Tag Archives: blend

Best And Worst Q4’15: All Cap Blend ETFs, Mutual Funds And Key Holdings

Summary The All Cap Blend style ranks third in Q4’15. Based on an aggregation of ratings of 60 ETFs and 585 mutual funds. QDEF is our top-rated All Cap Blend style ETF and RMUIX is our top-rated All Cap Blend style mutual fund. The All Cap Blend style ranks third out of the twelve fund styles as detailed in our Q4’15 Style Ratings for ETFs and Mutual Funds report. Last quarter , the All Cap Blend style ranked third as well. It gets our Neutral rating, which is based on an aggregation of ratings of 60 ETFs and 585 mutual funds in the All Cap Blend style. See a recap of our Q3’15 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 Blend style ETFs and mutual funds are created the same. The number of holdings varies widely (from 8 to 3796). This variation creates drastically different investment implications and, therefore, ratings. Investors seeking exposure to the All Cap Blend 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 Seven ETFs are excluded from Figure 1 because their total net assets (TNA) 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 The Jensen Quality Value Fund ( JNVIX and JNVSX ) is excluded from Figure 2 because its total net assets are below $100 million and do not meet our liquidity minimums. The FlexShares Quality Dividend Defensive Index ETF (NYSEARCA: QDEF ) is the top-rated All Cap Blend ETF and the Royce Special Equity Multi-Cap Fund (MUTF: RMUIX ) is the top-rated All Cap Blend mutual fund. Both earn a Very Attractive rating. The State Street SPDR SSgA Risk Aware ETF (NYSEARCA: RORO ) is the worst-rated All Cap Blend ETF and the Chou Opportunity Fund (MUTF: CHOEX ) is the worst-rated All Cap Blend mutual fund. RORO earns our Dangerous rating and CHOEX earns our Very Dangerous rating. Cisco Systems (NASDAQ: CSCO ) is one of our favorite stocks held by RMUIX and earns our Very Attractive rating. Since 2005, Cisco has grown after-tax profits ( NOPAT ) by 7% compounded annually. Over this same timeframe, Cisco has consistently earned a return on invested capital ( ROIC ) above 14% and currently earns a top quintile ROIC of 16%. Despite the strong fundamentals, CSCO shares are up only 1% year-to-date. At its current price of $28/share, Cisco has a price-to-economic book value ratio ( PEBV ) of 0.8. This ratio implies that the market expects Cisco’s NOPAT to permanently decline by 20%. This expectation seems unlikely considering the steady profit growth throughout the company’s history. If Cisco can grow NOPAT by 5% compounded annually for the next five years , the stock is worth $38/share today – a 36% upside. Sears Holding Corps (NASDAQ: SHLD ) is one of our least favorite stocks held by CHOEX and earns our Dangerous rating. Since 2011, Sear’s NOPAT has fallen from $668 million to -$1.1 billion in 2015. The company’s ROIC followed suit as it fell from 3% to a bottom quintile -7% over the same timeframe. While many investors may be aware of the problems that caused SHLD to fall over 50% in the past two years, they may not realize just how high the expectations baked into the current stock price remain. To justify its current price of $24/share, Sears must immediately achieve 3% pre-tax margins (a level last seen in 2008) and grow revenue by 4% compounded annually for the next 11 years . This expectation seems awfully optimistic given that Sears hasn’t grown revenue at all since 2007. Figures 3 and 4 show the rating landscape of all All Cap Blend ETFs and mutual funds. Figure 3: Separating the Best ETFs From the Worst ETFs (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 Thaxston McKee receive no compensation to write about any specific stock, style, or theme.

Best And Worst Q3’15: Small Cap Blend ETFs, Mutual Funds And Key Holdings

Summary The Small Cap Blend style ranks last in Q3’15. Based on an aggregation of ratings of 30 ETFs and 659 mutual funds. FNDA is our top-rated Small Cap Blend ETF and PXQSX is our top-rated Small Cap Blend mutual fund. The Small Cap Blend style ranks last out of the 12 fund styles as detailed in our Q3’15 Style Ratings for ETFs and Mutual Funds report. It gets our Dangerous rating, which is based on an aggregation of ratings of 30 ETFs and 659 mutual funds in the Small Cap Blend style as of July 20, 2015. See a recap of our Q2’15 Style Ratings here. Figures 1 and 2 show the five best and worst-rated ETFs and mutual funds in the style. Not all Small Cap Blend style ETFs and mutual funds are created the same. The number of holdings varies widely (from 24 to 2526). This variation creates drastically different investment implications and, therefore, ratings. Investors seeking exposure to the Small Cap Blend 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 Eight 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 Four mutual funds are excluded from Figure 2 because their total net assets are below $100 million and do not meet our liquidity minimums. The Schwab Fundamental U.S. Small Company Index ETF (NYSEARCA: FNDA ) is the top-rated Small Cap Blend ETF and the Virtus Quality Small-Cap Fund (MUTF: PXQSX ) is the top-rated Small Cap Blend mutual fund. FNDA earns a Dangerous rating and PXQSX earns an Attractive rating. The Global X Guru Small Cap Index ETF (NYSEARCA: GURX ) is the worst-rated Small Cap Blend ETF and the Investment Managers Chartwell Small Cap Value Fund (MUTF: CWSVX ) is the worst-rated Small Cap Blend mutual fund. Both earn a Very Dangerous rating. Escalade (NASDAQ: ESCA ) is one of our favorite stocks held by Small Cap Blend funds and earns our Very Attractive rating. Since bottoming out in 2008, Escalade’s after-tax profit ( NOPAT ) has grown by an impressive 55% compounded annually. NOPAT margin has increased tenfold to 10% over the same timeframe. Return on invested capital ( ROIC ) has also improved to 10% from 1% in 2009. Despite the strong turnaround since the economic recession, ESCA remains undervalued. At the current price of $18/share, ESCA has a price to economic book value ( PEBV ) ratio of 0.9. This ratio implies that the market expects the company’s profits to permanently decline by 10%. If Escalade can grow NOPAT by just 6% compounded annually for the next five years , the stock is worth $22/share – a 22% upside. Alon USA Energy (NYSE: ALJ ) is one of our least favorite stocks held by Small Cap Blend funds and earns our Very Dangerous rating. Since 2011, NOPAT has declined by 28% compounded annually. Alon currently earns a 5% ROIC, which is less than a quarter of the 22% earned in 2005. Investors have overlooked the deterioration of Alon’s fundamentals, and the stock is overvalued. To justify the current price of $18/share, Alon must grow NOPAT by 12% compounded annually for the 15 years . For a company that has struggled with earning consistent profits for years, this expectation appears to be overly optimistic. Figures 3 and 4 show the rating landscape of all Small Cap Blend 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 Max Lee 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.

