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Bears Miss Out On Social Media Payday

Social media shares have borne the brunt of the recent market selloff but few short sellers are lining up to short the market despite its recent underperformance as tracked by the Global X Social Media ETF (NASDAQ: SOCL ). Social media companies make up half of the once hotly tipped but now largely discredited , “FANG” trade of fast growing tech companies with a global presence. The market’s recent shunning of these high flying mercurial shares, spurred on by a spate of disappointing tech earnings and wider fears surrounding the health of the global economy means that every one of the acronym’s four constituents are trading over 10% off their recent highs. The headwinds faced by the sector’s flagship stocks are reflected in the overall sector as the Global X Social Media ETF hit a two and a half year low earlier this month. While the fund has rebounded somewhat in the last 10 days, it is still down by 13% ytd which is more than twice the fall seen by the rest of the market. The headwinds felt by the sector have been relatively universal as eighty percent of the ETF’s constituents have seen their shares retreat year to date. Collapse catches short sellers out This recent collapse of the once popular trade looks to have caught short sellers out as the ETF’s constituents entered 2016 with a below average short interest. In fact, demand to borrow the fund’s constituents fell by over a third last year and short interest stood near a two year low prior to the selloff. This indifference towards social media shares runs against that seen in the rest of the market where short selling stands at multi year highs. While there has been a 7% increase in demand to borrow social media shares since the start of the year, that number also trails the increase in shorting activity seen in the S&P 500 where average short interest is up by double digits since the start of the year. Lack of appetite universal As with the fall in share prices, the lack of appetite to sell social media shares short is fairly universal as only seven of SOCL’s constituents see any material short interest as defined by having more than 3% of shares out on loan. Pandora (NYSE: P ) is the most shorted of the lot with 8% of its shares now out on loan. Its shares have fallen by a quarter as investors’ fret about the company’s prospects in an increasingly crowded streaming field. Ironically, Groupon (NASDAQ: GRPN ), which was the highest conviction short at the start of the year, has become a painful short as its shares surged following Alibaba’s (NYSE: BABA ) disclosed stake in the online discounter. Short sellers have covered 10% of their positions as their trades went against them. The only firm to see a material rise in short interest across the field since the start of the year has been LinkedIn (NYSE: LNKD ) after its shares nearly halved in the wake of a disappointing earnings update. While short interest in the professional social media firm has since quadrupled, the 2.1% of LNKD shares now out on loan is still less than that seen at the start of 2015. Investors not buying dip Investors in SOCL have shown little patience to ride out the recent volatility as over $32m of funds have flowed out of the ETF since the start of the year. These strong outflows represent over a quarter of the AUM managed by the fund at the start of the year which underscores the wave of negative sentiment felt by the sector since the start of the year.

