Tag Archives: black

IVE: Why To Get Back Into Value With This ETF

By Jonathan Jones and Tom Lydon The value factor is starting to shake off several years of slack performance to outpace its growth and momentum counterparts as investors yearn for safer destinations in 2016, according to industry analyst ETF Trends . That is proving to be good news for exchange traded funds such as the $9.4 billion iShares S&P 500 Value ETF (NYSEArca: IVE ) . “It’s got a nice 2.5% dividend and when you are stuck in a trading range you want to be in value,” said Brock Moseley, president of Miracle Mile Advisors, of IVE in an interview with TheStreet.com . As the market cools off and moves toward more stable growth, exchange traded funds that track the value style may outperform. “Should economic conditions continue to stabilize, value stocks may be one of the bigger beneficiaries,” according to Russ Koesterich, Global Chief Investment Strategist and Head of the Model Portfolio & Solutions Business at BlackRock . “Value typically outperforms during periods when economic conditions are improving.” Value stocks typically trade at cheaper prices relative to fundamental measures of value, such as earnings and the book value of assets. In contrast, growth stocks tend to run at higher valuations since investors expect rapid growth in those company measures. IVE holds nearly 370 stocks, almost 24% of which are financial services names. Energy stocks account for over 12% of IVE’s weight and healthcare and industrial stocks each command allocations of more than 11%. The S&P 500 Value ETF showed a 14.62 price-to-earnings and a 1.65 price-to-book. In contrast, the S&P 500 Growth ETF has a 19.34 P/E and a 3.99 P/B while the S&P 500 Index ETF was trading at a 16.7 P/E and a 2.34 P/B. Plain vanilla index ETFs that track the value theme has outperformed so far this year, or at least have not done as poorly as broader benchmarks. Nevertheless, potential investors should still look under the hood of these value stock ETFs as no two are created alike and offer varying performances. iShares S&P 500 Value ETF Click to enlarge 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.

Despite An Uptick In Equities; Fund Investors Remain Risk Adverse

By Tom Roseen Generally ignoring mixed economic news, equity investors continued to follow the lead of oil prices throughout the fund-flows week ended March 2, 2016. On Thursday, February 25, markets rallied, with the Dow Jones Industrial Average posting a 212-point gain after investors learned that Venezuela’s oil minister had said he was meeting next month with other oil ministers, with a goal of stabilizing oil prices. Technology and financial issues led the rally as investors took a risk-on approach, helped by news of a jump in durable goods orders; investors ignored the details that shipments of nondefense capital goods excluding aircraft were negative and that the Shanghai Composite dropped 6.4% for the day. Throughout the flows week investors cheered the comments of St. Louis Federal Reserve President James Bullard, who reiterated that the pressure to raise interest rates has eased. Preliminary Q4 2015 GDP growth was revised upward during the week to 1.0%, which helped offset a dip in oil prices on Friday. Despite better-than-expected earnings reports from the likes of J.C. Penney and Kraft Heinz, investors continued to bid up gold. On Monday, February 29, investors continued to push up utilities issues and gold prices, underscoring the markets’ continued volatility. Nonetheless, oil futures rose sharply on reports of a possible production freeze, and investors’ global economic fears declined slightly after China lowered its reserve-requirement for that nation’s banks. On Tuesday stocks rallied, with investors bidding up financial and technology stocks on news that oil prices had jumped higher and that the ISM Manufacturing Index rose to 49.5% for February; while still in contraction territory, that beat consensus estimates. The NASDAQ Composite witnessed its largest one-day gain since August 2015 as utilities and Treasuries took a breather. Another strong gain in oil prices on Wednesday pushed stocks into the black once again. Investors met the “Goldilocks” news from the Federal Reserve’s Beige Book with a sigh of relief; it hinted that the central bank might be slow to raise interest rates this year, while showing the economy is still growing. This rally pushed the ten-year Treasury yield to its strongest closing high since February 5. Despite the risk-on attitude by many investors this past week, risk aversion remained the mantra of fund investors. For the week fund investors were net purchasers of fund assets (including those of conventional funds and exchange-traded funds [ETFs]), injecting a net $6.4 billion for the fund-flows week ended March 2. The increase in recent market volatility pushed investors toward safe-haven plays and fixed income securities, padding the coffers of money market funds (+$5.7 billion net), taxable bond funds (+$2.9 billion net), and municipal bond funds (+$0.2 billion net), while being net redeemers of equity funds (-$2.4 billion). For the first week in five equity ETFs witnessed net inflows; however, this past week they took in just $450 million. As a result of rises in oil prices and good economic news during the week, authorized participants (APs) were net purchasers of domestic equity ETFs (+$1.5 billion), injecting money into the group for the first week in three. Despite a slight improvement in the global markets, APs-for the fifth consecutive week-were net redeemers of nondomestic equity ETFs (-$1.0 billion). Perhaps as a result of persistent risk aversion, accompanied by the rally in technology firms, APs bid up some unlikely names, with the SPDR Gold Trust ETF (NYSEARCA: GLD ) (+$1.1 billion), the PowerShares QQQ Trust ETF (NASDAQ: QQQ ) (+$0.6 billion), and the iShares U.S. Real Estate ETF (NYSEARCA: IYR ) (+$0.3 billion) attracting the largest amounts of net new money of all individual equity ETFs. At the other end of the spectrum, the SPDR S&P 500 Trust ETF (NYSEARCA: SPY ) (-$1.2 billion) experienced the largest net redemptions, while the iShares MSCI Japan ETF (NYSEARCA: EWJ ) (-$362 million) suffered the second largest redemptions for the week. For the third week in four conventional fund (ex-ETF) investors were net redeemers of equity funds, redeeming $2.8 billion from the group. Domestic equity funds, handing back $2.9 billion, witnessed their fourth consecutive week of net outflows, while posting a weekly gain of 3.32%. Meanwhile, their nondomestic equity fund counterparts, posting a 3.69% return for the week, witnessed net inflows (although just +$87 million) for the fifth consecutive week. On the domestic side investors lightened up on large-cap funds and equity income funds, redeeming a net $1.6 billion and $1.0 billion, respectively. On the nondomestic side international equity funds witnessed $362 million of net inflows, while global equity funds handed back some $274 million net. For the third week in four taxable bond funds (ex-ETFs) witnessed net inflows, taking in a little under $2.0 billion. High-yield funds witnessed the largest net inflows, taking in $2.6 billion (for their second consecutive week of net inflows), while government-mortgage funds witnessed the second largest net inflows (+$0.4 billion). Corporate investment-grade debt funds witnessed the largest net redemptions from the group, handing back $754 million for the week. For the twenty-second week in a row municipal bond funds (ex-ETFs) witnessed net inflows, taking in $125 million this past week.

