Tag Archives: mutual funds

LS Opportunity Fund Changes Sub-Advisor, Objective, Strategy

By DailyAlts Staff There have been a number of changes to the LS Opportunity Fund (MUTF: LSOFX ) over the past several months. On April 23, the fund’s Board of Trustees filed paperwork with the SEC announcing the termination of the fund’s sub-advisory relationship with Independence Capital Asset Partners. According to sources, this change was due to the retirement of Jim Hillary, a portfolio manager on the fund and Chairman, CEO and CIO of Independence Capital Asset Partners. In addition to Mr. Hillary’s retirement, the firm will be returning capital to his hedge fund investors. Following the termination of Independence, the fund appointed Prospector Partners, LLC, a Connecticut based asset manager, as an interim sub-advisor and transitioned the portfolio to Prospector on May 28. Shareholders are being asked to approve Prospector as the sub-advisor, along with additional changes to the fund as outlined below, at the upcoming shareholder’s meeting on September 17. Changes to Fund Objectives and Implementation Now the LS Opportunity Fund is planning changes to its investment objective and strategy, as well as giving its advisor more power to hire and fire sub-advisors. According to a July 15 SEC filing, these changes will not result in higher fees for investors, nor will they alter the long/short equity orientation of the fund’s strategy. There is, however, a moderate change to the implementation of that strategy, which will now allow the fund to combine long positions with shorts of two or more stocks in the same sector, whereas previously, it called for “pair trades” of one long and exactly two shorts. The fund’s investment objective has also been slightly revised, with the new objective “to seek to generate long-term capital appreciation by investing in both long and short positions within a portfolio consisting of primarily publicly-traded common stock, with less net exposure than that of the stock market in general.” Formerly, the word “risk” appeared in place of “net exposure” in the fund’s stated objective. Fund Performance The LS Opportunity Fund, which launched in September 2010, has a three-star rating from Morningstar. For the three-year period ending June 30, the fund returned 7.76%, ranking it in the top 38% of funds in its Morningstar category. More recently, however, the fund’s returns haven’t been as strong: Year-to-date, through June 30, the LS Opportunity Fund’s -3.57% returns ranked in the bottom 13% of long/short equity funds. For more information, view a copy of the fund’s prospectus .

