Tag Archives: mutual funds

How To Avoid The Worst Sector Mutual Funds: Q2’15 In Review

Summary The large number of mutual funds has little to do with serving your best interests. Below are three red flags you can use to avoid the worst mutual funds. The following presents the least and most expensive sector mutual funds as well as the worst overall sector mutual funds per our 2Q15 sector ratings. Question: Why are there so many mutual funds? Answer: mutual fund providers tend to make lots of money on each fund so they create more products to sell. The large number of mutual funds has little to do with serving your best interests. Below are three red flags you can use to avoid the worst mutual funds: 1. Inadequate Liquidity This issue is the easiest to avoid, and our advice is simple. Avoid all mutual funds with less than $100 million in assets. Low levels of liquidity can lead to a discrepancy between the price of the mutual fund and the underlying value of the securities it holds. Plus, low asset levels tend to mean lower volume in the mutual fund and larger bid-ask spreads. 2. High Fees Mutual funds should be cheap, but not all of them are. The first step here is to know what is cheap and expensive. To ensure you are paying at or below average fees, invest only in mutual funds with total annual costs below 1.90%, which is the average total annual cost of the 649 U.S. equity Sector mutual funds we cover. Figure 1 shows the most and least expensive sector mutual funds. Rydex provides 3 of the most expensive mutual funds while Vanguard mutual funds are among the cheapest. Figure 1: 5 Least and Most Expensive Sector Mutual Funds Sources: New Constructs, LLC and company filings Investors need not pay high fees for quality holdings. The Fidelity Select Insurance Portfolio (MUTF: FSPCX ) earns our Very Attractive rating and has low total annual costs of only 0.97%. On the other hand, the Vanguard REIT Index Fund (MUTF: VGSNX ) holds poor stocks. No matter how cheap a mutual fund, if it holds bad stocks, its performance will be bad. The quality of a mutual fund’s holdings matters more than its price. 3. Poor Holdings Avoiding poor holdings is by far the hardest part of avoiding bad mutual funds, but it is also the most important because a mutual fund’s performance is determined more by its holdings than its costs. Figure 2 shows the mutual funds within each sector with the worst holdings or portfolio management ratings . Figure 2: Sector Mutual Funds with the Worst Holdings Sources: New Constructs, LLC and company filings Fidelity appears more often than any other providers in Figure 2, which means that they offer the most mutual funds with the worst holdings. Our overall ratings on mutual funds are based primarily on our stock ratings of their holdings. The Danger Within Buying a mutual fund without analyzing its holdings is like buying a stock without analyzing its business and finances. Put another way, research on mutual fund holdings is necessary due diligence because a mutual fund’s performance is only as good as its holdings’ performance. PERFORMANCE OF MUTUAL FUND’s HOLDINGs = PERFORMANCE OF MUTUAL FUND Disclosure: 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.

