Tag Archives: lists

Can Emerging Market ETFs Sustain The Rally?

After surviving a lackluster stretch, emerging market ETFs recoiled lately as a relief rally bolstered the demand for risky securities. The deterrents that came in its path earlier seem to have cleared as the U.S. rate hike bets have taken a backseat, marring the price of the greenback at the start of 2016. Impressive gains were noticed in commodity prices in the wake of a weaker dollar. Also, hopes of further stimulus from the eurozone and Japan, China’s relentless efforts to shore up its waning economy and the hunger for higher current income (as a drive for safety encouraged the need for fixed-income investing, which in turn affected U.S. Treasury bond yields) made emerging market space a rising star lately. The winning trend can be validated by 10.4% and 11.1% returns realized respectively by the two most popular ETFs, the iShares MSCI Emerging Markets ETF (NYSEARCA: EEM ) and the Vanguard FTSE Emerging Markets ETF (NYSEARCA: VWO ), in the past one month (as of March 8, 2016), against gains of 7.6% for the all-world exchange-traded fund, the iShares MSCI ACWI index ETF (NASDAQ: ACWI ), and a 7% uptick in the S&P 500-based fund, the SPDR S&P 500 Trust ETF (NYSEARCA: SPY ). As of now, the drivers of the rally look fragile. Investors may cheer the recent reserve requirement ratio cuts in China, but these have hardly boosted the Chinese markets. Rather, weak Chinese trade data has been pushing its market down, along with other emerging market securities. On the other hand, the recent rally in oil prices is anything but stable, keeping a check on the broad-based global market recovery. Meanwhile, the U.S. economy came up with some upbeat economic numbers on manufacturing, jobs, inflation and consumer confidence. All these once again brought back rate hike talks on the table. If any such cues are given by the Fed in its upcoming meeting, the emerging markets will once again lose luster. All in all, the operating backdrop is not all bright. So, investors should practice caution while targeting this investing arena. Below, we highlight a few ETFs that can be considered in the days to come (see all emerging market ETFs here ). High Yield – WisdomTree Emerging Markets Equity Income ETF (NYSEARCA: DEM ) As foreign investors normally park their money in the riskier emerging market bloc for higher yields, what could be a better choice than DEM? This $1.31 billion ETF holds about 320 stocks. Though the fund is heavy on trouble zones like China, Russia and Brazil, and might see a sell-off ahead, a 30-day SEC yield of 6.29% would provide some protection against capital erosion. Also, the fund has highest exposure in the relatively better-placed zone, Taiwan. The fund has a Zacks ETF Rank #3 (Hold) and is up about 6% this year (as of March 8, 2016). Low Volatility – iShares MSCI Emerging Markets Minimum Volatility ETF (NYSEARCA: EEMV ) A low-volatility portfolio is yet another key to long-term success. For investors seeking exposure to the emerging markets, EEMV could be an intriguing pick. The $2.9 billion ETF charges 25 bps in fees. In total, the fund holds over 250 stocks in its basket, with each accounting for less than 1.71% share. The fund has a slight tilt toward financials, with 26.8% share, while information technology, telecommunication services and consumer staples round off the next three spots. The fund has retreated 0.2% in the year-to-date frame (as of March 8, 2016), was up 6.2% in the last one month and it has a Zacks ETF Rank #3. High Quality – SPDR MSCI Emerging Markets Quality Mix ETF (NYSEARCA: QEMM ) High-quality ETFs are generally rich on value characteristics, as these focus on stocks having high-quality scores based on three fundamentals factors – the performance of value, low volatility and quality factor strategies. This fund follows the MSCI Emerging Markets Quality Mix Index, holding a large basket of 744 stocks. It has amassed about $97.3 million and charges a low fee of 30 bps per annum. The fund puts more weight in China, Taiwan and South Korea. The Zacks Rank #3 fund was up 7.7% in the last one month, but off 1.2% year to date, and it yields about 2.13% (as of March 8, 2016). Original Post

