Category Archives: stocks

Small Permian Producers’ Charts, EPS Forecasts Outpace Industry Recovery

Domestic oil production stocks have staged a remarkable rebound, alongside the 14-week rally in oil prices. Despite a number of the stock rising more than 100% during the run-up, nearly all still remain far below their 52-week highs. There are a few exceptions. Stocks including Callon Petroleum ( CPE ), Diamondback Energy ( FANG ) and Parsley Energy ( PE ) are poised to retake highs established in 2014. While their EPS are projected to continue declining through this year, all are forecast to see a sharp profit rebound in 2017. Callon is a good example of why the three are outperforming many of their oil patch brethren. It cleared a cup-with-handle base April 20, is now 20% above the base’s 9.68 buy point and 4% below a high set in July 2014. Like many stocks in the industry, Callon peaked in June 2008, as oil prices stabbed to highs near $150 a barrel. Callon is puny by oil business standards: $138 million in 2015 revenue. It teetered on the brink of collapse in 2007-08, as the failure of an offshore project caused earnings to collapse and revenue to retreat, despite spiking oil prices. The company responded by getting out of offshore work and placing its emphasis on gathering acreage in the Permian Basin. Located in West Texas and southeast New Mexico, the Permian has gained new life as horizontal drilling techniques have opened its multilayered formations to exploitation. While larger players are more diversified, Callon’s Permian focus has allowed it to claim a 41% initial rate of return at $41 per-barrel oil prices, putting it well ahead of most of domestic producers. That makes it an early mover in an industry where many larger companies won’t see a profit until oil reaches $50 a barrel or higher. The price of West Texas Intermediate oil has remained largely above $41 since mid-April. It has not touched $50 since October. Callon has also managed to recover thanks to a conservative debt load, well within the bounds of group peers. Analysts’ consensus projects earnings will contract sharply for a second straight year in 2016, then rebound 300% in 2016. Revenue, which declined in three of the past four years, is forecast to surge 36% this year and 44% next. Callon’s chart position — poised just below a 2014 high — is important due to a factor called overhead supply. This comes into play when existing shareholders who bought near previous peaks have held on waiting to offload shares at or near the price where they purchased. As Callon has advanced, it has overcome just about all of its overhead supply. Moreover, areas of overhead supply are not much of an obstacle after a couple of years have passed since they were formed. Oil producers Parsley Energy, RSP Permian ( RSPP ) and Diamondback Energy are Permian producers, all carry relatively modest debt and all are tinkering with new highs. Most the oil industry’s major industry think tanks have projected a rebalancing of oil supplies in the second half of this year or entering 2017.  Supply data has progressively appeared to support those views. That combination gives good cause for optimism, and is largely responsible for helping to fuel the speculative lift oil prices. But economic data does little to suggest any kind of significant, pending rebound in demand. And oil producers around the world — a group with a poor track record of balancing production with the market’s needs — remain ready to push production higher as soon as prices reach each company’s predetermined target levels.

