Tag Archives: mutual funds

Inside NANR: The Most Successful New ETF Of 2016

Oil price volatility has put energy sector ETFs in focus since the start of this year. After tumbling to a 13-year low in mid February, oil has made an impressive comeback surging nearly 47% over the past one-month period. Robust performance was driven by improving demand/supply trends, which are rebuilding investors lost confidence in the rebalancing of the oil market. This is especially true given signs of falling production in the U.S. and the Organization of the Petroleum Exporting Countries (OPEC), hopes of a deal by major oil producers to freeze oil output at the January level, receding fears of a recession in the U.S., and signs of stabilization in China and the other developed economies (see: all the energy ETFs here ). Additionally, oil drilling activity in the U.S. has fallen to the lowest level since at least 1940 reflecting that U.S. output will continue to decline in the coming weeks. A slew of capital spending cuts last year and another round of major cuts this year added to the strength and will continue to curb oil production and reduce global supply. All these suggest that the oil market might bottom out after two years of persistent decline. However, volatility persists given increasing production in Iran, a strong dollar and weak global economic growth. Given the uncertain backdrop for oil, investors are seeking well-balanced exposure to the basket of natural resources companies instead of just energy sector allocation. And this drive has made the new ETF – SPDR S&P North American Natural Resources ETF (NYSEARCA: NANR ) – immense popular and successful so far this year. This fund offers exposure to the natural resources companies in the energy, materials and agriculture industries. This is because it has been getting the first-mover advantage and has accumulated $817 million in AUM in just three months of debut while surging 17.2% in the same period. Average daily volume is solid as it exchanges nearly 570,000 shares in hand (read: 5 Very Successful ETF Launches of 2015 ). Given this, it might be worth it to shed some light on this ETF and its holdings for those who are unfamiliar with the product, but are thinking about jumping in on the product. Below we highlight some of the key details regarding NANR, which made it one of the fastest-growing and most-successful ETFs of this year. NANR in Focus The ETF tracks the S&P BMI North American Natural Resources Index, charging investors 35 bps in fees and expenses. Holding 61 securities in its basket, it is highly concentrated on the top two firms – Exxon Mobil (NYSE: XOM ) and Chevron (NYSE: CVX ) – with over 9% share each. Other firms hold no more than 6.15% of assets. Materials make up for half of the portfolio, closely followed by 44.3% in energy and the rest in consumer staples. The product has a certain tilt toward large cap and value stocks as about more than two-third of the portfolio falls in the large-cap category while about half of it is classified as value picks. The combination of large-cap value securities has the potential to deliver higher returns and reduce overall volatility in the portfolio. In addition, these securities tend to outperform when considered on a long-term investment horizon and are less susceptible to trending markets. As such, these provide safety and could be the perfect choice for investors concerned about oil price volatility and its negative impact on the sector. In terms of performance, NANR has gained 15.6% year to date, easily outpacing the ultra-poplar Energy Select Sector SPDR ETF (NYSEARCA: XLE ) and the Materials Select Sector SPDR ETF (NYSEARCA: XLB ) . Investors should note that both these funds have plenty of holdings similar to NANR. Despite this, XLE and XLB are up just 3.4% and 2.3%, respectively. Link to the original article on Zacks.com

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

The Small Cap Value style ranks eleventh out of the twelve fund styles as detailed in our Q1’16 Style Ratings for ETFs and Mutual Funds report. Last quarter , the Small Cap Value style ranked tenth. It gets our Dangerous rating, which is based on aggregation of ratings of 19 ETFs and 268 mutual funds in the Small Cap Value style. See a recap of our Q4’15 Style Ratings here. Figures 1 and 2 show the five best and worst-rated ETFs and mutual funds in the style. Not all Small Cap Value style ETFs and mutual funds are created the same. The number of holdings varies widely (from 13 to 1482). This variation creates drastically different investment implications and, therefore, ratings. Investors seeking exposure to the Small Cap Value style should buy one of the Attractive-or-better rated mutual funds from Figure 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 The First Trust Mid Cap Value AlphaDEX Fund (NYSEARCA: FNK ) and the Guggenheim S&P MidCap 400 Pure Value ETF (NYSEARCA: RFV ) are excluded from Figure 1 because their total net assets are below $100 million and do not meet our liquidity minimums. 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 iShares Morningstar Small-Cap Value ETF (NYSEARCA: JKL ) is the top-rated Small Cap Value ETF and the Royce Special Equity Fund (MUTF: RSEIX ) is the top-rated Small Cap Value mutual fund. JKL earns a Neutral rating and RSEIX earns a Very Attractive rating. The Guggenheim S&P SmallCap 600 Pure Value ETF (NYSEARCA: RZV ) is the worst-rated Small Cap Value ETF and The Putnam Small Cap Value Fund (MUTF: PSLAX ) is the worst-rated Small Cap Value mutual fund. RZV earns a Dangerous rating and PSLAX earns a Very Dangerous rating. Standard Motor Products (NYSE: SMP ) is one of our favorite stocks held by RSEIX and earns a Very Attractive rating. Since 2004, Standard Motor Products has grown after-tax profit ( NOPAT ) by 19% compounded annually. Over this same time, the company has greatly improved its return on invested capital ( ROIC ) from 2% in 2004 to 13% over the last twelve months. Despite this long-term success, SMP is undervalued at current prices. At its current price of $33/share, SMP has a price-to-economic book value ( PEBV ) ratio of 0.9. This ratio means that the market expects SMP’s NOPAT to permanently decline by 10%. If Standard Motor Products can grow NOPAT by just 5% compounded annually for the next decade , the stock is worth $47/share today – a 42% upside. Raven Industries (NASDAQ: RAVN ) is one of our least favorite stocks held by ARIVX and earns a Dangerous rating. From 2005 to the last twelve months, Raven Industries has failed to grow NOPAT. Over the same time, the company’s profitability has tanked, with ROIC falling from 29% to 7%. With such poor fundamentals, it should be no surprise that RAVN is down 20% over the past decade. What may surprise you though is that RAVN remains overvalued. To justify its current price, Raven Industries must grow NOPAT by 6% compounded annually for the next 21 years . This expectation seems rather optimistic given Raven’s poor track record of profit growth. Figures 3 and 4 show the rating landscape of all Small 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.

