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5 Top-Ranked Diversified Bond Mutual Funds To Add To Your Portfolio

Fixed-income securities are the preferred choice of investors who are ready to forgo capital growth for regular income flows. The expense involved in creating such a portfolio of bonds from different categories may be quite considerable. This is why most investors select mutual funds since they are a convenient and affordable method of investing in bonds. Also, diversified bond funds further reduce the risk involved by holding securities from different sectors. A downturn in any one sector therefore only has a partial effect on the fund’s fortunes. Below, we share with you 5 best-ranked diversified bond mutual funds. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) and we expect the funds to outperform their peers in the future. PIMCO Fixed Income SHares: Series C (MUTF: FXICX ) seeks to maximize total return with preservation of capital. FXICX invests the majority of its assets in fixed-income securities including corporate debt obligations, inflation-indexed securities of corporate bodies and structured notes. FXICX allocates its assets throughout the globe. The PIMCO Fixed Income SHares C fund has a three-year annualized return of 1.6%. Curtis Mewbourne is the fund manager of FXICX since 2009. PIMCO Income Fund A (MUTF: PONAX ) invests a minimum of 65% of its assets in fixed income securities from a wide range of sectors. These securities may include options, futures contracts and swap agreements. PONAX may invest not more than half of its assets in securities that are rated below investment grade. The PIMCO Income A fund has a three-year annualized return of 3.9%. PONAX has an expense ratio of 0.85% compared to a category average of 1.02%. Toreador Core Fund Adv (MUTF: TORLX ) seeks long-term capital growth. TORLX invests mostly in domestic and foreign large-cap companies. The market capitalizations of these companies are identical to those listed in the S&P 500 Index or the Russell 1000 Index. The Toreador Core Retail fund has a three-year annualized return of 8%. As of October 2015, TORLX held 97 issues, with 5.14% of its total assets invested in Micron Technology Inc. (NASDAQ: MU ). Columbia Strategic Income Fund A (MUTF: COSIX ) invests in U.S. government bonds, investment grade corporate bonds, mortgage backed securities, inflation-protected securities, convertible securities as well as high yield instruments. COSIX seeks total return that includes current income and capital appreciation. The Columbia Strategic Income A fund has a three-year annualized return of 0.7%. Colin Lundgren is the lead manager and has managed COSIX since 2010. John Hancock Income Fund A (MUTF: JHFIX ) seeks a high level of current income. JHFIX mostly invests in three types of securities. These include corporate debt securities from both developed and emerging markets, U.S. government securities and domestic high yield bonds. JHFIX may invest a maximum 10% of its assets in foreign stocks. The JHancock Income A fund has a three-year annualized return of 1.7%. JHFIX has an expense ratio of 0.81% compared to a category average of 1.02%. Original Post

A New Cybersecurity ETF From Global X Is On Its Way (Revised)

The year 2015 may have been soft for the cybersecurity ETFs, but the craze for issuing more cybersecurity funds has not abated at all. Issuers are still seeing long-term prospects in it. Most recently, ETF issuer Global X announced plans to dip its toes into the space and filed for a cybersecurity ETF. Inside the Proposed Fund The fund looks to track the Cyber Security Index. The fund invests a minimum of 80% of its total assets in global securities, and in ADRs and GDRs based on the securities in the underlying index, per the filing . How Does It Fit in the Portfolio? The newly filed ETF can be a good choice for investors seeking exposure to the fast-growing and high-potential space of cybersecurity. While technology has been a great boon to mankind, it has lugged with it the ills of “cybercrime”. Enterprises and government agencies constantly face cyber attacks and are always in the want of rigorous cybersecurity to fight hackers. Per the Center for Strategic and International Studies and McAfee, cybercrime is a fast expanding industry with high returns and low risks. Their study projects that cybercrime costs the world over $400 billion per year. Also, “Key Findings from the Global State of Information Security Survey 2015” by PWC indicated that cybersecurity instances increased at a CAGR of 66% from 2009. These data clearly explain the latent potential of the newly filed product. ETF Competition While no one has any doubt over the success of the fund, provided it gets an approval, thanks to the budding potential in the space, competition seems to be a little tough. The PureFunds ISE Cyber Security ETF (NYSEARCA: HACK ) and the First Trust NASDAQ CEA Cybersecurity ETF (NASDAQ: CIBR ) are presently operating in the regular cybersecurity field with about $1.02 billion and $105.8 million, respectively. HACK is about a year old while CIBR is just six months old. HACK charges 75 bps, and CIBR charges 60 bps as fees. Investors should also note that Direxion – a renowned player in the leveraged and inverse leveraged ETF world – is also in the arena with two products focusing on the cybersecurity sector – one providing a leveraged bull play and the other an inverse leveraged bear play. The Direxion Daily Cyber Security Bull 2x Shares ETF (NYSEARCA: HAKK ) looks to offer double the daily exposure to the ISE Cyber Security Index while the Direxion Daily Cyber Security Bear 2x Shares ETF (NYSEARCA: HAKD ) gives twice the opposite exposure of the daily performance of the same index. If Global X fund manages to get an approval, it needs to offer competitive expense ratio and a better balancing in portfolio to garner investors’ assets. After all, the proposed fund lacks the first-mover advantage. So, to beat HACK and CIBR over the long term, the proposed fund should offer attractive options as far as exposure, stock-specific concentration risk and expense ratios are concerned. Original post

