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Best And Worst: Mid Cap Growth ETFs, Mutual Funds And Key Holdings

Summary Mid Cap Growth style ranks eighth in Q2’15. Based on an aggregation of ratings of 11 ETFs and 409 mutual funds. IJK is our top rated Mid Cap Growth ETF and IMIDX is our top rated Mid Cap Growth mutual fund. The Mid Cap Growth style ranks eighth out of the 12 fund styles as detailed in our Q2’15 Style Ratings report. It gets our Dangerous rating, which is based on an aggregation of ratings of 11 ETFs and 409 mutual funds in the Mid Cap Growth style. Figures 1 and 2 show the five best and worst rated ETFs and mutual funds in the style. Not all Mid Cap Growth style ETFs and mutual funds are created the same. The number of holdings varies widely (from 24 to 623). This variation creates drastically different investment implications and, therefore, ratings. Investors seeking exposure to the Mid 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. 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. The iShares S&P Mid-Cap 400 Growth ETF (NYSEARCA: IJK ) is our top-rated Mid Growth ETF and the C ongress Mid Cap Growth Fund Inst (MUTF: IMIDX ) is our top-rated Mid Cap Growth mutual fund. Both earn our Attractive rating. CF Industries Holdings (NYSE: CF ) is one of our favorite stocks held by Mid Cap Growth ETFs and mutual funds. CF has grown after-tax profit ( NOPAT ) by 14% compounded annually for the past five years and currently earns a 21% return on invested capital ( ROIC ) that places it in the top quintile of all companies we cover. CF has also generated positive economic earnings every year since 2007. The best news of all is that the market’s expectations for CF are very low, which leaves the company largely undervalued at its current price of ~$63/share. If CF can grow NOPAT by 10% compounded annually for the next five years , the stock is worth $85/share today – a 35% upside. CF’s track record of 14% compounded annual profit growth and strong returns on capital suggests that the market’s expectations should be easily achievable. The Ark Industrial Innovation ETF (NYSEARCA: ARKQ ) is our worst-rated Mid Cap Growth ETF and The Goodwood SMID Cap Discovery Fund (MUTF: GAMAX ) is our worst rated Mid Cap Growth mutual fund. ARKQ earns our Neutral rating and GAMAX earns our Very Dangerous rating. One of the worst stocks in Mid Cap Growth ETFs and mutual funds is Tuesday Morning Corporation (NASDAQ: TUES ). Since 2009 the company’s ROIC has never exceeded 5%. However, the company’s cost of capital (WACC) has been greater than ROIC over the same time frame. This has contributed to negative economic earnings every year for the past six years. NOPAT growth has been equally disappointing and over the last four years and has declined by 12% compounded annually over this timeframe. The decline is even more pronounced over longer periods. Over the last decade NOPAT has fallen from $69 million in 2004 to $9 million in 2014. NOPAT margin over this period has also declined from 8% in 2004 to just 1% in 2014. Despite low NOPAT growth and shareholder value destruction, the company has nearly tripled in share price since 2011, making the stock very overvalued. To justify its current price of $14/ share, the company would need to grow NOPAT by 20% for the next 15 years . This seems highly unlikely given Tuesday Morning’s consistently declining profits over the past decade. Figures 3 and 4 show the rating landscape of all Mid Cap Growth ETFs and mutual funds. Figure 3: Separating the Best ETFs From the Worst ETFs (click to enlarge) Figure 4: Separating the Best Mutual Funds From the Worst Funds (click to enlarge) Sources Figures 1-4: New Constructs, LLC and company filings D isclosure: David Trainer and Allen L. Jackson receive no compensation to write about any specific stock, style, 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. (More…) 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.

