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4 Sector ETFs Jump To Top Ranks As Q1 Earnings Hit

By now, we are all aware of the fact that the Q1 earnings season, which has just taken off, is going to be a soft one. Earnings of the S&P 500 index are likely to decline 10.3% in the first quarter while revenues are expected to fall 0.6% as per Zacks Earnings Trends issued on April 14, 2016. The key drag was the energy sector as evident from the 5.2% expected Q1 earnings decline from the ex-oil S&P 500 index, Revenues enter the growth territory (up 2.4%) if we rule out the energy sector weakness from the S&P 500. Notably, the energy sector is expected to report a 105.8% decline in earnings for Q1 on 29.8% lower revenues. But then, the other 15 sectors constituting the S&P 500 index (as per Zacks methodology) are not sturdy enough. Only six sectors will likely post mild-to-positive earnings growth this season with acute recessionary impact expected in basic materials (down 23.8%), industrial products (down 25.7%) and conglomerates (down 23.7%). Needless to say, stocks and the related ETFs will come under pressure post earnings releases of such sectors. Investors might be at a loss as to where to bet their money to reap the return of a bull market, without being perturbed by earnings weakness. For them, below are four sector ETFs that have soared to the top Zacks Ranks (#1 or #2) at the threshold of the earnings season (read: Winning ETF Strategies for Q2 ). Guggenheim S&P 500 Equal Weight Technology ETF (NYSEARCA: RYT ) – #2 (Buy) to #1 (Strong Buy) Technology ETFs were badly hit in the first quarter of 2016, having returned minutely or posting massive losses as risk-off sentiments loomed large. However, things took a turn for the better lately as a flurry of upbeat U.S. economic data and a dovish Fed whet investors’ risk appetite. The sector is expected to post 6.7% decline in earnings on 2.6% revenue growth. So, investors intending a momentum play in the tech space can bet on RYT which is an equal-weighted version of the S&P 500 Information Technology Index and gives exposure to a broader technology sector. RYT has a Medium risk outlook. Guggenheim S&P Equal Weight Health Care ETF (NYSEARCA: RYH ) – #3 (Hold) to #1 The scenario was almost the same for the broader healthcare sector which returned to health recently. A biotech rebound, compelling valuation, increasing merger and acquisition activities and several important product approvals act as tailwinds to the sector. The broader medical sector is projected to post 0.9% growth in earnings in Q1 on bumper 9.1% higher revenues. No points for guessing why investors should target this space right now. An intriguing bet on this sector is RYH which is an unmanaged equal-weighted version of the S&P 500 Health Care Index. RYH has a Medium risk outlook. Market Vectors Gaming ETF (NYSEARCA: BJK ) – #3 to #1 This gaming sector falls into the consumer discretionary category, which should be on a smooth road ahead on compelling valuation, expectations of a longer low-rate environment due to a dovish Fed and a softer dollar driving earnings of companies with considerable exposure in foreign lands. The consumer discretionary space looks better placed than many other sectors for the first-quarter earnings season. The sector is likely to record 1.8% earnings growth on 5.8% growth in revenues. The fund, BJK, gives investors exposure to the overall performance of the largest and most liquid companies in the global gaming industry. From a country look, U.S. takes the top spot at 34.0% while Australia and China round off the top three with a double-digit exposure each. IQ US Real Estate Small Cap ETF (NYSEARCA: ROOF ) – #3 to #2 As the U.S. Treasury bond yields are hovering at lower levels despite a slowly improving economy, the outlook for real estate is looking up. The sector performs well in a low-yield environment while a growing economy ensures demand for real estates. Investors can bet on this trend via ROOF which is made up of small-cap stocks – the best capitalization to play the recovering domestic economy. Plus, ROOF yields about 5.80% annually (as of April 14, 2016) and can act as a decent income destination for investors. Link to the original post on Zacks.com