Best And Worst Q1’16: Financials ETFs, Mutual Funds And Key Holdings

The Financials sector ranks seventh out of the ten sectors as detailed in our Q1’16 Sector Ratings for ETFs and Mutual Funds report. Last quarter , the Financials sector ranked sixth. It gets our Dangerous rating, which is based on an aggregation of ratings of 41 ETFs and 244 mutual funds in the Financials sector. See a recap of our Q4’15 Sector Ratings here . Figures 1 and 2 show the five best and worst-rated ETFs and mutual funds in the sector. Not all Financials sector ETFs and mutual funds are created the same. The number of holdings varies widely (from 22 to 572). This variation creates drastically different investment implications and, therefore, ratings. Investors seeking exposure to the Financials sector 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 Four ETFs are excluded from Figure 1 because their total net assets are below $100 million and do not meet our liquidity minimums. See our ETF screener for more details. 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 iShares US Insurance ETF (NYSEARCA: IAK ) is the top-rated Financials ETF and the Davis Financial Fund (MUTF: DVFYX ) is the top-rated Financials mutual fund. Both earn a Very Attractive rating. The PowerShares KBW Premium Yield Equity REIT Portfolio ETF (NYSEARCA: KBWY ) is the worst-rated Financials ETF and the Rydex Series Real Estate Fund (MUTF: RYREX ) is the worst-rated Financials mutual fund. Both earn a Very Dangerous rating. 602 stocks of the 3000+ we cover are classified as Financials stocks. The Progressive Corp (NYSE: PGR ) is one of our favorite stocks held by IAK and earns a Very Attractive rating. PGR also lands on January’s Most Attractive Stocks list. Since 2009, Progressive has grown after-tax profit ( NOPAT ) by 5% compounded annually. Over this same time frame, Progressive’s return on invested capital ( ROIC ) never fell below 17% and is currently a top quintile 19%. The strength in Progressive’s business helps explain why the stock was up over 17% in 2015, but even after this price increase shares remain undervalued. At its current price of $31/share, Progressive has a price to economic book value ( PEBV ) ratio of 1.0. This ratio means that the market expects Progressive’s NOPAT to never meaningfully grow from its current levels. If Progressive can grow NOPAT by just 5% compounded annually (similar to past five years) for the next five years , the stock is worth $39/share today – a 26% upside. Prologis (NYSE: PLD ) is one of our least favorite stocks held by RYREX and earns a Dangerous rating. On the surface, Prologis would appear to be a healthy business that has grown GAAP net income by 181% compounded annually since 2010. However, this net income growth fails to account for the expansion of the balance sheet to fund the GAAP growth. In fact, Prologis’ debt has increased from $3.6 billion to $10.4 billion since 2010 and in total, Prologis’ invested capital has grown from $7 billion to $25 billion over the past five years. Increasing invested capital does not come free of charge and after removing the cost for Prologis’ invested capital we find that Prologis has only earned positive economic earnings in one of the past 17 years (2005). Despite its long-term track record of value destruction, PLD is priced for significant profit growth going forward. To justify its current price of $41/share, PLD must grow NOPAT by 10% compounded annually for the next 12 years . This expectation seems highly optimistic given PLD’s history of value destruction. Figures 3 and 4 show the rating landscape of all Financials 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 Mutual Funds Click to enlarge Sources: New Constructs, LLC and company filings D isclosure: David Trainer and Kyle Guske II receive no compensation to write about any specific stock, sector or theme.