Category Archives: stocks

Wireless Firms Act As Utilities; Other Techs Exit Top Rankings

The market faces no shortage of challenges: a buildup of distribution days, the S&P 500 settling back into negative territory for the year, and the Nasdaq diving below support at its converged 50- and 200-day moving averages. Those technical challenges are being underscored by another development: a vacuum of leadership among technology industries. Tech industry groups have entirely exited the top 20 of IBD’s 197 group rankings, with the exception of two: wireless and integrated telecom services. The wireless services group includes major mobile phone carriers Sprint ( S ) and T-Mobile U.S. ( TMUS ). The integrated group is dominated by AT&T ( T ) and Verizon ( VZ ). Investigate this tech stock that broke out of a base in heavy trade on Thursday using IBD’s Stock Checkup feature. Wireless services and networks are clearly high-tech territory. But as more consumers abandon their landlines and rely strictly on wireless services, and as more young people spend a growing share of their lives via smartphones, the wireless stocks also increasingly present the stability associated with utility stocks. In that respect, they represent a defensive hedge for funds and other large investors as indexes weaken. This could help explain why both of the telecom groups rose into the top 20 rankings as the broad market pulled back over the past four weeks. The S&P 500 has backed off 3.7% from its mid-April high. The tech-heavier Nasdaq peeled back 5.3% during the same period. Even 13 weeks ago, when defensive groups such as utilities, bond funds and tobacco crowded the leading ranks, tech groups including Internet content providers, chip equipment makers and solar energy manufacturers held in the top 20 rankings. Instead of continuing to lead the market, those three groups have since fallen to rankings of No. 85, No. 110 and No. 169, respectively. Beyond the top 20 rankings, medical systems manufacturers rank a strong No. 23. The technology-driven group counts Intuitive Surgical ( ISRG ) and Idexx Laboratories ( IDXX ) among its bulwarks. The next tech group bearing some potential growth stocks is the scientific electronic equipment group, ranked No. 41 Thursday. Danaher ( DHR ) and Agilent ( A ) are the strong suits here. The only other tech group in IBD’s top 50 rankings is the foreign telecom services industry, led by China Mobile ( CHL ), Japan’s Nippon Telephone & Telegraph ( NTT ) and London-based Vodafone Group ( VOD ). What about the big-charisma tech names? Apple ( AAPL ) is down 16% from its mid-April high. Alphabet ( GOOGL ) is down 10% and fighting for support at its 200-day line. Facebook ( FB ) is down only 3%, but has erased all gains from its April 28 breakout. A number of other stocks in the group are also keeping their heads up as the market pulls back. Look at WebMD Health ( WBMD ) and Zillow ( Z ), just to name a couple. Sell-offs among China-based plays, including Baidu ( BIDU ), YY Inc. ( YY ) and Momo ( MOMO ) have helped pressure the Internet content group to a No. 167 ranking. Amazon.com’s ( AMZN ) chart remains durable, extended above a buy point. Also in the Internet retailers group, Argentina’s MercadoLibre ( MELI ) is in buy range from a 127.87 buy point, although its fundamentals continue to lag. But sell-offs in the group — particularly among China-based Internet plays including JD.com ( JD ), 58.com ( WUBA ) and Vipshop Holding ( VIPS ) — have helped hold the group to a weak No. 104 ranking.

Applied Materials Q3 Guidance Tops By $300 Mil After Narrow Q2 Beat

No. 2 chip-gear maker Applied Materials ( AMAT ) toasted Wall Street’s current-quarter guidance expectations late Thursday and reported in-line Q2 metrics, prompting shares to rise in after-hours trading. Late Thursday, Applied Materials stock was up more than 4% in after-hours trading Thursday, after the company posted its Q2 earnings results. Shares closed down a penny in the regular session in the stock market today , at 19.91. Top rival ASML ( ASML ) stock fell 1.3% Thursday. Soon-to-merger KLA-Tencor ( KLAC ) and Lam Research ( LRCX ) stocks split the difference, down and up less than 1% each in the regular session. IBD’s 34-company Electronic Semiconductor-Manufacturing industry group fell nearly 1%. For the quarter ended May 1, Applied Materials reported $2.45 billion in sales and 34 cents earnings per share ex items, flat and up 17%, respectively, vs. the year-earlier quarter. Sales edged analyst views for $2.43 billion and EPS beat the consensus for 32 cents. Three months ago, Applied Materials guided to a 5%-10% sequential increase in sales, implying $2.37 billion to $2.48 billion, and 30-34 cents. Applied Materials guided to a 14%-18% quarter-over-quarter jump in current-quarter sales, implying $2.79 billion to $2.89 billion and topping the consensus of 22 analysts polled by Thomson Reuters for $2.51 billion. Sales would be up 14% vs. the year-ago quarter. EPS minus items guidance for 46-50 cents was a dime above Wall Street at the low point, and would be up 45.5%.

