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Best And Worst Q1’16: All Cap Value ETFs, Mutual Funds And Key Holdings

The All Cap Value style ranks fourth out of the twelve fund styles as detailed in our Q1’16 Style Ratings for ETFs and Mutual Funds report. Last quarter , the All Cap Value style ranked fourth as well. It gets our Neutral rating, which is based on aggregation of ratings of 11 ETFs and 272 mutual funds in the All Cap Value style. See a recap of our Q4’15 Style Ratings here. Figure 1 ranks from best to worst the seven all-cap value ETFs that meet our liquidity standards and Figure 2 shows the five best and worst-rated all-cap value mutual funds. Not all All Cap Value style ETFs and mutual funds are created the same. The number of holdings varies widely (from 20 to 2025). This variation creates drastically different investment implications and, therefore, ratings. Investors seeking exposure to the All Cap Value 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 Five 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 The Northern Lights Fund Trust II Al Frank Fund ( VALAX , VALUX ) is excluded from Figure 2 because its total net assets are below $100 million and do not meet our liquidity minimums. The PowerShares FTSE RAFI US 1000 Portfolio ETF (NYSEARCA: PRF ) is the top-rated All Cap Value ETF and the Transamerica Partners Institutional Large Value Fund (MUTF: DIVIX ) is the top-rated All Cap Value mutual fund. PRF earns an Attractive rating and DIVIX earns a Very Attractive rating. The First Trust Value Line Dividend ETF (NYSEARCA: FVD ) is the worst-rated All Cap Value ETF and the Copley Fund (MUTF: COPLX ) is the worst-rated All Cap Value mutual fund. FVD earns a Neutral rating and COPLX earns a Very Dangerous rating. Wells Fargo & Company (NYSE: WFC ) is one of our favorite stocks held by PRF and earns an Attractive rating. Wells Fargo was also featured as a long idea in November2015. Wells Fargo’s ability to grow after-tax profits ( NOPAT ) has been extremely impressive. Over the past decade, the company has grown NOPAT by 12% compounded annually. Over this same time, Wells Fargo has consistently earned a double-digit return on invested capital ( ROIC ) and over the trailing-twelve-months, earns an 11% ROIC. Despite the impressive business strength, the company remains undervalued. At its current price of $48/share, Wells Fargo has a price-to-economic book value ( PEBV ) ratio of 0.9. This ratio means that the market expects the company’s NOPAT to permanently decline by 10% from current levels. If Wells Fargo can grow NOPAT by just 5% compounded annually for the next decade , the stock is worth $67/share today – a 40% upside. Orbcomm Inc. (NASDAQ: ORBC ) is one of our least favorite stocks held by FRAVX and earns a Dangerous rating. Over the past five years, Orbcomm’s NOPAT has declined by 20% compounded annually. In fact, the business has never generated positive economic earnings in any year since going public in 2006. Orbcomm currently earns a bottom-quintile ROIC of 1%. In spite of the poor fundamentals, ORBC is up nearly 20% in the last year and is now significantly overvalued. To justify its current price of $7/share, Orbcomm must grow NOPAT by 34% compounded annually for the next 14 years. Figures 3 and 4 show the rating landscape of all All Cap Value 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 Kyle Guske II receive no compensation to write about any specific stock, 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. 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 Q1’16: Utilities ETFs, Mutual Funds And Key Holdings