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

The Mid Cap Value style ranks tenth out of the twelve fund styles as detailed in our Q1’16 Style Ratings for ETFs and Mutual Funds report. Last quarter , the Mid Cap Value style ranked seventh. It gets our Dangerous rating, which is based on aggregation of ratings of 9 ETFs and 124 mutual funds in the Mid Cap Value style. See a recap of our Q4’15 Style Ratings here. Figure 1 ranks from best to worst all nine Mid-Cap Value ETFs and Figure 2 shows the five best and worst-rated mid-cap value mutual funds. Not all Mid Cap Value style ETFs and mutual funds are created the same. The number of holdings varies widely (from 36 to 1761). This variation creates drastically different investment implications and, therefore, ratings. Investors seeking exposure to the Mid 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 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 Nuance Mid Cap Value Fund (MUTF: NMVLX ) is excluded from Figure 2 because its total net assets are below $100 million and do not meet our liquidity minimums. The Vident Core US Equity Fund (NASDAQ: VUSE ) is the top-rated Mid Cap Value ETF and the BMO Mid-Cap Value Fund (MUTF: BMVGX ) is the top-rated Mid Cap Value mutual fund. VUSE earns a Very Attractive rating and BMVGX earns an Attractive rating. The PowerShares Russell Midcap Pure Value Portfolio (NYSEARCA: PXMV ) is the worst-rated Mid Cap Value ETF and the Nuveen Mid Cap Value Fund (MUTF: FASEX ) is the worst-rated Mid Cap Value mutual fund. PXMV earns a Dangerous rating and FASEX earns a Very Dangerous rating. East West Bancorp (NASDAQ: EWBC ) is one of our favorite stocks held by BMVGX and earns an Attractive rating. Over the past decade, East West Bancorp has grown after-tax profit ( NOPAT ) by 14% compounded annually. Since 2008, the company has improved its return on invested capital ( ROIC ) from 2% to 14% for the last twelve months. Best of all, the recent share price decline has provided a great buying opportunity. At its current price of $31/share, East West Bancorp has a price-to-economic book value ( PEBV ) ratio of 0.9. This ratio means that the market expects East West Bancorp’s NOPAT to permanently decline by 10% from current levels. If EWBC can grow NOPAT by just 7% compounded annually for the next decade , the stock is worth $39/share today – a 26% upside. American Campus Communities (NYSE: ACC ) is one of our least favorite stocks held by TCVAX and earns a Dangerous rating. Despite positive GAAP net income, which doesn’t fully account for changes to the balance sheet, American Campus Communities has generated negative economic earnings in each year since 2005. Over that same time frame, the company’s already low ROIC of 5% in 2005 has fallen to a bottom quintile 4% over the last twelve months. Despite the fundamental issues above, ACC is significantly overvalued. To justify its current stock price of $43/share, ACC must stop destroying shareholder value and grow NOPAT by 12% compounded annually for the next decade . This expectation seems awfully optimistic given ACC’s track record. Figures 3 and 4 show the rating landscape of all Mid 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.

Smart Beta ETFs That Stood Out Amid Market Volatility

The ‘smart beta’ rage has lately taken the charge of the ETF world. Simply put, the days of plain vanilla ETFs or market-cap weighted ETFs are gone and products with several winning attributes are coming on stream. By now, investors are quite familiar with what the smart-beta concept actually is. As the name suggests, this approach calls for a strategic procedure rather than a plain vanilla market-cap oriented method of portfolio construction. Smart beta funds normally follow the passive investment strategy but with a slight twist which enables it to generate market-beating returns. Many people call it an enhanced investing strategy. A survey conducted by Create-Research shows that smart beta ETFs make up for around 18% of the U.S. ETF market. Another survey pursued by FTSE Russell reveals that 68% of financial advisors are eyeing smart beta ETFs while 70% are focusing on multiple strategic beta techniques. Investors dream of sweeping off the market and scooping up capital gains through this approach. The love for smart beta products was best reflected when renowned investment house Goldman Sachs recently forayed into the ETF industry with a host of smart-beta products (read: Can Goldman Dominate the Smart Beta ETF Industry? ). Below we have highlighted five ‘Smart Beta’ options that outperformed the broader U.S. market ETF SPDR S&P 500 ETF (NYSEARCA: SPY ), which has lost about 1.7% so far this year (as of March 4, 2016) (read: How You Can Beat the Market with Dividend Aristocrat ETFs ). PowerShares DWA Utilities Momentum ETF (NYSEARCA: PUI ) As bond yields fell on a flight to safety triggered off by global growth concerns and oil price declines at the initial part of the year, rate-sensitive sectors like utilities soared. The sector is known for its relatively high dividend payout and defensive but capital-intensive nature. As a result, a low-yield environment is a winning backdrop for it. While all utilities ETFs performed well in the stormy first two months of 2016, PUI – comprising utility companies that are showing relative strength – fared better. PUI is up 8.2% in the year-to-date frame (as of March 4, 2016). PowerShares S&P 500 High Dividend Low Volatility ETF (NYSEARCA: SPHD ) The drive for high current income along with focus on low volatile stocks has made this high dividend low volatility ETF a winner this year. The underlying index of the fund looks to track the performance of 50 securities selected from the S&P 500 Index that have historically provided high dividend yields with lower volatility. The fund yields 3.47% annually and is up 7.1% so far this year (as of March 4, 2016) (read: 3 Safe High Dividend ETFs to Beat the Volatile Market ). ALPS Emerging Sector Dividend Dogs ETF (NYSEARCA: EDOG ) The fund benefited from the return of the emerging markets and investors’ lure for dividends. The underlying index of the fund picks five stocks in each of the 10 sectors that make up the S-Network Emerging Markets which offer the highest dividend yields. The fund is equal-weighted in nature. The fund yields 4.48% annually and is up 12.3% so far this year (as of March 4, 2016) (read: Emerging Markets Back On Track: 5 Outperforming ETFs ). IQ Global Resources ETF (NYSEARCA: GRES ) Since commodities have enjoyed a phenomenal run in the year-to-date frame, this fund has found a place in the top-performers’ list. The IQ Global Resources ETF focuses on momentum and valuation factors to identify global companies that function in commodity-specific market segments and whose equity securities trade in developed markets, including the U.S. These segments include the major commodity sectors, plus Timber, Water and Coal. The fund has added 11.3% so far this year (as of March 4, 2016). The fund yields 2.60% annually. PowerShares S&P Mid-Cap Low Volatility ETF (NYSEARCA: XMLV ) As volatility spiked to start 2016, this mid-cap low volatility fund gained considerable investor attention. The fund measures the performance of 80 of the least volatile stocks from the S&P MidCap 400 Index over the past 12 months. XMLV is up over 3.4% and yields 1.83% annually. Original Post