5 Alternative Mutual Funds To Dodge Volatility In 2016

U.S. stock markets have been volatile for a pretty long time. Market volatility can make anyone feel anxious. It threatens the one thing that everybody holds dear – their money. To weather such market swings and book in profits, alternative mutual funds are the best available choice. Their potential to hedge risks, provide unwavering returns and diversify portfolio helps to stand out from other mutual fund classes, particularly in difficult times. Up-and-Down Markets Since June 30, 2015, concerns regarding Grexit have made the markets volatile. Later, from August 24 to August 27, 2015, the Chinese stock market crash unleashed a downward spiral. Add to it the continuous rout in oil prices, uncertainty about the Fed rate hike and selloff in bank stocks and you know why the U.S. markets have been so unstable. The CBOE Volatility Index (VIX) has been proof enough. VIX is “a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices.” VIX being a fear-gauge index moves contrary to market trends. In the first week of January the index gained 48.33%, while in the second week it gained a meager 0.04%. On the other hand, the index declined 17.32% and 9.58% during the last two weeks, respectively. Come February, the index recorded gains of 15.74% and 8.64%, respectively, in the first two weeks, while in the third week it fell 19.17%. This shows that investor sentiment is constantly fluctuating and the stock market is subject to gyrations. Meanwhile, the VIX settled at 20.72 on Wednesday. Any reading above 20 indicates high volatility in the markets. How to Play This Volatility? The best way to navigate market volatility is by investing in alternative mutual funds, which will not only minimize risk but will also provide stable returns. These types of funds are available to investors of all income levels and provide that extra edge brought by diversity. These funds mostly include market-neutral funds, long/short equity funds and trading-leveraged equity funds. Let us now discuss these three types of funds in some details. Market-Neutral Mutual Funds Market-neutral funds aim to adopt a precision approach by shorting 50% of their assets and holding 50% long. This approach seeks to identify pairs of assets whose price movements are related. The fund goes long on the outperforming asset and shorts the underperformer. Say, for example, you take a $1 million long position in Pfizer and a $1 million short position in Wyeth. Both are large pharmaceutical companies. Now, if pharmaceutical stocks fall, you will lose because of your long position in Pfizer but will gain because of the short position in Wyeth. A market-neutral fund is designed to provide stable returns at relatively lower levels of risk regardless of market direction. This is particularly relevant in today’s highly volatile scenario when the objective is to protect the capital invested. Long/Short Mutual Funds Equity long/short funds seek to gain from both winning and losing stocks, irrespective of the current market scenario. These funds use conventional methods to identify stocks that are either undervalued or overvalued. It profits from shorting the overvalued stocks and by buying the undervalued stocks. Weights are subject to change and are dependent on the management’s view regarding the market. For example: Say an investor buys a long/short mutual fund for $100, then the fund manager will invest it in assets that are expected to do well. The manager shorts $30 in stocks that are believed to be overvalued. In the process, he receives $30 in cash. He will now use the $30 to buy more assets with an upside potential. So, now he has a total of $130 invested in long positions and $30 in short positions. This type of long/short fund is called a 130/30 mutual fund. Trading-Leveraged Equity Funds Leveraged funds use borrowed money to increase returns in a short spell of time. These funds generally strive to return a certain multiple of the short-term returns of an equity index. For example, a 2X S&P 500 fund aims to generate twice the returns that the S&P 500 manages to achieve. Leveraged funds are primarily marked “ultra”, “bull” or “2X”. Leveraged funds also offer benefits such as diversification. These funds invest in a diversified portfolio of assets which minimize risk, while escalating returns. In addition to this, investors enjoy the benefits of “dollar cost averaging,” where a young investor depositing $10,000 in these funds reaps the same benefits a high net worth individual receives, say by depositing $50,000,000. These funds also enjoy tax deductions. 5 Alternative Mutual Funds to Invest In The investment community is a dynamic one where new products will come into play and make the most of the stock markets. In times of market volatility, alternative mutual funds are such new product classes that are equipped to protect investors’ portfolio and provide steady returns. Here we have selected five such alternative mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or #2 (Buy), have positive 3-year and 5-year annualized returns and carry a low expense ratio. Calamos Market Neutral Income A (MUTF: CVSIX ) seeks high current income. CVSIX invests mainly in convertible securities and employs short selling to enhance income and hedge against market risk. The fund’s 3-year and 5-year annualized returns are 1.9% and 2.7%, respectively. Annual expense ratio of 1.11% is lower than the category average of 1.7%. CVSIX has a Zacks Mutual Fund Rank #1 and has a minimum initial investment of $2,500. Gateway A (MUTF: GATEX ) seeks to capture most of the higher returns associated with equity market investments, while exposing investors to significantly less risk than other equity investments. The fund’s 3-year and 5-year annualized returns are 3% and 3.5%, respectively. Annual expense ratio of 0.94% is lower than the category average of 1.82%. GATEX has a Zacks Mutual Fund Rank #1 and a minimum initial investment of $2,500. Diamond Hill Long-Short A (MUTF: DIAMX ) seeks to provide long-term capital appreciation. DIAMX invests its assets in U.S. equity securities of any size capitalization that are undervalued and sells short equity securities of any size capitalization that are overvalued. The fund’s 3-year and 5-year annualized returns are 5.4% and 6.3%, respectively. Annual expense ratio of 1.4% is lower than the category average of 1.82%. DIAMX has a Zacks Mutual Fund Rank #1 and a minimum initial investment of $2,500. Aberdeen Equity Long-Short A (MUTF: MLSAX ) seeks long-term capital appreciation with a total return greater than the S&P 500 Index. MLSAX invests a large portion of its assets in long and short positions in equity securities of publicly traded companies in the U.S. The fund’s 3-year and 5-year annualized returns are both 0.1. Annual expense ratio of 1.56% is lower than the category average of 1.82%. MLSAX has a Zacks Mutual Fund Rank #2 and a minimum initial investment of $1,000. ProFundsUltraSector Health Care Investor (MUTF: HCPIX ) seeks daily investment results, before fees and expenses that correspond to one and one-half times the daily performance of the Dow Jones U.S. Health CareSM Index. The fund’s 3-year and 5-year annualized returns are 22.9% and 23.9%, respectively. Annual expense ratio of 1.61% is lower than the category average of 1.99%. HCPIX has a Zacks Mutual Fund Rank #2 and a minimum initial investment of $15,000. A higher minimum investment helps the fund manager to control cash flows, which eventually helps management of assets on a regular basis. Original Post