The Utilities sector ranks last out of the ten sectors as detailed in our Q1’16 Sector Ratings for ETFs and Mutual Funds report. Last quarter , the Utilities sector ranked fifth. It gets our Dangerous rating, which is based on aggregation of ratings of nine ETFs and 34 mutual funds in the Utilities sector. See a recap of our Q4’15 Sector Ratings here . Figure 1 ranks from best to worst eight Utilities ETFs and Figure 2 shows the five best and worst-rated Utilities mutual funds. Not all Utilities sector ETFs and mutual funds are created the same. The number of holdings varies widely (from 20 to 255). This variation creates drastically different investment implications and, therefore, ratings. Investors should not buy any Utilities ETFs or mutual funds because none get an Attractive-or-better rating. If you must have exposure to this sector, you should buy a basket of Attractive-or-better rated stocks and avoid paying undeserved fund fees. Active management has a long history of not paying off. 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 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 Fidelity MSCI Utilities Index ETF (NYSEARCA: FUTY ) is the top-rated Utilities ETF and the American Century Quantitative Equity Utilities Fund (MUTF: BULIX ) is the top-rated Utilities mutual fund. Both earn a Neutral rating. The Guggenheim S&P 500 Equal Weight Utilities ETF (NYSEARCA: RYU ) is the worst-rated Utilities ETF and the ICON Utilities Fund (MUTF: ICTVX ) is the worst-rated Utilities mutual fund. RYU earns a Dangerous rating and ICTVX earns a Very Dangerous rating. 79 stocks of the 3000+ we cover are classified as Utilities stocks, but due to style drift, Utilities ETFs and mutual funds hold 255 stocks. PPL Corporation (NYSE: PPL ) is one of our favorite stocks held by Utilities ETFs and mutual funds. It is the only Utility stock that earns an Attractive rating. Since 1998, PPL has grown after-tax profits ( NOPAT ) by 10% compounded annually. Over this timeframe, PPL has improved its return on invested capital ( ROIC ) from 6% to 7%, which is the highest ROIC of all 79 Utilities stocks under coverage. Despite the continued strength of PPL’s business, the stock is only up 6% over the past decade and shares are currently undervalued. At its current price of $36/share, PPL has a price to economic book value ( PEBV ) ratio of 0.6. This ratio means that the market expects PPL’s NOPAT to permanently decline by 40% from its current levels. If PPL can grow NOPAT by just 3% compounded annually for the next decade , the stock is worth $59/share today – a 64% upside. Connecticut Water Service (NASDAQ: CTWS ) is one of our least favorite stocks held by Utilities ETFs and mutual funds and earns a Very Dangerous rating. Throughout the history of our model, which dates back to 1998, Connecticut Water Service has never generated positive economic earnings . The company’s ROIC has declined from 5% to 3% over the same timeframe. However, at its current price of $41/share the stock remains significantly overvalued. To justify its current price, Connecticut Water Service must grow NOPAT by 7% compounded annually for the next nine years . While this may not seem like much in terms of profit growth, keep in mind that CTWS has failed to generate economic profits in any year for nearly two decades. Figures 3 and 4 show the rating landscape of all Utilities 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. 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.

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

The Information Technology sector ranks third out of the ten sectors as detailed in our Q1’16 Sector Ratings for ETFs and Mutual Funds report. Last quarter , the Information Technology sector ranked second. It gets our Neutral rating, which is based on aggregation of ratings of 28 ETFs and 109 mutual funds in the Information Technology. 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 Information Technology sector ETFs and mutual funds are created the same. The number of holdings varies widely (from 25 to 397). This variation creates drastically different investment implications and, therefore, ratings. Investors seeking exposure to the Information Technology 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 The PowerShares Dynamic Semiconductors Portfolio (NYSEARCA: PSI ) is excluded from Figure 1 because its 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 The Fidelity Advisor Communications Equipment Fund (MUTF: FDMIX ) is excluded from Figure 2 because its total net assets are below $100 million and do not meet our liquidity minimums. The Market Vectors Semiconductor ETF (NYSEARCA: SMH ) is the top-rated Information Technology ETF and the Vanguard Information Technology Index Fund (MUTF: VITAX ) is the top-rated Information Technology mutual fund. Both earn a Very Attractive rating. The ARK Innovation ETF (NYSEARCA: ARKK ) is the worst-rated Information Technology ETF and the Rydex Internet Fund (MUTF: RYINX ) is the worst-rated Information Technology mutual fund. ARKK earns a Dangerous rating and RYINX earns a Very Dangerous rating. 511 stocks of the 3000+ we cover are classified as Information Technology stocks. Applied Materials (NASDAQ: AMAT ) is one of our favorite stocks held by SMH and earns an Attractive rating. Going back to 1998, the earliest year in our model, Applied Materials has grown after-tax profit ( NOPAT ) by 10% compounded annually. AMAT currently earns a 12% return on invested capital ( ROIC ) and has generated over $2.8 billion in free cash flow over the last three years. Despite the nearly two decades of strong business operations, AMAT shares are significantly undervalued. At its current price of $16/share, AMAT has a price to economic book value ( PEBV ) ratio of 1.1. This ratio means that the market expects Applied Materials to grow profits by only 10% over its remaining corporate life. If Applied Materials can grow NOPAT by just 5% compounded annually (half its historical rate) over the next decade , the stock is worth $20/share today – a 25% upside. Trimble Navigation (NASDAQ: TRMB ) is one of our least favorite stocks held by ARKK and earns a Dangerous rating. In five of the past six years Trimble has generated negative economic earnings . In fact, the only time TRMB generated consecutive years of positive economic earnings was during the economic boom from 2004-2008. Since then, the company’s ability to create shareholder valued has deteriorated. Since 2008, the company’s ROIC has declined from 10% to 6%. Investors have taken notice of the downward trend in Trimble’s operations as the stock has fallen 26% over the past year, but shares remain overvalued. To justify its current price of $21/share, Trimble must grow NOPAT by 15% compounded annually for the next 17 years . This expectation seems highly optimistic given the recent history of deteriorating business operations at Trimble. Figures 3 and 4 show the rating landscape of all Information Technology 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. 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.