Tag Archives: management

3 Emerging Market ETFs With Q4 Gains

Wrong were those investors who thought emerging markets would perform miserably in the fourth quarter due to the looming Fed tightening. The gradual waning of cheap dollar inflows post lift-off, the resultant rise in the greenback, sluggish emerging currencies, high inflation issues, political disorder and the commodity market rout were deemed to dull the appeal of emerging markets. The theory wasn’t completely baseless. The broader emerging market ETF iShares MSCI Emerging Markets (NYSEARCA: EEM ) has lost 17% so far this year and over 3.3% so far this quarter (as of December 18, 2015). But not all emerging market equities and the related ETFs have been vulnerable. At least, Q4 performance of a few emerging market ETFs has been noteworthy. Investors should note that the S&P 500-based SPDR S&P 500 Trust ETF (NYSEARCA: SPY ) has added over 1.8% so far this quarter (as of December 18, 2015) and the world ETF iShares MSCI ACWI (All Country World Index) Index (ACWI ) is up 0.3%. A couple of emerging market ETFs have managed to climb and two funds even impressed with their double-digit returns in the quarter-to-date period (as of December 18, 2015). Interestingly, these top performers are spread across various sectors or countries and could be better plays in the current market. This suggests that there have been winners in every corner of the space, even amid a sluggish overall trend. Below, we highlight three top-performing emerging market ETFs in the quarter-to-date frame. Emerging Markets Internet & E-Commerce ETF (NYSEARCA: EMQQ ) – Up 23.3% The Internet and e-commerce industry is developing fast with the increased use of social networking sites and online trading as well as the growing adoption of smartphones and other mobile Internet devices. So, this product has more to do with technological expansion in the emerging markets rather than reflecting the slowing potential of those economies. In fact, EMQQ can succeed on the back of a fast-expanding middle-class population of emerging nations. This $12-million ETF considers companies from Asia, Latin America, Africa and Eastern Europe. Country-wise, China takes the highest allocation in the fund. Alibaba (NYSE: BABA ), Baidu (NASDAQ: BIDU ) and Baozun (NASDAQ: BZUN ) are the top three holdings of the fund. EMQQ charges 86 bps in fees and is up 23.5% so far in the fourth quarter (as of December 18, 2015). First Trust ISE Chindia ETF ( FNI ) This fund follows the ISE Chindia Index, which measures the performance of the liquid firms domiciled either in China or in India. Notably, even after the upheaval in August, Chinese stocks are among the top and stellar performing securities in the emerging market pack. As far as India is concerned, it is one of the most stable emerging markets at the current level in terms of economic growth and corporate profitability. It has accumulated nearly $230 million in its asset base. The product puts nearly 50% of its assets in the top 10 holdings, with JD.com (NASDAQ: JD ), Tata Motors (NYSE: TTM ) and NetEase (NASDAQ: NTES ) being the top three firms. From a sector look, more than 35% of the assets are allocated to information technology while about one-third goes to consumer discretionary. FNI charges 60 bps in fees per year from investors and has returned 12.63% so far in the quarter. The product looks to track 50 emerging market-based depositary receipts. The fund invests about 45% of assets in China while Taiwan, Brazil and India get the next three positions with 14%, 12.5% and 10.4% weight, respectively. The fund charges 30 bps in fees. Sector-wise, the fund is heavy on information technology (38.68%) while telecom (16.75%), financials (14.7%) and energy (10.2%) get double-digit exposures. Alibaba (11.5%) and Taiwan Semiconductor (NYSE: TSM ) (10.6%) are the top two stocks of the fund. ADRE is up 5.6% in the quarter-to-date frame and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook. Original

Santa Brings Best Gifts For Oil ETFs

The long beleaguered oil industry could not have asked for a better Christmas Eve. A miserable year thanks to huge supply and falling demand has ended up in around a 50% fall in oil investments so far this year. Prices have plunged from over $110 a barrel seen in early 2014 to below $40 level now. But Santa Clause must have lugged surprise gifts for the oil sector as the price of this liquid commodity started to ascend prior to Christmas. The reason behind this jump was The American Petroleum Institute’s recent report (on December 22) which said the U.S. crude oil inventories declined 3.6 million barrels in the most recent week. If this was not enough, the very next day, the U.S. Energy Department indicated a decline of 5.9 million barrels in the week ended December 18. Analysts’ had predicted 1.1 million barrels of jump. U.S. crude oil inventories, which are now around 484.8 million barrels, have never seen such a Christmas Eve in the last 80 years. Gasoline and Distillate fuel output also fell last week, as per Energy Information Administration. The news brought a fresh lease of life to the oil sector, and why not? The space was shaken by the OPEC top brass Saudi Arabia and other Gulf countries’ decision of ‘no product cut’ even after the global supply glut, fast falling demand on global growth issues, rising greenback on the Fed lift-off and mounting U.S. crude stockpiles over the last few weeks. ETF Impact Following the news of the inventory drawdown, oil futures started to rise. In fact, oil pulled up the entire stock market in the last two days after Fed-related woes upset it a few days back. The United States Oil ETF (NYSEARCA: USO ) – which looks to track the daily changes of the spot price of light, sweet crude oil delivered to Cushing, Oklahoma – gained over 5.6% in the last two days (as of December 23, 2015). The Path S&P Crude Oil Total Return Index ETN (NYSEARCA: OIL ) – which reflects the returns that are potentially available through an investment in the WTI crude oil futures – added about 7.1% in the last two days (as of December 23, 2015). The United States Brent Oil ETF (NYSEARCA: BNO ) – which looks to track the daily changes in percentage terms of the spot price of Brent crude oil – advanced about 4.4% in the last two days (as of December 23, 2015). The PowerShares DB Oil ETF (NYSEARCA: DBO ) – which consists of futures contracts on WTI crude and is intended to reflect the performance of crude oil – returned about 5.6% in the last two days (as of December 23, 2015). Needless to say, energy stocks will also be big-time beneficiaries of this uptrend in oil. The energy sector ETF, the Energy Select Sector SPDR ETF (NYSEARCA: XLE ) returned about 5.6% in the last two days (as of December 23, 2015). The First Trust ISE-Revere Natural Gas Index ETF (NYSEARCA: FCG ) – which identifies and selects stocks that are involved in the exploration and production of natural gas – rose about 12% in the last two days (as of December 23, 2015). Bottom Line Having said that, we would like to note that oil price does not have any solid prospect in the near term. As per OPEC, oil will take four more years to return to the $70 a barrel level. Moreover, the International Energy Agency (IEA) noted that surplus supplies in the global oil market will remain in 2016 as demand growth has dropped from a five-year high level . Also, the likely joining of another player Iran in the global oil production arena – if international sanctions are lifted – will likely keep the market flooded with oil, per IEA. So, investors expecting a Santa Rally in the oil field should take a cautious approach. After all, the recent spike in oil prices looks temporary and the liquid commodity might succumb to a slowdown any time soon. Original Post