ECB To Further Stimulate Economy: 5 Euro Mutual Funds To Buy

The Eurozone economy is trying hard to crawl back to its pre-crisis peak. It is currently grappling with issues like a slower growth rate, slump in bank stocks as well as a refugee crisis. Europe was subject to a continuous inflow of refugees from war-torn nations like Syria, Afghanistan and Iraq. In addition, global headwinds such as the sluggish growth rate in China and a continuous slump in oil prices are causing a lot of heartburn for the region. The European Central Bank (ECB) introduced reform measures to boost its fragile economy, which fell short of expectations. Nevertheless, the ECB President Mario Draghi’s assurance at the European Parliament that more stimulus measures are on the way boosted investor sentiment. He believes that the Eurozone economy is on a firmer ground than what it seems. He also sounded pretty confident about the state of the beleaguered banking sector. As for the refugee crisis, most of the economists believe that it won’t have a large economic impact as it is more of a political issue. In fact, ageing nations such as Germany’s manpower will stand to improve. In order to cash in on these positives, investors may look toward investing in Europe-focused mutual funds. These funds not only delivered positive returns during the period of crisis, but are also poised to perform well on the back of an improving economy. Lackluster Growth, Bank Stocks Take a Hit The 19-country Eurozone expanded at an annual rate of 1.1% in the final quarter of 2015, less than what it was at the onset of the 2008 global economic crisis. Greece falling back into recession and Italy’s economy remaining stagnant were some of the major reasons that pulled back the broader economic growth in the Euro region. The ECB responded to the crisis by trimming a key interest rate to negative 0.3% in December and extending its bond-buying program of 60 billion euro a month until March 2017. These measures were taken to boost the ailing Eurozone economy and achieve the desired inflation rate of less than 2%. However, these steps were not enough to impress investors as they were anticipating deeper rate cuts and additional asset purchases. The inflation rate in the single-currency area stood at 0.4% in January, way below the level expected. Meanwhile, banks’ stocks in Europe took a beating. The Stoxx Europe 600 Banks Index that covers 47 regional companies engaged in the banking sector tanked more than 20% year to date. Ultra-low interest rates are hampering the profits that banks make from loans. The spread between long-term rates at which banks lend and short-term rates at which banks borrow has shrunk considerably. A Confident Draghi Given the wild swings in banks’ shares, Draghi reassured investors about the health of the banking sector. Draghi emphasized that even though low-interest rates adversely affected banks, the monetary stimulus measures employed since the financial crisis have increased the resilience level of the broader financial system. He said that Eurozone banks have boosted their financial strength by increasing core tier one capital ratios from 9% to 13%. The banks are also in a “good position” to handle bad loans. He added that “the ECB’s supervisory arm is working closely with the relevant national authorities to ensure that [their] non-performing-loan policies are complemented by the necessary national measures.” Moreover, Draghi said that “[they] will not hesitate to act” to stimulate the Eurozone economy and push the inflation rate to its desired level. He pledged to revive the economy by “reviewing and possibly reconsidering the monetary policy stance in early March.” He has already fought back to improve sentiments by keeping interest rates unchanged in January. After hearing from Mario Draghi, economist Howard Archer of IHS Global Insight said that the ECB may cut the interest rate from a negative 0.3% to a negative 0.4% in March. The ECB might also increase its asset purchases by 20 billion euro to 30 billion euro from the current level. If this comes about, stocks are certainly expected to move north. 5 Euro-Focused Mutual Funds to Buy Given the optimism exuded by Draghi, investors might have a look at funds exposed to the Eurozone. Our analysis is based on selecting funds that have overcome bottlenecks by posting commendable returns. Further, fueled by solid fundamentals, these funds are also poised to perform well in the near term. These funds have positive 3-year and 5-year annualized returns, carry a low expense ratio, have minimum initial investment within $5000 and possess a Zacks Mutual Fund Rank #1 (Strong Buy) or #2 (Buy). When it comes to the refugee crisis, however, it will be prudent to keep an eye on the region to arrive at informed decisions. Fidelity Europe (MUTF: FIEUX ) seeks growth of capital over the long term. FIEUX invests a large portion of assets in securities of European issuers and other investments that are tied economically to Europe. This fund’s 3-year and 5-year annualized returns are 1.6% and 1.4%, respectively. Annual expense ratio of 1.01% is lower than the category average of 1.47%. FIEUX has a Zacks Mutual Fund Rank #1. Invesco European Growth A (MUTF: AEDAX ) seeks long-term growth of capital. AEDAX invests a major portion of its assets in securities of European issuers and in derivative instruments that have economic characteristics similar to such securities. This fund’s 3-year and 5-year annualized returns are 2.1% and 4.5%, respectively. Annual expense ratio of 1.37% is lower than the category average of 1.47%. AEDAX has a Zacks Mutual Fund Rank #2. T. Rowe Price European Stock (MUTF: PRESX ) seeks long-term growth of capital. PRESX invests the majority of its assets in European companies. This fund’s 3-year and 5-year annualized returns are 3.1% and 4.2%, respectively. Annual expense ratio of 0.95% is lower than the category average of 1.47%. PRESX has a Zacks Mutual Fund Rank #2. JPMorgan Intrepid European A (MUTF: VEUAX ) seeks total return from long-term capital growth. VEUAX invests primarily in equity securities issued by companies with principal business activities in Western Europe. This fund’s 3-year and 5-year annualized returns are 2.4% and 2.9%, respectively. Annual expense ratio of 1.41% is lower than the category average of 1.47%. VEUAX has a Zacks Mutual Fund Rank #2. Fidelity Nordic (MUTF: FNORX ) seeks long-term growth of capital. FNORX invests a large portion of assets in securities of Danish, Finnish, Norwegian and Swedish issuers and other investments that are tied economically to the Nordic region. This fund’s 3-year and 5-year annualized returns are 10.5% and 7.5%, respectively. Annual expense ratio of 0.99% is lower than the category average of 1.86%. FNORX has a Zacks Mutual Fund Rank #1. Original Post