Tag Archives: mutual funds

Is It Time To Short Small-Cap Stocks?

By DailyAlts Staff Size matters to factor-based investors, as small-cap stocks have historically outperformed their large-cap counterparts. But throughout the equity market’s history, there have been periods of dramatic small-cap underperformance, and David Schulz, president of Convergence Investment Partners, thinks we may be headed into such a period. He and his team at Convergence are rare among small-cap managers in employing an active shortin g strategy as both a source of alpha and a way to reduce risk. The Convergence Opportunities Fund (MUTF: CIPOX ) reflects the views of Mr. Schulz and his team. The fund, which debuted in November 2013 and ranked in the top 9% of funds in its category in its first calendar year, lost 5.4% in the first nine months of 2015, but still ranked in the top quartile of its peers. Going forward, the fund should outperform if small caps underperform, providing a unique way for investors to diversify their portfolio risks. Why are Mr. Schulz and Convergence bearish on small caps? The firm sent out an alert late last month citing a variety of reasons pertaining to valuation: Roughly 27% of stocks in the small-cap Russell 2000 index have negative P/E ratios (i.e., they’re unprofitable), while this is true of only 8% of large- and mid-caps in the Russell 1000; About 9% of Russell 2000 stocks have a P/E ratio of 50 or higher, while less than 6% of Russell 1000 stocks have such high earnings multiples; and In total, 36% of stocks in the Russell 2000 have P/E ratios that are either negative or over 50 – and 10 stocks in the index have P/Es that are over 1000! Furthermore, increased volatility in the equity markets has been bearish for small caps, since conditions have led investors to “sharpen their focus on valuations,” in Convergence’s words. In the brutal month of August, the 25 small-cap stocks with the highest P/E ratios returned -8.83%, while the 25 stocks with the lowest P/Es returned -0.28%. Since there are many more small caps with high P/Es than with low valuations, this trend is bearish for small caps in general, but Convergence’s Opportunities Fund applies a long/short approach to capture the upside exposure to the best-valued small-cap stocks. The firm says so-called “hope stocks” are on its list of shorts – these are companies with “weak balance sheets; low or decelerating cash flow, earnings, and sales; and high expectations.” Convergence believes an active short portfolio can complement an active long portfolio, especially during particularly tumultuous times. The short portfolio can “cushion the fall” when the market is under pressure and “add materially to the overall return of the portfolio over time.” Ultimately, stocks are differentiated by their fundamentals, and with interest rates expected to rise soon, the most fundamentally sound companies should outperform those with weaker balance sheets and decelerating earnings. The Convergence Opportunities Fund seeks to capitalize by applying a flexible long/short approach to U.S. small-caps. Share this article with a colleague

4 Top-Ranked Technology Mutual Funds For High Return

The technology sector is more likely to report above par earnings than other sectors as the demand for technology and innovation remains high. However, technology stocks are considered to be more volatile than other sector specific stocks in the short run. In order to minimize this short-term volatility almost all tech funds adopt a growth management style with a focus on strong fundamentals and a relatively higher investment horizon. Investors having an above par appetite for risk and a fairly longer investment horizon should park their savings in these funds. Below we will share with you 4 buy-rated technology mutual funds. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) as we expect these mutual funds to outperform their peers in the future. Columbia Seligman Global Technology Fund A (MUTF: SHGTX ) seeks long-term capital growth. SHGTX invests a major portion of its assets in equities of technology companies located throughout the globe. SHGTX invests across a wide range of countries. SHGTX invests a minimum of 40% of its assets in foreign companies that are not traded in the US. The Columbia Seligman Global Technology A is a non-diversified fund and has returned 21.3% over the past one year. SHGTX has an expense ratio of 1.46% as compared to the category average of 1.47%. BlackRock Science & Technology Opportunities Portfolio A (MUTF: BGSAX ) invests the majority of its assets in equity securities issued by domestic and foreign science and technology companies. BGSAX may invest a maximum 25% of its net assets in emerging economies. BGSAX generally invests in common stocks but may also invest in preferred stocks and convertible securities. The BlackRock Science & Technology Opportunities Investor A has returned 19.3% over the past one year. As of August 2015, BGSAX held 158 issues with 6.41% invested in Apple Inc. (NASDAQ: AAPL ). Fidelity Advisor Electronics Fund A (MUTF: FELAX ) seeks capital appreciation. FELAX invests a large portion of its assets in common stocks of companies whose primary operations are related to electronic components, equipment vendors, electronic component manufacturers, electronic component distributors, electronic instruments and electronic systems vendors. Investments are made in both domestic and foreign companies. FELAX uses a fundamental analysis to select companies for investment purposes. The Fidelity Advisor Electronics A is a non-diversified fund and has returned 21.2% over the past one year. FELAX has an expense ratio of 1.27% as compared to the category average of 1.47%. T Rowe Price Global Technology Fund (MUTF: PRGTX ) invests a major portion of its assets throughout the world in the common stocks of companies that derive their revenues from the development, advancement, and use of technology. PRGTX invests in a minimum of 5 countries and a minimum 25% of its assets are invested in foreign companies. PRGTX invests in firms with an established track record. The T Rowe Price Global Technology Fund has returned 21.2% in the last one year. Joshua K. Spencer is the fund manager and has managed PRGTX since 2012. Original Post Share this article with a colleague