The Best And Worst Of January: Market-Neutral Funds

Market-neutral mutual funds and ETFs posted aggregated loses of 0.14% in January, bringing their one-year totals through January 31 to a near-flat +0.01%. Market-neutral funds, which seek a balance between long and short equity positions in pursuit of returns that are uncorrelated with the broad market, have had an ultra-low beta of 0.13, relative to the Barclays U.S. Aggregate Bond Index, for the year ending January 31, but have averaged just 0.04% of alpha over that time. Average volatility of the funds has been low, as the category has an aggregate one-year standard deviation of just 4.89%; but risk-adjusted returns have been unimpressive, with the average fund in the category sporting a one-year Sharpe ratio of -0.16. Top Performers in January The three best-performing market-neutral funds in January were: QuantShares U.S. Market Neutral Anti-Beta ETF (NYSEARCA: BTAL ) Hussman Strategic Growth Fund Inv (MUTF: HSGFX ) Cognios Market Neutral Large Cap Fund Inst (MUTF: COGIX ) The QuantShares U.S. Market Neutral Anti-Beta ETF ( BTAL ) was January’s top-performing market-neutral product, posting monthly gains of a whopping 9.48%! For the year ending January 31, the fund was up 6.24%, generating 9.81% of alpha with a beta of 3.96, relative to the Barclays U.S. Aggregate Bond Index. That high beta may not be attractive to market-neutral investors despite the bullish returns, and the ETF’s 13.58% one-year standard deviation falls at the top of the rankings for the category. Among the 58 funds in the category with a 1-year track record, BTAL earned a one-year Sharpe ratio – a measure of risk-adjusted performance – of 0.66, outperforming all but 13 funds. The Hussman Strategic Growth Fund Inv ( HSGFX ) was among the top-performing market-neutral mutual funds in January, ranking second only to the above ETF in the category. The fund’s January returns of +5.01% weren’t enough to push it into the black for the year, though, as it was down 6.91% for the 12 months ending January 31. HSGFX produced a -6.25% alpha over the past year, with a beta of 1.53 and volatility of 11.94%. This yielded a one-year Sharpe ratio of -0.55 – not the worst in the category, but certainly worse than the category average. The Cognios Market Neutral Large Cap Fund Inst ( COGIX ) ranked third in January, with returns of +4.29%. For the year ending January 31, the fund’s gains of 10.16% ranked in the top 2% of the Morningstar Market Neutral category. Those gains break down into a 1.66 beta and 10.27% alpha, with a very nice 1.26 Sharpe ratio and 7.88% volatility. The fund, which launched on the last day of 2012, had annualized three-year gains of 7.87%, earning it a five-star rating from Morningstar . Bottom Performers in January The three worst-performing market-neutral funds in January were: Highland HFR Event-Driven Activist ETF (NYSEARCA: DRVN ) Schooner Hedged Alternative Income Fund Inst (MUTF: SHAIX ) Turner Titan Long/Short Fund Inst (MUTF: TSPEX ) An ETF was the top-performing market-neutral fund in January, and an ETF was the worst performer: The Highland HFR Event-Driven Activist ETF ( DRVN ) fell 8.50% for the month, making it the category’s worst by a wide margin. The fund only launched on May 29, 2015, and thus, doesn’t have longer-term performance numbers to analyze. The Schooner Hedged Alternative Income Fund Inst ( SHAIX ) lost 3.91% in January, but still held on to a +1.88% one-year return through January 31. The fund had a beta of -1.58 over the past year and generated an alpha of 1.67%. Its annualized volatility of 6.62% was the lowest of any fund reviewed this month. All of this adds up to a decent Sharpe ratio of 0.30. Finally, the Turner Titan Long/Short Fund Inst (TPSEX) had the third-worst performance of all market-neutral funds in January, with its shares falling 3.24% for the month. Nevertheless, the fund maintained one-year returns of +3.50% (an alpha of 3.36%) through January 31, with a beta of -1.22. TPSEX had annualized volatility of 7.27% through January 31, and a Sharpe ratio of 0.50. Past performance does not necessarily predict future results. Jason Seagraves contributed to this article.