Will Gold Continue Its Dominance Over Silver ETFs?

The weakness in the global financial markets has helped precious metals, like gold and silver, to recover their sheen in 2016. Sluggish growth in China since the beginning of the year and the global oil market turbulence has lifted safe-haven demand. The jump in gold and silver prices was also supported by plunging interest rates on a global scale. With the Fed not expected to raise interest rates in the near term, the rally is expected to continue. While gold has gained 18% and 11% year to date and in the past one month, respectively, silver has risen 10% so far this year and just 4.4% in February. Will the Trend Continue? Gold and silver prices have exhibited a strong correlation in the past 10 years. In fact, some investors regard silver as a leveraged play on gold. Per a regression analysis based on FactSet data, silver prices move 1.4 times the increase in gold prices on an average. In other words, if gold rises by 1% in a particular session, silver is expected to gain 1.45%. However, this year prices have gone the other way round as evident from the year-to-date and monthly figures. The outperformance of gold can be due to the fact that silver is widely used for industrial purposes. Weak manufacturing activities across the globe, particularly in China, have hurt the demand for the white metal, affecting its price. How to Play? But history they say repeats itself and the appreciation of gold prices over silver is not likely to be sustainable over the long run. This is because conditions in the U.S. market are slowly improving and industrial demand for silver is expected to get a boost from stepped-up domestic economic activity. Additionally, silver supply could contract given the dearth in deposits faced by the silver miners , forcing producers to look for fresh projects. Meanwhile, investors returned to risk-on trade sentiment in the recent week, which could affect the demand for gold bullion. Investors could play the market by going long on silver and short on gold. Below, we have highlighted some of the silver and inverse gold ETFs. Investors should note that since these inverse products when combined with leverage are very volatile, these are suitable only for traders and those with a high-risk tolerance and short-term outlook. Additionally, the daily rebalancing – when combined with leverage – may force these products to deviate significantly from the expected long-term performance figures. Still, for ETF investors who expect the outperformance of gold over silver to be short-lived, the products discussed below could make for interesting choices. Long on Silver iShares Silver Trust ETF (NYSEARCA: SLV ) The fund tracks the price of silver bullion measured in U.S. dollars. It is the ultra-popular silver ETF with AUM of over $5 billion and heavy volume of nearly 6 million shares a day. It charges 50 bps in fees per year from investors. The fund holds a Zacks ETF Rank #3 (Hold) with a High risk outlook and has returned 10.2% so far this year. ETFS Physical Silver Trust ETF (NYSEARCA: SIVR ) This fund has amassed $227.8 million in its asset base while trades in moderate volume of more than 82,000 shares per day on average. It tracks the performance of the price of silver less the Trust expenses and is backed by physical silver. Expense ratio is 0.30%. The fund also holds a Zacks ETF Rank #3 (Hold) with a High risk outlook and has returned 10.4% so far this year. PowerShares DB Silver ETF (NYSEARCA: DBS ) This product provides exposure to the silver futures market rather than spot market and tracks the DBIQ Optimum Yield Silver Index Excess Return index. It is has AUM of $19.5 million and average daily volume of less than 3,000 shares, increasing the total cost for the fund in the form of a wide bid/ask spread. DBS is the high cost choice in the silver bullion space, charging 79 bps in fees per year from investors. Like other silver ETFs, the fund holds a Zacks ETF Rank #3 (Hold) with a High risk outlook. In the year-to-date period, it has gained 10.4%. Short on Gold ProShares Ultra Short Gold ETF (NYSEARCA: GLL ) This fund seeks to deliver twice (2x or 200%) the inverse return of the daily performance of gold bullion in U.S. dollars; the gold price is fixed for delivery in London. GLL gains when the gold market falls and is appropriate for hedging purposes against the decline in gold prices. With an expense ratio of 0.95%, the product has AUM of $47 million and average daily volume of 21,000 shares. DB Gold Double Short ETN (NYSEARCA: DZZ ) This ETN seeks to deliver twice (2x or 200%) the inverse return of the daily performance of the Deutsche Bank Liquid Commodity Index-Optimum Yield Gold. DZZ initiates a short position in the gold futures market but charges a relatively lesser price of 75 bps a year. The product has amassed over $49.6 million in AUM. The ETN has volume of 432,000 shares a day. VelocityShares 3x Inverse Gold ETN (NASDAQ: DGLD ) This product provides three times (300%) short exposure to the daily performance of the S&P GSCI Gold Index Excess Return plus returns from U.S. T-bills net of fees and expenses. This $9.9 million ETN charges 135 bps in fees per year from investors and has average daily volume of 24,000 shares. Original Post