The Tree Is Up With The Best ETFs

Christmas isn’t Christmas without a tree. While the evergreen never fails to bring in cheer to the most lonesome of hearts, we decided to do something very different this year – build a tree with the choicest of ETFs of the season. Let’s build the base first, which is the most valuable of all for investors, and of course, where all the gifts are to be found. And what’s more fitting than the broad market ETF, the SPDR S&P 500 (NYSEARCA: SPY ) , which tracks the major U.S. benchmark – the S&P 500 index – to give a solid foundation to our tree. It holds 506 stocks in its basket that are widely spread out across a number of sectors and securities. None of the securities hold more than 3.4% share while information technology, financials, healthcare, consumer discretionary, and industrials are the top five sectors accounting for double-digit exposure each. The product has $174.8 billion in AUM and charges 9 bps in fees per year. It has a Zacks ETF Rank of 3 or ‘Hold’ rating with a Medium risk outlook. Since the stock market tends to rise on holiday optimism and year-end seasonal factors, high beta and high momentum ETFs are expected to lead the market in the weeks ahead. This is because high beta funds experience larger gains than the broader market counterparts in a soaring market. On the other hand, momentum investing should be a winning strategy for investors seeking higher returns in a short spell in any market environment. This strategy seeks to take advantage of market volatility by buying hot stocks, which have shown an uptrend over a few weeks or a few months, and selling those stocks that are going down. So, a couple of high beta and momentum ETFs could be the best option to include in our Christmas tree. In particular, the PowerShares S&P 500 High Beta Portfolio ETF (NYSEARCA: SPHB ) and the First Trust Dorsey Wright Focus 5 ETF (NASDAQ: FV ) are the most popular choices in their respective areas. They went in to form the fronds and leaves of the tree. SPHB tracks the performance of 100 stocks from the S&P 500 Index with the highest beta over the past 12 months. It has amassed $65.7 million in its asset base and charges 0.25% in expense ratio. The product is widely spread out across each security as none of them holds more than 1.54% of total assets. About one-fourth of the portfolio is allotted to energy, while financials, information technology and healthcare round off the next three spots with double-digit exposure each. FV on the other hand tracks the Dorsey Wright Focus Five Index, which provides targeted exposure to the five First Trust sector and industry-based ETFs that Dorsey, Wright & Associates (DWA) believes have the maximum chance of outperforming the other ETFs in the selection universe. Securities with high relative strength scores (strong momentum) are given higher weights. Currently, the product has the highest exposure to the biotech sector via the First Trust NYSE Arca Biotechnology Index ETF (NYSEARCA: FBT ) at 24.8%, followed by the First Trust DJ Internet Index ETF (NYSEARCA: FDN ) and the First Trust Health Care AlphaDEX ETF (NYSEARCA: FXH ) at 21.0% and 19.3%, respectively. It has accumulated nearly $4.6 billion in AUM while it charges 94 bps in annual fees. For the top layers, we’ve included financial ETFs like the Financial Select Sector SPDR ETF (NYSEARCA: XLF ) as the sector is a major beneficiary of a rising interest rate environment. This is the most popular financial ETF with AUM of $19.1 billion and an expense ratio of 0.14%. The fund follows the Financial Select Sector Index, holding 89 stocks in its basket. It is heavily concentrated in the top five firms that collectively make up 36.7% of the portfolio while the other firms hold less than 2.6% share. At the very top is the star ETF of the year – the First Trust Dow Jones Internet Index ETF ( FDN ) . The fund offers exposure to the Internet corner of the broad technology space by tracking the Dow Jones Internet Composite Index. In total, it holds a small basket of 42 securities with double-digit allocation in the top two firms. The ETF has amassed $4.87 billion in AUM while charging 54 in fees. Now that we are done with the tree’s structure, we are left with decorating it with lights and chocolates. For this, the best ETFs that could fit in here are the iPath Pure Beta Cocoa ETN (NYSEARCA: CHOC ) for the chocolate decor, and most importantly the Utilities Select Sector SPDR ETF (NYSEARCA: XLU ) for lighting up the tree. And voila, the tree is up! May it bring in bountiful returns for the investor with the jingle of Santa’s bells. Original Post