Catch These Poland ETFs On The Upswing

Poland’s currency zloty, bonds and stocks gained on Monday (May 16, 2016) as Moody’s reaffirmed its long-term credit rating for the country at A2. And unsurprisingly two ETFs tracking the country – the iShares MSCI Poland Capped ETF (NYSEARCA: EPOL ) and the VanEck Vectors Poland ETF (NYSEARCA: PLND ) – jumped 3.4% and 3%, respectively. Poland, one of the outperformers in the EU, has been lagging in recent months thanks to growth slowdown in the emerging markets. Eurozone troubles also continue to weigh on the country. Still, as per IMF forecasts, the country’s GDP growth rate is expected to touch 4% in 2016 as compared to 3.6% in 2015 building investors’ confidence in the country. Headwinds Remain Although Poland did not get a downgrade from Moody’s, the rating agency revised its outlook for the country to negative from stable. The agency cited several reasons for the change in outlook including fiscal risks arising from a substantial increase in current expenditures, uncertainty as to offsetting revenue measures and the government’s intention to lower the retirement age. Another factor affecting the outlook was the risk of deterioration in the investment climate thanks to unpredictable policies and legislations. The President’s office has recently presented a proposal to implement a law converting Swiss franc mortgages into zlotys. The International Monetary Fund (IMF) has criticized this proposal and stated that the country’s financial system along with credit and economic growth will stand to suffer if the country goes ahead with its plan to convert foreign-currency denominated mortgages. The IMF has also warned that the increase in government expenditure would lead to a rise in budget deficit to 2.8% in 2016. The rising budget deficit could even cross 3% in 2017, breaching the European Union’s budgetary rules. Instead, the IMF has encouraged the Polish government to follow policies that are market friendly. Despite these concerns, investors who believe that Poland is poised for a turnaround could catch the Poland-focused ETFs. Both the ETFs carry a favorable Zacks ETF Rank of 3 or ‘Hold’ rating, suggesting room for upside. EPOL in Focus EPOL has about $173.4 million in AUM and an average daily volume of 274,000 shares. The product tracks the MSCI Poland IMI 25/50, charging 63 basis points a year from investors. With 40 stocks in its basket, this fund puts as much as 46.1% of its total assets in the top five holdings, suggesting high concentration risk. Financials actually makes up roughly half of the portfolio with 44.7% exposure. Energy and materials round off the top three sectors with exposure of 17.3% and 9.6% respectively. Shares of EPOL fell roughly 5.4% in the last one-month period ended May 16, 2016. PLND in Focus The fund looks to track the VanEck Vectors Poland Index and has 26 securities in its basket, charging investors 60 basis points a year in fees. The fund has 36.4% of its total assets in the top five holdings. PLND also puts heavy focus on financials, with as much as 37.1% exposure, followed by a 14.1% allocation to energy, 12.7% coverage in utilities and 11.4% in consumer discretionary. PLND sees a paltry volume of around 13,000 daily, while the ETF lost more than 5.8% in the last 30 days. Original Post

What’s Driving The Global ETF Industry?

Amid continued volatility in the oil price and the instability in the stock markets, assets invested under global ETFs/ETPs touched an all-time high of $3.138 trillion in April. While equities failed to impress the ETF space, fixed income led the way. As per data from ETFGI’s April 2016 global ETF and ETP industry insights report , the Global ETF/ETP industry had a whopping 6,297 ETFs/ETPs from 283 providers on 65 exchanges at the end of April 2016. As per the report, inflows were witnessed across the globe with record levels of assets being gathered in the U.S. ($2.217 trillion), Canada ($77.42 billion), Europe ($533.34 billion), Japan ($145.93 billion) and other countries in the Asia-Pacific region ($125.21 billion) (read: Will European ETFs Continue to Underperform SPY? ). In April, global ETFs/ETPs witnessed net inflows of $10.13 billion, led by fixed income ETFs/ETPs which gathered the largest net inflows with $7.73 billion. This is not surprising considering the upcoming U.S. election, Brexit vote and the impact of quantitative easing across the globe which have ruffled investors. Below we have discussed a couple of areas which saw the highest inflow last month. Bond ETFs Record flows in bond ETFs could be attributed to the low-yield environment in most developed markets across the world. Disappointing macroeconomic data, global market turbulence and threats to the stability of the U.S. economy have been making headlines since the beginning of the year, leading to volatility across all asset classes. Because of these factors, bond ETFs have lately gained a lot of popularity as investors continue to look for attractive and stable yield in this ultralow rate interest environment (read: Time for Investment Grade Corporate Bond ETFs? ). In fact, these uncertainties led the central bank to lower the number of hikes and the projected federal funds rate this year. It now expects the federal funds rate to rise to 0.875% by the end of the year, instead of the previously expected 1.375%, implying only two rate hikes as compared to the four projected in December. The double blessing of easy monetary policy globally and a delayed rate hike in the U.S. made fixed-income securities a winner in the month, as investors scurried to safer assets. Funds which saw maximum inflows were the iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSEARCA: LQD ) – $1.2 billion, the Vanguard Total Bond Market ETF (NYSEARCA: BND ) – $ 834.3 billion and the iShares Core Total U.S. Bond Market ETF (NYSEARCA: AGG ) – $829.6 million. Minimum Volatility ETFs With mixed data flowing in from various quarters and widespread fear among investors about the direction of the market, it’s not surprising that investors are looking to follow a proper trading strategy which ensures stability. With that in mind investors sought low volatility ETFs with funds like the iShares MSCI USA Minimum Volatility ETF (NYSEARCA: USMV ) and the iShares MSCI EAFE Minimum Volatility ETF (NYSEARCA: EFAV ) witnessing inflows of $1.2 billion and $601.2 million, respectively. Link to the original post on Zacks.com