Mutual Funds In Focus Ahead Of Q2 Earnings Season

The first quarter earnings season was not very encouraging and the official commencement of the second quarter earnings season too had a dismal start. After beating bottom-line estimates for four consecutive quarters, aluminum giant Alcoa (NYSE: AA ) finally missed the earnings estimates. To add to the disappointment, the second quarter estimates have been moving lower. Management has consistently provided lower guidance. On that note, it can be said that under promising is a good thing to come out with outperforming results. The declining trend in second quarter earnings is not unique this time though. Also, the magnitude of lower revisions this time is lower compared to the trend ahead of the first quarter. The spotlight is already on the second quarter earnings, and the action heightens starting next week. Before we brace ourselves for a very busy next couple of weeks, let’s look at some buy-ranked mutual funds that boast high average EPS growth. Q2 Earnings Expectations Earnings for the S&P 500 components are projected to decline 6.7% year on year while revenues may drop 6%. Growth is projected to suffer across 9 out of 16 sectors. These 9 sectors may incur earnings decline. Again, the energy sector might be the biggest laggard as earnings for the sector may slump 64% with a decline of 41.5% in revenues. Finance sector however is expected to see 2.6% higher earnings, though sales may drop 5%. Technology on the other hand may incur a 1.6% drop in earnings, but revenues will improve 0.8%. Meanwhile, taking the energy sector out, total earnings for the S&P 500 may edge up 0.5% with 0.3% decline in revenues. Despite negative revisions, and as mentioned earlier, the magnitude of revisions downward in second quarter is lower than first quarter. For the second quarter, the magnitude of negative revision is 3.1%. This compares favorably with 8.3% lower revisions in first quarter 2015 and 5.9% in first quarter 2014. Run Up to the Second Quarter The first quarter had major headwinds to deal with. The GDP numbers were not so impressive and companies had a lot to worry about stronger dollar. Strength in the U.S. dollar had a huge impact on the trade deficit over the first quarter. While a stronger dollar dragged down the export demand in the first quarter, it also boosted import demand as it made foreign goods cheaper. The ‘dollar scapegoating’ was a theme in reading the first quarter results. Weakness in first quarter earnings numbers was attributed to the strength of the dollar. The large-cap S&P 500 companies earn about 40% of their revenues from outside the US. Total first quarter earnings for the 498 S&P 500 members were up 2.4% on 3.3% lower revenues. Only 62% could beat EPS estimates and only 42.4% outperformed revenue expectations. This time however, the dollar should be of greater importance. In the run up to the second quarter, markets were mostly worried about the Greece debt deal crisis. However, this should not affect the US multinationals. Also, the economy has been promising this time, with quality data from housing and retail sectors. 5 Mutual Funds with the Best Average EPS Growth Below we present 5 mutual funds that currently have the best average EPS growth. These funds carry either a carry a Zacks Mutual Fund Rank #1 (Strong Buy) or Zacks Mutual Fund Rank #2 (Buy). Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but the likely future success of the fund. The minimum initial investment is within $5000. These funds are not only in the green so far this year, but have positive total return over the last 1, 3 and 5 year periods. Fidelity Select Medical Delivery Portfolio (MUTF: FSHCX ) seeks long-term capital growth. FSHCX invests a major portion of its assets mainly involved in operations related to hospitals, nursing homes and other organizations engaged in providing health care services. FSHCX primarily focuses on acquiring common stocks of companies throughout the globe. FSHCX currently carries a Zacks Mutual Fund Rank #2. The year-to-date and 1-year gains are 13.3% and 30.8%. Meanwhile, the 3 and 5 year annualized returns are 24.4% and 22.3%. The annual expense ratio of 0.79% is lower than the category average of 1.37%. The average EPS growth is 22.4%. Among the top five holdings, UnitedHealth Group (NYSEARCA: UHN ), McKesson (NYSE: MCK ), Cigna (NYSE: CI ) and Cardinal Health (NYSE: CAH ) have average earnings surprise for the past four quarters of 8.3%, 6.4%, 5.5% and 4.1%. Rydex S&P SmallCap 600 Pure Growth Fund (MUTF: RYSGX ) seeks results that are at par (excluding fees and expenses) with the S&P SmallCap 600 Pure Growth Index’s performance. A lion’s share of its assets is invested in the common stock of companies listed on the underlying index. RYSGX currently carries a Zacks Mutual Fund Rank #2. The year-to-date and 1-year gains are 9.3% and 9.6%. Meanwhile, the 3 and 5 year annualized returns are 16.4% and 17.2%. The annual expense ratio of 1.51% is however higher than the category average of 1.35%. The average EPS growth is 19.5%. Among the top five holdings, Lannett (NYSE: LCI ), Skechers USA (NYSE: SKX ), Taser International (NASDAQ: TASR ), Gentherm (NASDAQ: THRM ) and Take-Two Interactive Software (NASDAQ: TTWO ) have average earnings surprise for the past four quarters of 4.7%, 22.5%, 50.6%, 27.5% and 88.9%. Fidelity Independence Fund (MUTF: FDFFX ) invests primarily in common stocks of domestic and foreign issuers. FDFFX realizes capital gains without considering the tax consequences to shareholders. The management is not constrained by any particular investment style and may invest in either ‘growth’ stocks or ‘value’ stocks or both. FDFFX currently carries a Zacks Mutual Fund Rank #2. The year-to-date and 1-year gains are 3% and 4.7%. Meanwhile, the 3 and 5 year annualized returns are 20.7% and 17%. The annual expense ratio of 0.73% is lower than the category average of 1.19%. The average EPS growth is 19.4%. Among the top five holdings, Apple (NASDAQ: AAPL ), Gilead Sciences (NASDAQ: GILD ), Medivation (NASDAQ: MDVN ), Celgene (NASDAQ: CELG ) and American Airlines Group (NASDAQ: AAL ) have average earnings surprise for the past four quarters of 9.6%, 15.5%, 23.2%, 4.2% and 1.6%. Fidelity Select Leisure Portfolio (MUTF: FDLSX ) seeks capital growth. FDLSX invests at least 80% of assets in common stocks of companies principally engaged in the design, production, or distribution of goods or services in the leisure industries. FDLSX currently carries a Zacks Mutual Fund Rank #1. The year-to-date and 1-year gains are 7.2% and 13.4%. Meanwhile, the 3 and 5 year annualized returns are 19.7% and 19.6%. The annual expense ratio of 0.8% is lower than the category average of 1.48%. The average EPS growth is 18.3%. Among the top five holdings, Starbucks (NASDAQ: SBUX ), Yum! Brands (NYSE: YUM ), Chipotle Mexican Grill Inc (NYSE: CMG ) and Wyndham Worldwide (NYSE: WYN ) have average earnings surprise for the past four quarters of 0.8%, 1.5%, 7.8% and 5.1%. Janus Forty Fund (MUTF: JDCAX ) invests in a group of 20-40 common stocks that have growth potential. JDCAX may invest in companies of all sizes, ranging from prominent firms to smaller and emerging growth firms. JDCAX currently carries a Zacks Mutual Fund Rank #1. The year-to-date and 1-year gains are 6.3% and 15.8%. Meanwhile, the 3 and 5 year annualized returns are 17.9% and 15.1%. The annual expense ratio of 0.92% is lower than the category average of 1.19%. The average EPS growth is 17.7%. Among the top five holdings, Lowe’s Companies (NYSE: LOW ), Delphi Automotive PLC (NYSE: DLPH ), Valeant Pharmaceuticals International (NYSE: VRX ) and Endo International PLC (NASDAQ: ENDP ) have average earnings surprise for the past four quarters of 0.7%, 4.2%, 80.4% and 6.6%. Link to the original article on Zacks.com