Q2 Outlook For Retail ETFs

Retailing involves buying large quantities of goods and selling them in smaller quantities to consumers for a profit. The health of the retail industry is an important economic indicator, as it is linked directly to consumers and their propensity to spend. Consumer spending is the key to the well-being of any economy, as it accounts for more than two-thirds of economic activity. The link between consumer spending and the retail industry becomes more relevant, as retail sales attract approximately 30% of total consumer spending in the U.S. Also, the retail industry ranks among the top U.S. industries and employs an enormous workforce, contributing to the health of the job market. Before jumping onto the trends in retail, here’s a peek into the key economic indicators, which suggests where the market is heading. Recent data revealed that U.S. consumer spending rose a marginal 0.1% in February 2016, following a revised January 0.1% rate of increase, which was previously reported at a 0.5% increase. Adjusted for inflation, consumer spending rose 0.2%. This slowdown in consumer spending has lowered the predictions for economic growth in the first quarter of 2016. We note that income rose by a modest 0.2% in February, after a 0.5% increase in January, which marked the strongest income growth in seven months. Analysts suggest that the slowdown in incomes is rather temporary amid a tightening job market that is driving wages higher. Despite this recent weakness, market pundits still expect consumer spending to pick up as the year passes, as the improvement in employment levels will likely drive up incomes and ultimately encourage consumers to spend. Concurrently, a report by the Commerce Department suggests that the third estimate of real gross domestic product (GDP) expanded at an annual rate of 1.4% for the fourth quarter of 2015, above the second estimate of 1%. Also, according to the report, real GDP for 2015 rose 2.4%, at the same rate as for 2014. These reports collectively advocate that the U.S. economy is definitely showing resilience, while keeping rumors of an upcoming recession at bay. Seconding these views, we note that the U.S labor market looks quite stable, with unemployment rate for March standing slightly up from last month at 5%. The report by the Bureau of Labor Statistics indicated that a total of 215,000 nonfarm payroll was added in March, of which retail employment increased 48,000. Given a rebounding U.S. economy, the retail space is bubbling with optimism. This is evident from March’s 0.5% rise in retail sales, excluding automobiles, gasoline stations and restaurants, from February 2016, as reported by the nation’s largest retail trade group – National Retail Federation (NRF). The federation pointed out that the growth in March came despite the uncertain global economic outlook and challenges in the industrial and financial sectors. Sales for the month benefited from an early Easter that increased retailers’ sales, as well as steady improvements in labor market and increased incomes that determine consumers’ spending appetite. As reported in February, NRF projects retail sales in 2016 to rise 3.1%, which is higher than the 10-year average sales growth of 2.7%. Online sales in 2016 are expected to increase in the band of 6-9%. Market experts expect retail sales growth in 2016 to come on the back of improving wages, new job creations as well as steady consumer confidence, which will negate the headwinds from an uncertain global environment, particularly the economic slowdown and financial mayhem in China, the strong U.S. dollar and persistent problems in the energy sector. Playing the Sector through ETFs ETFs present a low-cost and convenient way to get a diversified exposure to this sector. Below, we have highlighted a few ETFs tracking the industry: SPDR S&P Retail ETF (NYSEARCA: XRT ) Launched in June 2006, the SPDR S&P Retail ETF is a fund that seeks investment results corresponding to the S&P Retail Select Industry Index. It consists of 98 stocks, the top holdings being Office Depot Inc. (NASDAQ: ODP ), Fresh Market Inc. (NASDAQ: TFM ) and Children’s Place Inc. (NASDAQ: PLCE ), representing asset allocation of 1.56%, 1.36% and 1.32%, respectively, as of April 1, 2016. The fund’s gross expense ratio is 0.35%, while its dividend yield is 1.17%. XRT has $632.14 million of assets under management (AUM) as of April 1, 2016. Market Vectors Retail ETF (NYSEARCA: RTH ) Initiated in December 2011, the Market Vectors Retail ETF tracks the performance of Market Vectors US Listed Retail 25 Index. It comprises 26 stocks, the top holdings being Amazon.com Inc. (NASDAQ: AMZN ), Home Depot Inc. (NYSE: HD ) and Wal-Mart Stores Inc. (NYSE: WMT ), representing asset allocation of 13.65%, 8.68% and 7.20%, respectively, as of April 4, 2016. The fund’s net expense ratio is 0.35% and its dividend yield is 2.25%. RTH has managed to attract $141.5 million in AUM as of April 4, 2016. PowerShares Dynamic Retail Portfolio ETF (NYSEARCA: PMR ) The PowerShares Dynamic Retail Portfolio ETF, launched in October 2005, follows the Dynamic Retail Intellidex Index and is made up of 30 stocks that are primarily engaged in operating general merchandise stores, such as department stores, discount stores, warehouse clubs and superstores. Its top holdings are The Walgreens Boots Alliance Inc. (NASDAQ: WBA ), CVS Health Corp. (NYSE: CVS ) and Home Depot Inc. ( HD ), reflecting asset allocation of 5.13%, 5.06% and 5.05%, respectively, as of April 4, 2016. The fund’s net expense ratio is 0.63%, while its dividend yield is 0.74%. PMR has managed to attract $22.5 million in AUM as of April 4, 2016. Original Post