Junk Bond ETF ANGL Soaring: Will Its Flight Last?

Heightened volatility is driving investors to safe havens, making 2016 the year of the bond market. While long-term bonds are the undisputed winners, the high yield corner has drawn attention over the past three-months on investors’ drive for higher yields and a rebound in oil price. In addition, high-yield spreads have tightened significantly from 8.64 on February 12 to 6.36 currently, as per the BofA Merrill Lynch US High Yield Option-Adjusted Spread , making junk bonds attractive. This suggests that investors are now demanding lower premium than comparable Treasury bonds to compensate for the risk. However, the risk of default is on the rise, dampening the appeal for junk bonds. This is because the resumption of the slide in commodity prices and renewed global growth concerns are weighing on companies’ profits and balance sheets yet again. As per Moody’s Investors Service, global junk bond defaults will accelerate to 5% by the end of November, up from the previous forecast of 4.6% one month ago, and 3.8% in March. Fitch Ratings expects high yield bond defaults to climb to 6% this year from 4.5% last year and touch the highest level since 2000 (read: Junk versus Investment Grade Corporate Bond ETFs ). Given the heightened credit risk and low rate environment, investors thronged the high yield quality fund – VanEck Vectors Fallen Angel High Yield Bond ETF (NYSEARCA: ANGL ) . The fund gained 12.3% in the year-to-date time frame, outperforming the broad bond fund (NYSEARCA: BND ) and junk bond fund (NYSEARCA: JNK ) by wide margins. ANGL in Focus This ETF seeks to track the performance of the BofA Merrill Lynch US Fallen Angel High Yield Index, which focuses on the ‘fallen angel’ bonds. Fallen angel bonds are high yield securities that were once investment grade but have fallen from grace and are now trading as junk bonds. This unique approach gives the portfolio 248 securities that are widely spread across them, with none holding more than 1.65% of assets. The fund has an effective duration of 5.67 years and year to maturity of 9.33. Additionally, the product mainly comprises BB and B rated corporates, which together make up for 85.3% of the asset base. Bonds from energy and material sectors occupy the top two positions with 25.2% and 22.1%, respectively, while financial and communications round off the top four with double-digit allocation (read: all the High Yield Bond ETFs here ). ANGL has amassed $158.7 million in its asset base while trades in moderate volume of 82,000 shares a day on average. It charges a relatively low fee of 40 bps per year from investors and yields 5.20% per annum. Behind The Success of ANGL The fallen angels strategy is immensely successful this year as the number of fallen angels has increased substantially on a series of debt downgrades among energy and material firms – the top two sectors of the ETF. In this regard, Moody’s snatched investment grade ratings from 51 companies and gave them the junk status at the end of the first quarter, up from eight in the fourth quarter and 45 for the whole of 2015. These downgrades have boosted the performance of the ETF as bond price generally rebounds after losing an investment grade rating. Additionally, the rebound in oil prices from the 12-year low reached in mid-February injects further strength into these bonds and the ETF. As a result, fallen angels bonds tend to have lower default rates than their more traditional junk bond counterparts, thus offering better risk-reward profiles. These have a history of outperformance in nine out of the last 12 calendar years, according to Market Vectors. Moreover, the outperformance of ANGL was spurred by its higher average credit quality as about three-fourths of the portfolio carry the upper end rating (BB) of the junk category, leaving just less than 4% to the risky CCC-rated and lower. Link to the original post on Zacks.com