Columbia Threadneedle Rolls Out Unconstrained Fixed Income Fund

By DailyAlts Staff Fixed-income yield curves and credit spreads are expected to be dramatically impacted by the Federal Reserve’s interest-rate decisions later this year, and that has put a lot of bond-market investors in a quandary: Should I dump my debt holdings and take on equity risk? Liquid alternatives give even modest investors new options, including “unconstrained” fixed-income funds like the newly launched Columbia Global Unconstrained Bond Fund (MUTF: CLUAX ), which invests across the full spectrum of debt and currency markets in pursuit of absolute returns with low sensitivity to interest rates, credit spreads, and general market volatility. Designed for the New Normal “The fixed income world has undergone structural change and the characteristics that once defined fixed-income asset classes are becoming obsolete – witness the near-zero yields in some high-quality bonds,” said Jim Cielinski, Global Head of Fixed Income at Columbia Threadneedle Investments and one of the funds three portfolio managers, in a June 30 press release . “The Columbia Global Unconstrained Bond Fund is designed to exploit these new investment conditions by having the flexibility to invest successfully across a broad risk spectrum.” In addition to Mr. Cielinski, the fund’s managers include Martin Harvey and Gene Tannuzzo. Mr. Harvey has been with Threadneedle since 2003 and is also the lead manager of the firm’s Euro Aggregate Bond portfolios. Mr. Tannuzzo also joined Threadneedle in 2003 and is a senior portfolio manager for the company’s strategic income and multi-sector fixed income funds. Strategy Already Available in Europe and Asia The Columbia Global Unconstrained Bond Fund’s portfolio managers employ a fundamental, research-driven investment process. They’re also able to leverage Columbia Threadneedle’s team of over 180 professionals managing more than $200 billion in assets. The fund’s managers’ views may be expressed through long or short exposures to interest rate, credit, and currency markets, with the ample flexibility to navigate across various market environments and capitalize on current trends. Its objective is to complement other total return and yield-oriented strategies, and its benchmark is the Citi 1-month U.S. Treasury Bill Index. Although the fund just launched on June 30 in the U.S., the strategy has been available to investors in Europe and Asia for some time now. “I am excited to bring this capability to the U.S. market, which adds to the Columbia Threadneedle Investments suite of absolute return capabilities,” said Mr. Cielinski. For more information, visit columbiathreadneedleus.com . Share this article with a colleague