Author Archives: Scalper1

Best And Worst Q1’16: All Cap Growth ETFs, Mutual Funds And Key Holdings

The All Cap Growth style ranks seventh out of the twelve fund styles as detailed in our Q1’16 Style Ratings for ETFs and Mutual Funds report. Last quarter , the All Cap Growth style ranked sixth. It gets our Neutral rating, which is based on aggregation of ratings of 17 ETFs and 568 mutual funds in the All Cap Growth style. See a recap of our Q4’15 Style Ratings here. Figures 1 and 2 show the five best and worst-rated ETFs and mutual funds in the style. Not all All Cap Growth style ETFs and mutual funds are created the same. The number of holdings varies widely (from 20 to 2206). This variation creates drastically different investment implications and, therefore, ratings. Investors seeking exposure to the All Cap Growth style should buy one of the Attractive-or-better rated ETFs or mutual funds from Figures 1 and 2. Figure 1: ETFs with the Best & Worst Ratings – Top 5 Click to enlarge * Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity. Sources: New Constructs, LLC and company filings Five ETFs are excluded from Figure 1 because their total net assets are below $100 million and do not meet our liquidity minimums. Figure 2: Mutual Funds with the Best & Worst Ratings – Top 5 Click to enlarge * Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity. Sources: New Constructs, LLC and company filings Catalyst/Lyons Hedged Premium Return Fund (MUTF: CLPFX ) is excluded from Figure 2 because its total net assets are below $100 million and do not meet our liquidity minimums. iShares Core US Growth ETF (NYSEARCA: IUSG ) is the top-rated All Cap Growth ETF and JPMorgan Intrepid Growth Fund (MUTF: JGISX ) is the top-rated All Cap Growth mutual fund. IUSG earns an Attractive rating and JGISX earns a Very Attractive rating. Calamos Focus Growth ETF (NASDAQ: CFGE ) is the worst-rated All Cap Growth ETF and Sparrow Growth Fund (MUTF: SGFFX ) is the worst-rated All Cap Growth mutual fund. CFGE earns a Neutral rating and SGFFX earns a Very Dangerous rating. Gilead Sciences (NASDAQ: GILD ) is one of our favorite stocks held by JGISX and earns a Very Attractive rating. Gilead is also one of only seven S&P 500 stocks to rise 10% or more in 2008 . Over the past 10 years, Gilead has grown after-tax profits ( NOPAT ) by 43% compounded annually. The company has consistently earned a double-digit return on invested capital ( ROIC ) and currently earns a top-quintile ROIC of 80%. Despite the impressive growth in profits and profitability throughout its history, GILD is currently undervalued. At its current price of $90/share, Gilead has a price to economic book value ( PEBV ) ratio of 0.7. This ratio means that the market expects Gilead’s NOPAT to permanently decline by 30% from current levels. If Gilead can grow NOPAT by just 13% compounded annually for the next five years , the stock is worth $170/share – an 88% upside. Splunk Inc. (NASDAQ: SPLK ) is one of our least favorite stocks held by ITCBX and earns a Dangerous rating. Splunk was placed in the Danger Zone in July 2015 . Throughout its history, Splunk has failed to convert robust revenue growth into real profits. In fact, since 2013, Splunk’s NOPAT has fallen from -$20 million to -$260 million over the last twelve months. Making matters worse, Splunk’s NOPAT margin has fallen from -10% to -44% over the same time frame, and the company currently earns a bottom-quintile -25% ROIC. Despite these issues, investors have driven SPLK to an astronomical valuation. To justify its current price of $49/share, Splunk must immediately achieve NOPAT margins of 4% and grow revenue by 30% compounded annually for 19 years. In this scenario, Splunk would be generating just over $69 billion in revenue in 19 years, which would be equal to Comcast’s (NASDAQ: CMCSA ) 2014 revenue. The future cash flow expectations embedded in the current stock price are dangerously high. Figures 3 and 4 show the rating landscape of all All Cap Growth ETFs and mutual funds. Figure 3: Separating the Best ETFs From the Worst Funds Click to enlarge Sources: New Constructs, LLC and company filings Figure 4: Separating the Best Mutual Funds From the Worst Funds Click to enlarge Sources: New Constructs, LLC and company filings D isclosure: David Trainer and Kyle Guske II receive no compensation to write about any specific stock, style, or theme. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

If Workday Beat Consensus, That’ll Be 13 For 14 Quarters Since IPO

Well, it’s no Salesforce.com ( CRM ) in size, but investors are turning their attention to hot little rival Workday ( WDAY ), which reports earnings after the close Monday. The maker of cloud-based HR and financial software likely will show continued fast growth — while likely staying in the red as it spends to grow. For its fiscal Q4 2016 ended Jan. 31 , Workday guided to revenue of $317 million to $320 million, up 40% to 41% from the year-earlier quarter. Analysts polled by Thomson Reuters had modeled $320.3 million when Workday issued its Q3 results three months ago, but since then the consensus has slipped to $319.6 million. Workday didn’t forecast earnings, but analysts expect an adjusted loss per share of 4 cents vs. a 6-cent loss in the year-earlier quarter. Like many stocks, Workday has been scraping bottom lately, hitting a 39-month low on Feb. 9 at 47.32. Workday stock fell 16% on Feb. 5, but it wasn’t alone. That was the day Tableau Software ( DATA ) tanked 49.5% after releasing slower growth guidance for 2016, sending most software stocks down with it. Since then, Workday stock has enjoyed two good weeks, up 1% in early trading in the stock market today , near 60 but still down 25% for the year. Workday stock rose 3.2% Thursday, with enterprise software stocks helped by Salesforce.com’s late-Wednesday earnings beat and better-than-expected guidance. Salesforce.com stock rose 11% Thursday but was down a fraction early Friday. Noting that Workday “has beaten consensus revenue and EPS estimates in 12 of the 13 quarters it has been public,” D.A. Davidson analyst Jack Andrews is bullish. “We expect (Q4)  revenue to grow 41.9% …  to $321.2 million, above consensus …  and above the high end of the (Workday-provided) guidance range. By segment, we are projecting 44.6% growth in subscription services to $263 million (81.9% of total revenue) and 31.0% growth in professional services to $58.2 million,” he said in a research report. He expects a 3-cent per-share loss minus items, a penny better than consensus. “One interesting note is that we believe Oracle ( ORCL ) has pulled back a bit on its promotional program on SaaS (Software as a Service) and aims to offer future promotions to customers tactically, rather than automatically,” Andrews wrote. Davidson maintains a buy rating on Oracle stock.  It also has a buy rating on Workday stock, with a 99 price target. Oracle stock rose 1.8% Thursday, but was flat early Friday. Investment banker R.W. Baird on Thursday lowered its price target on Workday to 70 from 85, but it rates the stock outperform. “Workday’s share price has also been significantly reduced along with other high-valuation software stocks during the recent correction,” wrote Baird analyst Steven Ashley. In Workday’s Q3 earnings conference call with analysts, CFO Mark Peek said an adjusted operating profit likely wouldn’t happen until Q2 this year.