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UnitedHealth Solid Q1 Earnings Put These ETFs In Focus

The largest U.S. health insurer, UnitedHealth Group (NYSE: UNH ), reported solid first-quarter 2016 results. The company continued its long streak of earnings beats. Earnings per share came in at $1.81, surpassing the Zacks Consensus Estimate by 9 cents and the year-ago earnings by 17%. Revenues rose 25% year over year to $44.5 billion, broadly in line with the Zacks Consensus Estimate of $44.7 billion. The company reported medical care ratio of 81.7%, up 30 basis points year over year, thanks to the extra calendar day of service in the quarter. Growth was broad based, with a 54% increase in revenues for Optum, the health services business (see all the Healthcare ETFs here ). Based on solid first-quarter results and business trends, UnitedHealth raised its earnings guidance to $7.75-7.90 per share for 2016 from $7.60-7.80 per share projected earlier. The Zacks Consensus Estimate of $7.85 per share is within the guided range. The company expects revenues to be approximately $182 billion in 2016, which is in line with the current Zacks Consensus Estimate. As a result, the stock jumped 4.8% in the last two trading days (as of April 20, 2016), following the earnings announcement. The stock currently has a Zacks Rank #2 (Buy) with a Value Style Score of “A”. This underscores its potential to outperform in the weeks ahead. In its conference call, UnitedHealth stated that it would pull out of the majority of public exchanges owing to smaller overall market size and a higher risk profile within this market segment. Next year, the company plans to remain in only a few of the states and will not carry any financial exposure from the exchanges into 2017. ETFs in Focus Investors may want to take a closer look at the ETFs having the largest allocation to this health insurance giant, as UNH has shown encouraging trading following its earnings. For those, the iShares U.S. Healthcare Providers ETF (NYSEARCA: IHF ) could especially be on their radar, as UNH takes the top spot in the fund’s portfolio at 12.9% share. IHF This ETF provides exposure to 49 companies offering health insurance, diagnostics and specialized treatment by tracking the Dow Jones U.S. Select Healthcare Providers Index. About 45% of the portfolio is dominated by managed care firms, while healthcare services (26.5%) and healthcare facilities (23.3%) round off the top three. The fund has amassed $709.6 million in its asset base, while volume is good at about 112,000 shares per day, on average. It charges 44 bps in annual fees and expenses, and added 1.9% in the last two trading days following the UNH earnings release (as of April 20, 2016). The product has a Zacks ETF Rank of 1 or “Strong Buy” rating with a Medium risk outlook. Other ETFs Other healthcare ETFs, like the Health Care Select Sector SPDR ETF (NYSEARCA: XLV ) – 4.6%, the iShares U.S. Healthcare ETF (NYSEARCA: IYH ) – 4.3%, the PowerShares DWA Healthcare Momentum Portfolio ETF (NYSEARCA: PTH ) – 3.8%, the Fidelity MSCI Health Care Index ETF (NYSEARCA: FHLC ) – 3.9% and the Vanguard Health Care ETF (NYSEARCA: VHT ) – 4.1%, also have a decent exposure to UnitedHealth. Apart from the healthcare space, UNH is among the top 10 holdings in some large cap ETFs, such as the SPDR Dow Jones Industrial Average ETF (NYSEARCA: DIA ) and the PowerShares Dynamic Large Cap Growth Portfolio ETF (NYSEARCA: PWB ), with exposure of 4.9% and 3.4%, respectively. However, these products will be less impacted by the movement of UNH share price. Original Post

Earnings Or Oil – What Will Drive Financial ETFs Ahead?

