Tag Archives: ihi

Eyeing Q3 Revenue Growth Potential? Try These Sector ETFs

The ETF industry saw height of volatility in the third quarter of 2015 thanks to speculations over Fed tightening, global growth worries, a commodity market crash, horrendous equity sell-off in China and its shockwaves around the world. On the other hand, a strong greenback and a weak energy sector were the other permanent dampeners in the first three quarters of 2015. These evils are also haunting the Q3 earnings season, which has just picked up pace. Though an accommodative Fed and the probability of a delayed rate hike following momentum loss in the U.S. economy charged up stocks to start Q4, issues of the prior quarter will have a significant impact, mostly bad, on the corporate world. Expectations for both earnings and revenue growth remain negative for the quarter. As per the Zacks Earning Trends issued on October 14, 2015, earnings for the S&P 500 are expected to be down 4.9% in Q3 while revenues are likely to decline 5.6%. However, some sectors might surprise, snapping the downtrend and offering decent returns in the ongoing quarter, even if volatility follows through. While looking for these outstanding performers, we would like to highlight those sectors that are likely to post strong revenue gains. This is because; sales are harder to influence an income statement than earnings. A company can land up on decent earnings numbers by adapting cost-cutting or some other measures which do not speak for its core strength. But it is harder for a company to mold its revenue figures. Below, we highlight three lucrative sector ETFs that could be used to book some profits in this whimsical market. Each sector has positive and strong revenue growth estimates for Q3 and offers intriguing fundamentals to protect investors’ portfolios in a dubious global investing backdrop: The Medical or Health Care sector appears the best positioned with an 8.5% revenue growth estimate, the best in the universe of 16 S&P sectors categorized by Zacks. Rise in mergers and acquisitions, the Affordable Care Act, an aging global population and the sector’s non-cyclical nature could earn its some solid gains (read: Obamacare is Here to Stay: 3 ETFs to Buy ). This is especially true as skepticism piles up in the global market. Investors should note that pharma and some biotech companies recently suffered a horrendous sell-off on pricing concerns. On the one hand, the medical device corner showed greater resilience in this tumultuous phase, and on the other hand the sell-off made the entire sector affordable. This should go in its favor. As a result, medical devices ETFs like IHI should log greater gains. XHS is up 2.5% so far this year (as of October 15, 2015) and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook (read: 2 ETFs Rising to Rank #1 This Earnings Season ). The SPDR S&P Retail ETF (NYSEARCA: XRT ) Though retail sales remained soft lately as evident by the lower-than-expected sales data in September, the revenue growth prospect remains strong. Apart from medical, this is the only sector expected to see revenue growth in high single digits. To add to this, the Fed lift-off talk is now off the table. The Fed is also likely to opt for a slower rate hike trajectory once the step is actually taken, most probably sometime in early 2016. This should favor a cyclical sector like retail. Moreover, the still-subdued oil price is another tailwind for the sector as it would add up to consumers’ fuel price savings and encourage them to buy more discretionary products. However, lackluster job data is undoubtedly a concern for the sector. Retail/Wholesale is projected to register 7.3% revenue growth in Q3, the second best in the pack. XRT is down about 5% so far this year (as of October 15, 2015) and has a Zacks ETF Rank #1 with a Medium risk outlook. The iShares North American Tech ETF (NYSEARCA: IGM ) Tech stocks are giving robust performances of late on higher global IT spending, increased usage of smartphones, tablets or other gadgets, decent valuation and the pile of cash the companies are sitting on. As of now, the Zacks Earnings Trend predicts 3.7% expansion in revenues from tech companies, the third best growth rate. MTK is up about 5% so far this year (as of October 15, 2015). The fund currently has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook. Link to the original post on Zacks.com

Top 3 iShares ETFs Provide Exposure To The Health Care Sector

Summary The Top 3 iShares ETFs in our data base are EIS, IHI and EDEN. Large exposure to the health care area, in one form or another, is the common factor among the three ETFs. This sector has strong fundamentals driven by government mandated health reforms pushing managements to action. Introduction July was a choppy month in the markets, with Greece driving the headlines. The markets sold off during the Greek rebellion, rallied in relief when Greece agreed to tough bailout conditions, and sold off quickly heading into the Federal Reserve’s FOMC meeting. Then it bounced again, when the FOMC issued a dovish statement after its meeting. During this volatility, the three iShares ETFs that rose to the top of our medium-term rankings (see Figure 1) were the iShares MSCI Israel Capped ETF (NYSEARCA: EIS ), the iShares U.S. Medical Devices ETF (NYSEARCA: IHI ) the iShares MSCI Denmark Capped Investable Market Index ETF (BATS: EDEN ). The common factor uniting all three top iShares ETFs is the dominant exposure to the health care area in their portfolios. (click to enlarge) Figure 1: The best trending iShares ETFs from the ETFmeter.com database. (Chart courtesy ETFmeter.com ) The Common Factor EIS has approximately 26% of its assets in Teva Pharmaceuticals (NYSE: TEVA ). The world’s largest manufacturer of generic drugs this week announced it had purchased Allergan’s generic drug business. The deal just adds depth to its generics portfolio plus more growth opportunities, and pushed TEVA to a new high following its major breakout in early 2014. For EIS, its top 10 holdings account for nearly 70% of its assets, and add exposure to Israeli banks, industrials, telecom, and materials. The correlation between the performance of EIS and TEVA is a strong 79% (see Figure 2). (click to enlarge) Figure 2: Teva Pharmaceuticals is the largest holding of EIS, and the correlation between the two is 0.79 and rising (see lower graph). (Chart Courtesy StockCharts.com and ETFmeter.com) Medtronic, Abbot Labs and Thermo Fisher Scientific are the three top holdings of the iShares U.S. Medical Devices ETF, accounting for more than 30% of the ETFs assets. Almost 82% of the fund’s assets are in just 20 stocks. In our analysis, eight of the top 20 stocks are rising strongly. Its best performing stocks this month are Bard (NYSE: CR ) and Intuitive Surgical (NASDAQ: ISRG ). The long-term correlation between IHI and Medtronic (NYSE: MDT ), its largest holding, is 0.94 (see Figure 3). (click to enlarge) Figure 3: Medtronic is the largest holding of IHI, and the correlation between the two is 0.94 (see lower graph). (Chart Courtesy StockCharts.com and ETFmeter.com) The EDEN iShares Denmark ETF has broken out to new highs, and it has Novo Nordisk (NYSE: NVO ) to thank for it. A bit more than 22% of the ETF’s assets were in Novo Nordisk, with its top 10 holdings accounting for some 64% of the assets, scattered amongst the mega shippers and brewers. Novo Nordisk focuses on diabetes drugs and assorted pharmaceuticals. Lately, the 200-day correlation between EDEN and NVO is about 0.98, which means that the ups and downs of EDEN have closely followed the fortunes of NVO (see Figure 4). (click to enlarge) Figure 4: Novo Nordisk is the largest holding of EDEN, and the correlation between the two is 0.98 (see lower graph). (Chart Courtesy StockCharts.com and ETFmeter.com) Looking Ahead Health care stocks have been amongst the best performers for the past several years. Health care reform in the U.S. has pushed managements into action, and the fundamental drivers for the sector are likely to remain strong for the foreseeable future. Thus, these iShares ETFs are likely to have a wind in their sails far beyond the horizon. 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.