Q3 2015 Sector Ratings For ETFs And Mutual Funds

Summary Our sector ratings are based on the aggregation of our fund ratings for every ETF and mutual fund in each sector. The primary driver behind an Attractive fund rating is good portfolio management (stock picking) combined with low total annual costs. Cheap funds can dupe investors and investors should invest only in funds with good stocks and low fees. At the beginning of the third quarter of 2015, only the Consumer staples sector earns an Attractive-or-better rating. Our sector ratings are based on the aggregation of our fund ratings for every ETF and mutual fund in each sector. Investors looking for sector funds that hold quality stocks should look no further than the Consumer Staples and Information Technology sector. These sectors house the most Attractive-or-better rated funds. Figures 4 through 7 provide more details. The primary driver behind an Attractive fund rating is good portfolio management , or good stock picking, with low total annual costs . Attractive-or-better ratings do not always correlate with Attractive-or-better total annual costs. This fact underscores that (1) cheap funds can dupe investors and (2) investors should invest only in funds with good stocks and low fees. See Figures 4 through 13 for a detailed breakdown of ratings distributions by sector. Our fund rating methodology is detailed here . All of our reports on the best & worst ETFs and mutual funds in every sector are available here . Figure 1: Ratings For All Sectors (click to enlarge) Source: New Constructs, LLC and company filings To earn an Attractive-or-better Predictive Rating, an ETF or mutual fund must have high-quality holdings and low costs. Only the top 30% of all ETFs and mutual funds earn our Attractive or better ratings. The Fidelity Select Consumer Staples Portfolio (MUTF: FDFAX ) is the top rated Consumer Staples mutual fund. It gets our Very Attractive rating by allocating over 38% of its value to Attractive-or-better-rated stocks. PepsiCo Inc. (NYSE: PEP ) is one of our favorite stocks held by FDFAX and earns our Attractive rating. Over the last decade, PepsiCo has grown its after-tax profits ( NOPAT ) by 6% compounded annually. The company currently earns a healthy return on invested capital ( ROIC ) of 10%. Furthermore, PepsiCo has consistently generated positive economic earnings in every year of our model, which dates back to 1998. At its current price of $95/share, PEP has a price to economic book value ( PEBV ) of 1.2. This ratio implies that the market expects NOPAT growth of only 20% for the remainder of PepsiCo’s corporate life. These are low expectations considering that the company grew profits by 6% compounded annually for the past ten years. If Pepsi can continue to grow NOPAT by 6% compounded annually for the next decade , the stock is worth $127/share- a 34% upside from current valuations. The S aratoga Energy & Basic Materials Fund (MUTF: SBMBX ) is the worst rated Energy mutual fund. It gets our Very Dangerous rating by allocating over 45% of its value to Dangerous-or-worse-rated stocks. Making matters worse, it charges investors annual costs of 5.96%. Exxon Mobil (NYSE: XOM ) is one of our least favorite stocks held by SBMBX and earns our Dangerous rating. Since 2011, Exxon’s NOPAT has declined by 27% compounded annually. Exxon’s ROIC has fallen from 13% to a bottom quintile 5% in 2014. On a trailing twelve-month basis, ROIC has fallen even further to only 3%. Despite the issues Exxon has faced, the stock still remains overvalued. To justify its current price of $83/share, Exxon must grow NOPAT by 10% compounded annually for the next 13 years. This expectation seems optimistic given the current market landscape and Exxon’s inability to grow NOPAT at all over the last four years. Investors would be wise to steer clear of this oil & gas giant. Figure 2 shows the distribution of our Predictive Ratings for all sector ETFs and mutual funds. Figure 2: Distribution of ETFs & Mutual Funds (Assets and Count) by Predictive Rating (click to enlarge) Source: New Constructs, LLC and company filings Figure 3 offers additional details on the quality of the sector funds. Note that the average total annual cost of Very Dangerous funds is more than five times that of Very Attractive funds. Figure 3: Predictive Rating Distribution Stats (click to enlarge) * Avg TAC = Weighted Average Total Annual Costs Source: New Constructs, LLC and company filings This table shows that only the best of the best funds get our Very Attractive Rating: they must hold good stocks AND have low costs. Investors deserve to have the best of both and we are here to give it to them. Ratings by Sector Figure 4 presents a mapping of Very Attractive funds by sector. The chart shows the number of Very Attractive funds in each sector and the percentage of assets in each sector allocated to funds that are rated Very Attractive. Figure 4: Very Attractive ETFs & Mutual Funds by Sector (click to enlarge) Source: New Constructs, LLC and company filings Figure 5 presents the data charted in Figure 4. Figure 5: Very Attractive ETFs & Mutual Funds by Sector (click to enlarge) Source: New Constructs, LLC and company filings Figure 6 presents a mapping of Attractive funds by sector. The chart shows the number of Attractive funds in each sector and the percentage of assets allocated to Attractive-rated funds in each sector. Figure 6: Attractive ETFs & Mutual Funds by Sector (click to enlarge) Source: New Constructs, LLC and company filings Figure 7 presents the data charted in Figure 6. Figure 7: Attractive ETFs & Mutual Funds by Sector (click to enlarge) Source: New Constructs, LLC and company filings Figure 8 presents a mapping of Neutral funds by sector. The chart shows the number of Neutral funds in each sector and the percentage of assets allocated to Neutral-rated funds in each sector. Figure 8: Neutral ETFs & Mutual Funds by Sector (click to enlarge) Source: New Constructs, LLC and company filings Figure 9 presents the data charted in Figure 8. Figure 9: Neutral ETFs & Mutual Funds by Sector (click to enlarge) Source: New Constructs, LLC and company filings Figure 10 presents a mapping of Dangerous funds by fund sector. The chart shows the number of Dangerous funds in each sector and the percentage of assets allocated to Dangerous-rated funds in each sector. The landscape of sector ETFs and mutual funds is littered with Dangerous funds. Investors in Energy have put over 75% of their assets in Dangerous-rated funds. Figure 10: Dangerous ETFs & Mutual Funds by Sector (click to enlarge) Source: New Constructs, LLC and company filings Figure 11 presents the data charted in Figure 10. Figure 11: Dangerous ETFs & Mutual Funds by Sector (click to enlarge) Source: New Constructs, LLC and company filings Figure 12 presents a mapping of Very Dangerous funds by fund sector. The chart shows the number of Very Dangerous funds in each sector and the percentage of assets in each sector allocated to funds that are rated Very Dangerous. Figure 12: Very Dangerous ETFs & Mutual Funds by Sector (click to enlarge) Source: New Constructs, LLC and company filings Figure 13 presents the data charted in Figure 12. Figure 13: Very Dangerous ETFs & Mutual Funds by Sector (click to enlarge) Source: New Constructs, LLC and company filings D isclosure: David Trainer and Max Lee receive no compensation to write about any specific stock, sector or theme. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) 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.