The financial sector, which accounts for around one-fifth of the S&P 500 index, had a decent-to-downbeat Q1. Most big banks beat on the bottom line while very few lived up to analysts’ expectations on the top line. Modest gains in loan growth amid low interest rates were overshadowed by troubled investment banking activities and subdued fixed-income markets. Also, the energy sector weakness has been the key drag on the banking sector. This is because that U.S. banks have significant exposure to the long-ailing energy sector where chances of credit default are higher. In February, the S&P cut its outlook on several regional banks with the highest energy sector exposure, citing a likely increase in non-performing assets. Among the biggies, Wells Fargo (NYSE: WFC ) reported around $42 billion oil and gas credit in February. The situation is the same for J.P. Morgan, the energy loan of which accounts for 57% of the investment-grade paper. J.P. Morgan earlier noted that it ‘ set aside $600 million ‘ for loan losses emanating from the energy, metals and mining sectors. Against such a backdrop, a peek into the headline numbers of the Q1 earnings season becomes essential. If we go by the Zacks Earnings Trends issued on April 14, 2016, financial earnings are expected to fall 8.4% in Q1 on 1.8% higher revenues. Let’s take a look at the big banks’ earnings which released lately. Big Bank Earnings in Focus JPMorgan (NYSE: JPM ) reported first-quarter 2016 earnings of $1.35 per share, beating the Zacks Consensus Estimate of $1.26. Earnings were down 7% year over year. Net revenue of $24.1 billion was also ahead of the Zacks Consensus Estimate of $23.9 billion. Revenues declined 3% from the year-ago quarter. Citigroup’s (NYSE: C ) earnings from continuing operations of $1.11 for the quarter outpaced the Zacks Consensus Estimate of $1.04. However, earnings declined 26% on a year-over-year basis. Adjusted revenues at Citigroup tumbled 11% year over year to $17.56 billion. Also, the revenue figure missed the Zacks Consensus Estimate of $17.79 billion. Wells Fargo earned $0.99 a share in the first quarter, beating the Zacks Consensus Estimate by a penny but declining from the prior-year quarter’s earnings of $1.04 per share. Total revenue came in at $22.2 billion, beating the Zacks Consensus Estimate of $21.6 billion. However, revenues grew 4.2% year over year. Bank of America Corporation’s (NYSE: BAC ) first-quarter earnings of $0.21 per share lagged the Zacks Consensus Estimate by a penny. Further, the bottom line witnessed a year-over-year decline of 16%. Net revenue of $19.5 billion was down 7% year over year and below the Zacks Consensus Estimate of $20.5 billion. Morgan Stanley ‘s (NYSE: MS ) first-quarter earnings from continuing operations of $0.55 per share outdid the Zacks Consensus Estimate of $0.46 per share. The quarter’s earnings also reflect a significant decline from $0.85 per share earned in the prior-year quarter. Net revenue of $7.79 billion was down 21% year over year and shy of the Zacks Consensus Estimate of $8.34 billion. Goldman Sachs (NYSE: GS ) reported earnings per share of $2.68 in the first quarter of 2016, outpacing the Zacks Consensus Estimate of $2.57. However, the bottom line compared unfavorably with the year-ago figure of $5.94. Goldman’s net revenue slumped 40% year over year to $6.3 billion in the quarter. Also, revenues lagged the Zacks Consensus Estimate of $7.1 billion. Earnings Soft But What About Financial ETFs? Despite decent-to-downbeat results from banks in the last one week, the concerned ETFs were loved by investors on a rising risk appetite. Investors seemingly have downplayed the weak numbers from banks as they were already prepared for this blow. On the other hand, oil price staged a rebound lately, first on an expected output freeze deal in Doha which finally collapsed and then on a strike in Kuwait by oil workers. These showered gains on the below-mentioned financial ETFs lately. Each of the aforementioned companies have considerable exposure in funds like iShares U.S. Financial Services ETF (NYSEARCA: IYG ), PowerShares KBW Bank (NYSEARCA: KBWB ), Financial Select Sector SPDR (NYSEARCA: XLF ), U.S. Broker-Dealers Index Fund (NYSEARCA: IAI ) and Vanguard Financials ETF (NYSEARCA: VFH ). All the funds are in the green, having gained in the range of 3.7%-7% in the last five trading sessions (as of April 19, 2016). In any case, the broader market is appearing to follow the movements in oil lately and the financial sector investors are also seemingly doing the same. So, things are likely to be volatile in Q2 and investors are advised to stay on the sidelines. If the Fed again turns stringent in the near term, banks could see brighter days. Each of the aforementioned ETFs currently has a Zacks ETF Rank #3 (Hold). Original Post