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

Summary Mid Cap Blend style ranks ninth in 2Q15. Based on an aggregation of ratings of 19 ETFs and 328 mutual funds. CZA is our top rated Mid Cap Blend ETF and TMPIX is our top rated Mid Cap Blend mutual fund. The Mid Cap Blend style ranks ninth out of the 12 fund styles as detailed in our 2Q15 Style Ratings report . It gets our Dangerous rating, which is based on an aggregation of ratings of 19 ETFs and 328 mutual funds in the Mid Cap Blend style. Figures 1 and 2 show the five best and worst rated ETFs and mutual funds in the style. Not all Mid Cap Blend style ETFs and mutual funds are created the same. The number of holdings varies widely (from 25 to 3264). This variation creates drastically different investment implications and, therefore, ratings. Investors seeking exposure to the Mid Cap Blend 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. Validea Market Legends (NASDAQ: VALX ) and ProShares S&P MidCap 400 Dividend (NYSEARCA: REGL ) 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. Johnson Mutual Funds Opportunity Fund (MUTF: JOPPX ) is excluded from Figure 2 because its total net assets are below $100 million and do not meet our liquidity minimums. Guggenheim Mid-Cap Core (NYSEARCA: CZA ) is our top-rated Mid Cap Blend ETF and Touchstone Mid Cap Fund (MUTF: TMPIX ) is our top-rated Mid Cap Blend mutual fund. CZA earns our Attractive rating and TMPIX earns our Very Attractive rating. The Progressive Corp. (NYSE: PGR ) is one of our favorite holdings of Mid Cap Blend ETFs and mutual funds, despite being a large cap stock. Progressive earns our Attractive rating. Since 1998, Progressive has grown after-tax profit ( NOPAT ) by a steady 7% compounded annually. Progressive also boasts a top-quintile return on invested capital ( ROIC ) of 22%. The company counts rising economic earnings and strong free cash flow among its many other strong points. At ~$28/share, PGR trades at a price to economic book ( PEBV ) ratio of only 0.9. This valuation implies that Progressive’s NOPAT will permanently decline by 1c0% from current levels. However, if Progressive can grow NOPAT by just 5% compounded annually for the next five years , the stock is worth $41/share today — a 46% upside. Russell Small Cap Completeness ETF (NYSEARCA: RSCO ) is our worst rated Mid Cap Blend ETF and Saratoga Advantage Mid Cap Portfolio (MUTF: SPMAX ) is our worst rated Mid Cap Blend mutual fund. RSCO earns our Dangerous rating and SPMAX earns our Very Dangerous rating. One of the worst stocks held by Mid Cap Blend ETFs and mutual funds despite being a small cap stock, is Black Diamond Inc. (NASDAQ: BDE ). Black Diamond earns our Very Dangerous rating. In 2014 the company earned a negative NOPAT of $4 million, the company’s worst single year in our model. This negative NOPAT is particularly alarming since it represents the third consecutive year of declining NOPAT. Compounding this issue is Black Diamond’s value destroying -2% ROIC. Black Diamond’s economic earnings have also been negative for five consecutive years. Despite the poor financial state of the company, the stock has risen to unwarranted values and is now awfully overvalued. To justify its current price of ~$10/share, Black Diamond would need to achieve positive NOPAT margins (-2% in 2014) and grow revenue by 29% compounded annually for the next 16 years . With revenue growth below these expectations and actually declining in 2014, there remains significant downside risk in BDE shares. Figures 3 and 4 show the rating landscape of all Mid Cap Blend 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 Disclosure: David Trainer owns PGR. David Trainer and Allen L. Jackson receive no compensation to write about any specific stock, style, style or theme. Disclosure: I am/we are long PGR. (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.