhat “market-neutral” strategies. Their performance is largely independent of twists and turns in the market. Further since these strategies have low correlations with stocks, they also provide some diversification benefits to the portfolio. While there are a couple more options in the space – (NYSEARCA: CSMA ) and (BATS: MRGR ) – they have failed to take off, with just $5.5 million and $6.3 million in assets respectively, exposing them to closure risk. iShares U.S. Healthcare Providers ETF (NYSEARCA: IHF ) With Aetna’s announcement last week to acquire Humana for about $37 billion, deal frenzy in the healthcare space continues unabated. It’s been a take-over battle between the five largest health insurers – United Heath, Humana, Aetna, Anthem and Cigna – as the Federal Affordable Care Act continues to reshape the healthcare market. Renewed market dynamics are forcing the companies to diversify, cut costs, gain scale and improve technologies. With the trend likely to continue in the coming months, investors should consider investing in IHF, which appears to be the best healthcare ETF to benefit from this trend. This ETF follows the Dow Jones U.S. Select Healthcare Providers Index with exposure to companies that provide health insurance, diagnostics and specialized treatment. The product fund holds 51 securities in its portfolio with United Health, Express Scripts and Cigna being the top 3 holdings. The fund has been able to attract $1040 million in assets so far. It charges 43 bps in annual fees and expenses and has gained almost 20% so far this year. SPDR S&P Semiconductor ETF (NYSEARCA: XSD ) M&A activity has been extremely hot in the Chip industry. With revenue growth slowing down , primarily due to strong US dollar, excessive inventories and the end of a PX cycle upgrade, semiconductor companies are trying to grow, expand into new markets and stay competitive by acquiring smaller players in the industry. Avago Technologies’ $36.6 billion offer for Broadcom is the largest Technology M&A deal announced on record. XSD tracks the S&P Semiconductor Select Industry Index, holding 47 stocks in its basket in almost equal weights. While equal weighting reduces the company specific risks, the product is tilted towards small cap stocks, making it more volatile than broader technology ETFs. It charges 35 bps in fees per year and is up about 6% year-to-date. Original Post

2 Hot Sector ETFs Soaring To Rank #1 This Summer

The U.S. stock market has started to feel the heat of summer in some corners. While the S&P 500 and the Dow Jones Industrial Average have seen a lazy summer lull so far, the Russell 2000 Index and Nasdaq Composite Index have been burning with impressive gains of 3.6% and 1.8%, respectively, over the past one month. Increased confidence in the U.S. economy as well as a slower-than-expected Fed rate hike path is boosting specific sector stocks. In particular, financials are soaring on a rising rate environment while technology and health care have been the investors’ darlings when it comes to defensive trading. These sectors are likely to witness strong growth for the rest of summer. In fact, the spread out exposure to all market caps or a definite tilt toward small caps might lead to outsized gains. Additionally, U.S.-focused sectors offer investors with protection from the worst of the global turmoil, especially the looming Grexit fears. That being said, there are number of choices in these sectors but looking at the Zacks ETF Rank could help us to pick the likely best. The system looks to take into account a variety of factors, such as industry outlook and expert surveys; and then apply ETF-specific factors (like expense ratios and bid/ask spreads) in order to find the best funds in each segment. Using this system, we have found a handful of ETFs in the hot sectors that have earned themselves a Zacks ETF Rank #1 (Strong Buy) in the latest ratings update, and could thus outperform. In fact, a couple of funds in their respective sectors have seen their Ranks surging to the top hierarchy from #3 (Hold) and could make great summer picks. iShares U.S. Broker-Dealers ETF (NYSEARCA: IAI ) With the prospect of rising rates later in the year albeit at a slower pace, financials will remain on investors’ hot list for the coming months. This is because rising rates would boost income for banks, insurance companies and discount brokerage firms. Additionally, the more volatile but improving market bodes well for exchanges like ICE (NYSE: ICE ), NYSE or CME (NASDAQ: CME ) and those with large investment portfolios. Given this, the broker-dealers corner of the financial segment looks brighter and one way to tap the bullish trend is with IAI. This fund offers exposure to the U.S. investment banks, discount brokerages, and stock exchange firms by tracking the Dow Jones U.S. Select Investment Services Index. The product currently holds 25 securities with double-digit allocation going to Goldman Sachs (NYSE: GS ) and Morgan Stanley (NYSE: MS ). Other firms hold no more than 8.3% of assets. The ETF has a nice mix of all cap securities with 49% going to large caps, 32% to small caps, and the rest to mid caps. It has a certain tilt toward value securities, which tend to be less volatile and offer nice price appreciation opportunities. The fund has accumulated $354.2 million in AUM while sees good volume of nearly 76,000 shares a day. The product charges 43 bps in fees per year from investors and gained 2.2% over the past one month. PowerShares S&P SmallCap Health Care Portfolio ETF (NASDAQ: PSCH ) This ETF has been the clear winner in the broad health care world, returning nearly 23.5% so far this year and up 4.7% over the past one month. This is primarily thanks to strong earnings, merger frenzy, aging population and the Affordable Care Act or Obamacare. The sector’s non-cyclical nature is an advantage in the current environment, where concerns are spiking on global growth, stretched valuations, Greece crisis and uncertainty regarding rate hike. Apart from these, the concentrated exposure to the small cap health care securities is benefiting PSCH given the gradually improving economy. The fund tracks the S&P Small Cap 600 Capped Health Care Index and holds 72 securities in its basket with each holding less than 4.4% share. From an industry look, about one-third of the portfolio is allotted toward health care equipment and supplies followed by health care providers and services (29.2%) and pharmaceuticals (12.6%). The ETF is unpopular, having amassed $233.8 million in asset base and trading in lower volume of about 19,000 shares per day, while charging a relatively low fee of 29 bps a year. Bottom Line These sector ETFs have been the leaders to start summer and look protected from the global turmoil. Given that this trend will continue for the rest of the season, investors should definitely look at these ETFs or the other funds in the sector that have recently seen their Zacks Rank surging to #1. Originally published on Zacks.com