No-Load Funds Excel In Q1: 5 Top Performers

After a dream run last year, no-load mutual funds continued to offer healthy returns in the first quarter of 2016. While U.S.-based mutual funds registered significant outflows for most of the quarter primarily led by a massive slump in the major benchmarks, healthy returns indicate that no-load mutual funds attracted enough investor attention. Despite the early slump, the markets made a remarkable rebound during the latter half of the first quarter, which helped no-load mutual funds to eventually come up with solid returns. The lower expense advantage of no-load funds over load funds played an important role in boosting their demand. It will be interesting to find out the top performers from this category during the first quarter. But before that, let’s take a look at the performance of the no-load fund category during the period. Q1 Performance The top 100 funds out of the 10,714 no-load funds we studied, registered an average return of 25.9% last quarter compared to the top 100 load funds’ average return of 16.2%. Meanwhile, top no-load fund ProFunds Precious Metals UltraSector Investor’s (MUTF: PMPIX ) gains of 82.1% also came significantly higher than the return of 49.9% from Rydex Precious Metals A’s (MUTF: RYMNX ), which was the top performing mutual fund among those that carry sales load. The top performing no-load fund list for the first quarter is dominated by precious metal and utility funds. A massive crash witnessed earlier this year following weak global growth and a plunge in oil prices, boosted demand for securities related to the safe-haven sectors like gold and utilities. Separately, the strong average return of the top 100 no-load funds came in higher than most of the top performing mutual fund categories in the first quarter. Apart from the equity precious metals category, which gained 40.7% in the quarter, strong returns of the top 100 no-load funds easily beat all the broader mutual fund categories. The second-best utility category of the quarter gained 11.4%. While no-load mutual funds succeeded in providing healthy returns during the first quarter, the category also outperformed its load counterparts last year. The top performing 100 no-load mutual funds posted an average return of 16.74% in 2015 compared with the top 100 load funds’ average return of 11.05%. Also, the category managed to finish in the positive territory in the third quarter of 2015, which was the worst quarter in four years. Top Performing No-Load Mutual Funds In this segment, we have highlighted five top performing no-load mutual funds of the first quarter that carry either a Zacks Mutual Fund Rank #1 (Strong Buy) or #2 (Buy). These funds also have minimum initial investment within $5000, expense ratios below 1% and net assets over $50 million. Banking on these fundamentals, we expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund. Franklin Gold and Precious Metals Advisor (MUTF: FGADX ) invests the lion’s share of its assets in securities of companies involved in operations related to gold and precious metals. The fund carries a Zacks Mutual Fund Rank #2 and returned 45.5% during the first quarter. Annual expense ratio of 0.84% is lower than the category average of 1.44%. American Century Global Gold Investor (MUTF: BGEIX ) invests in securities of global companies whose operations are related to gold or other precious metals. The product carries a Zacks Mutual Fund Rank #2 and returned 43.5% during the first quarter. Annual expense ratio of 0.67% is lower than the category average of 1.44%. Fidelity Select Gold (MUTF: FSAGX ) invests heavily in companies whose principal operations are related to gold as well as in bullion or coins. The fund carries a Zacks Mutual Fund Rank #1 and returned 41% during the first quarter. Annual expense ratio of 0.90% is lower than the category average of 1.44%. Oppenheimer Gold & Special Minerals Y (MUTF: OGMYX ) invests mainly in common stocks of companies that are involved in mining, processing or dealing with gold. The product carries a Zacks Mutual Fund Rank #2 and returned 36% during the first quarter. Annual expense ratio of 0.92% is lower than the category average of 1.44%. American Century Utilities Investor (MUTF: BULIX ) uses qualitative and quantitative management techniques to invest a major portion of its assets in equities related to the utility industry. The fund carries a Zacks Mutual Fund Rank #1 and returned 16.7% during the first quarter. Annual expense ratio of 0.67% is lower than the category average of 1.25%. Original Post