5 Top-Rated Healthcare Mutual Funds To Add To Your Portfolio

Healthcare mutual funds provide excellent choices for investors looking to enter this safe-haven sector, which is likely to protect their investment during a market downturn. The healthcare sector has proven to be one of the most desirable avenues during difficult times as it does not vary with market conditions. Also, several pharmaceutical companies have a history of paying regular dividends, which can help to offset the losses from plummeting share prices. Below we will share with you 5 top-ranked healthcare mutual funds. Each has earned a Zacks #1 Rank (Strong Buy) as we expect these mutual funds to outperform their peers in the future. Fidelity Select Health Care Portfolio (MUTF: FSPHX ) seeks capital growth over the long run. FSPHX invests a major portion of its assets in companies involved in designing, manufacturing and selling healthcare products and services. FSPHX invests in companies across the world. The Fidelity Select Health Care Portfolio is a non-diversified fund and has returned 10.6% over the past one year. FSPHX has an expense ratio of 0.74% as compared to a category average of 1.35%. Fidelity Select Biotechnology Portfolio (MUTF: FBIOX ) invests a large share of its assets in companies primarily involved in research, development, manufacture and distribution of various biotechnological products. Factors such as financial strength and economic conditions are considered to invest in companies located anywhere in the world. The Fidelity Select Biotechnology Portfolio is a non-diversified fund and has returned 22.7% over the past one year. Rajiv Kaul is the fund manager and has managed FBIOX since 2005. Turner Medical Sciences Long/Short C (MUTF: TMSCX ) seeks capital appreciation. TMSCX invests a major chunk of its assets in healthcare firms. TMSCX uses a long/short growth strategy for reduction of volatility and capital preservation during a market downturn. TMSCX mainly focuses on acquiring securities of companies having market capitalizations greater than $250 million. TMSCX is expected to maintain a portfolio of 15 to 75 securities long, and 15 to 75 securities short. The Turner Medical Sciences Long/Short C has returned 11.1% over the past one year. TMSCX has an expense ratio of 1.50% as compared to a category average of 1.84%. Fidelity Select Medical Delivery Portfolio (MUTF: FSHCX ) invests largely in companies that either own or are involved in operating hospital and nursing homes, and are related to the healthcare services sector. FSHCX focuses on acquiring common stocks of both US and non-US companies. The Fidelity Select Medical Delivery Portfolio fund is non-diversified and has returned 19.9% over the last one-year period. Steven Bullock is the fund manager and has managed FSHCX since 2012. Fidelity Select Medical Equipment & Systems (MUTF: FSMEX ) seeks capital growth. FSMEX invests the majority of its assets in companies that are primarily involved in medical equipment and devices and the related technologies sector. FSMEX focuses on acquiring common stocks of companies by analyzing factors including financial strength and economic condition. FSMEX invests in both US and non-US companies. The Fidelity Select Medical Equipment & Systems is a non-diversified fund and has returned almost 14.3% over the past one year. As of August 2015, FSMEX held 55 issues with 23.57% of its assets invested in Medtronic PLC. Original Post