5 Buy-Ranked High-Yield Bond Mutual Funds

For the average investor, high-yield bond mutual funds are a great method to invest in bonds rated below investment-grade, popularly known as junk bonds. This is because these funds hold a wide range of such securities, significantly reducing the portfolio risk. In addition, these funds provide better returns than investments with higher ratings, including government and corporate bonds. Further, because the yield from such bonds is higher than investment-grade securities, these investments are less susceptible to interest rate fluctuations. Below we will share with you 5 buy-rated high yield bond mutual funds. Each has earned either a Zacks Mutual Fund Rank #1 (Strong Buy) or a Zacks Mutual Fund Rank #2 (Buy) , as we expect these mutual funds to outperform their peers in the future. To view the Zacks Rank and past performance of all high-yield bond funds, investors can click here . Lord Abbett Bond Debenture Fund A (MUTF: LBNDX ) invests a large chunk of its assets in fixed-income securities, including bonds and debentures. LBNDX may invest a significant share of its assets in junk bonds that are believed to provide a high return. It invests in high-yield securities that are ranked below BB/Ba. The Lord Abbett Bond-Debenture Fund A has a three-year annualized return of 7.2%. LBNDX has an expense ratio of 0.86%, compared to a category average of 1.07%. Wells Fargo Advantage Short-Term High Yield Bond Fund Investor (MUTF: STHBX ) seeks total return through high current income and capital growth. It invests a major portion of its assets corporate debt securities that are rated below investment-grade. STHBX may also invest a maximum of one-fourth of its assets in non-US securities that are denominated in the US dollar. The fund invests in securities that include corporate bonds and bank loans having fixed, floating or variable rates. The Wells Fargo Advantage Short-Term High-Yield Bond Investor fund has a three-year annualized return of 3.1%. As of May 2015, STHBX held 165 issues, with 1.47% of its total assets invested in Cit Grp 4.25%. Fidelity Advisor High Income Fund A (MUTF: FHIAX ) invests in income-generating securities, including debt securities, preferred stocks and convertible securities, with a primary focus on below-investment grade securities. It may also invest in defaulted securities and common stocks. In addition, FHIAX invests in firms that are going through a tough time. Factors such as financial strength and economic condition are considered before investing in a security throughout the globe. Matthew Conti is the fund manager, and he has managed FHIAX since 2001. Transamerica Partners High Yield Bond Fund Inv (MUTF: DVHYX ) seeks high current income. It mainly invests in underlying funds. DVHYX invests majority of its assets in bonds that are expected to provide a high return. The fund has a three-year annualized return of 6.2%. DVHYX has an expense ratio of 0.58%, compared to a category average of 1.07%. City National Rochdale High-Yield Bond Fund Servicing (MUTF: CHYIX ) invests a lion’s share of its assets in below-investment grade securities that are believed to produce fixed income, commonly known as “junk bonds.” The fund invests in securities, including corporate bonds and debentures, convertible securities, preferred securities and debt securities. CHYIX invests in securities that are issued by both US and non-US entities. As of March 2015, CHYIX held 179 issues, with 2.04% of its total assets invested in Central Garden & Pet 8.25%. Original Post