Handicapping Bubbles And Shocks

Tail risk, the risk of an asset or portfolio moving more than three standard deviations away from its current price, appears to be increasing around the world. And some investors feel ill-equipped to manage this risk. This according to our latest poll of institutional investors. Last week, we released the results of the Allianz Global Investors RiskMonitor survey, a comprehensive look at views on portfolio construction, asset allocation and risk. This year we queried 735 institutional investors around the globe representing a variety of different institutions: pension funds, foundations, endowments, sovereign wealth funds, family offices, banks and insurance companies. The findings of this year’s survey reinforced our view that global risks are increasing amid a complicated economic, geopolitical and monetary policy environment. In particular, this challenging climate was underscored by the survey results, which showed that two-thirds of the respondents believe that tail-risk events are likely to be more frequent due to the interconnectedness of global financial markets. In addition, two-thirds of the survey participants also assert that tail risk has become an increasing worry since the 2008-2009 global financial crisis. Specifically, 62% believe tail risk is a “high” or “very high” risk. And 41% of the institutional investors surveyed believe a tail-risk event is “likely” or “very likely” in the next 12 months. Yet far fewer are “confident” or “somewhat confident” that their portfolios have appropriate downside protection for the next tail-risk event. Known Unknowns? Where are they seeing the biggest risks? The institutional investors we surveyed believe the most likely cause of future tail-risk events include oil-price shocks, sovereign-debt default, European politics, new asset bubbles and a euro-zone recession. However, this view varies by region. In the Americas, investors polled believe oil-price shocks are most likely to be the cause of the next tail-risk event, followed by US politics and European politics. In Europe and the Middle East, new asset bubbles are believed to be the most likely cause of the next tail-risk event, followed by geopolitical tensions in Europe and sovereign-debt default. Meanwhile, in the Asia-Pacific region, oil-price shocks are perceived to be the most likely cause of the next tail-risk event, followed by sovereign-debt default and a euro-zone recession. Interestingly, the timing of the release of the study coincides with an escalation of the ongoing debt crisis in Greece. That volatile situation aligns with the view that a sovereign-debt default and European politics are probable causes of future tail-risk events. Heading for the Grexit? So could Greece’s problems trigger a tail-risk event? Today, in light of the recent deterioration in negotiations between Greek government officials and Greece’s creditors, we see a material rise in the risk of a mistake by either side. We now have less confidence in a constructive outcome than we’ve had previously. As a result, we see increasing potential for a “Grexit” – Greece intentionally leaving the European Monetary Union – or a “Graccident” – Greece accidentally exiting. The accidental exit could occur if there’s a run on the banks, which would trigger the termination of emergency liquidity assistance from the European Central Bank. We believe that the ECB’s quantitative easing program and Outright Monetary Transactions will temper a lot of the bond and currency volatility, and some of the stock-market volatility. However, a “black swan” event remains a possibility. This is relevant because, despite heightening risks, only 36% of institutional investors we surveyed believe they have access to the appropriate tools or solutions for dealing with tail risk. This lack of preparedness could be a recipe for bigger problems down the road for investors without sufficient risk management baked into to their portfolios. Obstacles hindering the adoption of appropriate tools include concerns about cost and a lack of understanding of tail risk.

The Super ‘Short-Term’ Epidemic

Bonds, dividend investing, ETF investing, currencies “}); $$(‘#article_top_info .info_content div’)[0].insert({bottom: $(‘mover’)}); } $(‘article_top_info’).addClassName(test_version); } SeekingAlpha.Initializer.onDOMLoad(function(){ setEvents();}); In a recent post I talked about the intertemporal conundrum, the problem of time in a portfolio. That is, we live in a dynamic world where our financial lives aren’t necessarily one clean “long-term” . Because of this we often obsess over the short-term and end up doing detrimental short-term actions in what is essentially a failed attempt to create certainty in an uncertain financial world. It isn’t totally irrational to think about the short-term, however, this article from Fund Reference shows just how bad the problem is. Here are just two examples of how bad the current state of affairs is: That is even worse than I would have expected. For every person who is thinking about the “long-term” there are almost 20 who are thinking about the “short-term”. And the chart on expenses relative to performance shows that we’re basically just chasing performance and downplaying the importance of fees. Yet the data shows this is precisely the wrong way to think about the financial markets. Yes, we’re all active investors . But the smart active investors maximize efficiencies by reducing portfolio frictions like taxes and fees while maintaining a realistic perspective of your investing time horizon. The obsession with the super short-term is almost certainly detrimental to your wealth. Share this article with a colleague