4 ETFs Surge To Top Rank Ahead Of Q1 Earnings

Though the stock market has made an impressive comeback from the worst nightmare it saw at the start of the year, volatility and uncertainty continue to dominate. This is especially true, given the expected Q1 corporate earnings decline for the fourth consecutive quarter. Amid this sluggishness, many investors still want to bet on a slowly improving U.S. economy, which is backed by a healing job market and rising consumer confidence. The rebound in the oil price from its 12-year low, the Fed’s dovish comments and the resultant weakness in dollar, added to the optimism, raising the appeal for riskier assets. For these investors, we delved into the Zacks ETF Rank to find the best picks. The system takes into account factors such as industry outlook and expert surveys; and then applies ETF-specific factors (like expense ratios and bid/ask spreads) to spot the best funds in each and every corner of the space. Using this system, we have picked a handful of ETFs that earned a Zacks ETF Rank #1 (Strong Buy) in the latest ratings update and could thus outperform (see: Our Zacks ETF Rank Guide ). Since earnings growth is expected to be negative for 11 of the 16 Zacks sectors, we have focused on four low-risk, broad ETFs rather than specific sectors. Each of these funds has seen its rank surge to the top hierarchy from #3 (Hold) and could be great picks this earnings season. Vanguard Mid-Cap Value ETF (NYSEARCA: VOE ) Investors seeking to participate in the growing economy, but wary of soft earnings, should consider mid-cap stocks in the basket form. This is because mid- caps are arguably safer options allowing both growth and stability simultaneously in a portfolio. These middle-of-road securities have the potential to move higher in turbulent times when compared to large and small caps. Further, honing in on value securities in this capitalization level ensures safety to investors. Value investing includes stocks with strong fundamentals – earnings, dividends, book value and cash flow – that trade below their intrinsic value and are undervalued by the market. In particular, VOE seems an exciting pick heading into the earnings season. The fund tracks the CRSP US Mid Cap Value Index, charging investors just 9 bps in annual fees. It holds 208 stocks, which are well spread across each component as none of these holds more than 1.3% share. Financials takes the top spot with one-fourth share while consumer goods, industrials, consumer services and utilities round off to the next four spots with a double-digit allocation each. It is one of the popular and liquid ETFs in the mid-cap space with AUM of $4.5 billion and average daily volume of 302,000 shares. The ETF has added 0.2% in the year-to-date time period. WisdomTree MidCap Dividend Fund (NYSEARCA: DON ) Dividend-focused ETFs have been riding high this year on investors’ drive for income amid heightened uncertainty in the stock market. This is because dividend-paying securities are the major sources of consistent income when returns from the equity market are at risk. Dividend-focused products offer safety in the form of payouts and stability in the form of mature companies that are less immune to the large swings in stock prices. Further, longer-than-expected interest rates have made this corner a hot investment area. As a result, DON seems an interesting choice for the coming months. This ETF provides exposure to the mid-cap segment of the U.S. dividend paying stocks by tracking the WisdomTree MidCap Dividend Index. The fund has been able to manage assets of $1.6 million and trades in a moderate volume of 80,000 shares a day on average. Expense ratio came in at 0.38%. Holding 402 stocks in its basket, the product is widely diversified across each component with each holding less than 1.8% of assets. From a sector look too, the fund is pretty well spread out with financials, consumer discretionary, utilities and industrials taking the double-digit exposure each. DON returned 11.1% so far this year. Schwab Fundamental U.S. Small Company Index ETF (NYSEARCA: FNDA ) Small-cap ETFs have lagged the broad market for the most part of this year due to endless worries stemming from the China turmoil and an oil price collapse. This trend seems to be reversing lately given the spate of upbeat economic data, an impressive rebound in oil prices, and of course, the spring fervor. The pint sized stocks generally outperform when the American economy is leading the way. Given this, investors should recycle their portfolio into the small-cap space to obtain a nice play and FNDA could be an excellent pick (see: all the Small Caps ETFs here ). This fund provides a complement to market-cap indexing and active management by following an innovative indexing approach using fundamental measures of company size by tracking the Russell Fundamental U.S. Small Company Index. In total, the fund holds a large basket of 884 securities with none accounting for more than 0.29%. Financials and industrials take the top two spots at 22.5% and 20.6%, respectively, closely followed by consumer discretionary (16.7%) and information technology (13.5%). FNDA is less liquid and less popular in the small-cap space with AUM of $688.3 million and average daily volume of 178,000 shares. Expense ratio came in at 0.32%. The ETF is up 0.8% in the year-to-date time frame. First Trust Small Cap Value AlphaDEX Fund (NASDAQ: FYT ) As small caps are risky options which could lead to extreme volatility stemming from huge gains and losses in a very short period of time, value stocks could provide some stability in the portfolio. This is because value stocks often overreact to both positive and negative news, resulting in share price movement that does not reflect the company’s true long-term fundamentals. This creates buying opportunities in such stocks at depressed prices. There is also potential for capital appreciation when the stock finally reflects its true market price. As a result, investors could focus on FYT for the coming months. This fund follows the NASDAQ AlphaDEX Small Cap Value Index, which uses the AlphaDEX methodology to select stocks from the NASDAQ US 700 Small Cap Value Index and ranks them on both growth and value factors. The approach results in a basket of 262 securities with none holding more than 0.74% of assets. Financials, industrials, consumer discretionary and information technology are the top four sectors accounting for a double-digit exposure each. FYT is often overlooked by investors as depicted by its lower level of AUM of $44.8 million and average daily volume of under 20,000 shares. It charges 70 bps in fees per year and has gained 0.5% in the year-to-date period. Original Post