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Spike In eBay Shares On Q4 Earnings Puts These ETFs In Focus

The e-commerce giant eBay Inc (NASDAQ: EBAY ) came out with Q4 results after the closing bell on January 21. Overall, the mood was optimistic on an earnings beat and restructuring initiatives, though a sales-miss restrained investors from full-hearted optimism on the stock. Net income in the fourth quarter rose to $0.81 from $0.66 per share a year earlier, based on Zacks data. This beat the Zacks Consensus Estimate of $0.77, which excludes stock options and non-recurring expenses. Net revenues of $4.92 billion fell shy of the estimate of $4.97 billion but grew 9% year over year. Revenues were primarily volume driven. eBay’s Marketplaces segment generating revenues from the sale of goods available on eBay properties, recorded a 1% jump in net transaction revenues. However, as expected, pricing was an issue for the company which is why on the margin front, the e-commerce giant clearly underperformed. The non-GAAP operating margin was down 150 bps to 29.2% in the quarter. Restructuring procedure is on with the e-commerce player. eBay’s plan to spin off the PayPal business will be completed in the second half of 2015 and the online marketplace announced that it would lay off 7% of its workforce in the first quarter. The company also announced it has entered into a standstill agreement with Carl Icahn, who is the company’s largest activist shareholder . Weak Guidance Though the story was decent so far, the guidance took a beating. The company expects net revenues in the range of $4.35-$4.45 billion, failing the analysts’ projection of $4.71 billion, per Bloomberg . The company’s non-GAAP earnings per share are guided in the range of $0.68-$0.71. The company expects net revenues of $18.60-$19.1 billion for the full year and non-GAAP earnings per diluted share of $3.05-$3.15. Market Impact The company’s streamlining initiatives might have given its stock a boost post earnings. The stock gained 3.5% after hours on January 21. The results have put some ETFs with considerable exposure to eBay in focus. These funds are highlighted below: PowerShares Nasdaq Internet Portfolio (NASDAQ: PNQI ) This fund follows the Nasdaq Internet Index, giving investors exposure to the broad Internet industry. The fund holds about 94 stocks in its basket with AUM of $248 million while charging 60 bps in fees per year. The in-focus eBay occupies the second position with an 8.37% allocation. In terms of industrial exposure, Internet software and services make up for more than two-thirds of the basket, followed by Internet retail. PNQI has lost nearly 2.2% so far this year (as of January 21, 2015). First Trust Dow Jones Internet Index (NYSEARCA: FDN ) This is one of the most popular and liquid ETFs in the broad tech space with AUM of over $1.96 billion and average daily volume of more than 250,000 shares. The fund tracks the Dow Jones Internet Index and charges 57 bps in fees per year. In total, the fund holds 41 stocks in its basket with the in-focus eBay taking the third spot with a 5.53% share. From a sector look, information technology accounts for about 70% of the portfolio while consumer discretionary makes up 22%. The ETF is down about 2.9% year to date. Market Vectors Wide Moat ETF (NYSEARCA: MOAT ) This ETF follows the Morningstar Wide Moat Focus Index and provides equal-weighted exposure to 21 U.S. securities that have a unique sustainable competitive advantage in their respective industries. Here, eBay occupies the tenth position in the basket, accounting for 5% of total assets. The product is pretty spread out across various sectors with energy, information technology and consumer discretionary taking double-digit allocation. The fund has accumulated $898 million in its asset base and sees good volume of about 200,000 shares a day. Its expense ratio comes in at 0.49%. The fund has added nearly 5% so far this year. Bottom Line eBay currently carries a Zacks Rank #4 (Sell) with poor fundamentals. However, investors should note that Internet commerce segment – the industry eBay operates in – presently resides in the top 23% allocation of Zacks Industry Rank. The company itself is also striving hard to turn around by adopting every possible measure. All these point to a moderately bullish long-term outlook. So, investors counting on the long-term potential in the space can consider the recent rally in eBay shares as a start to the wining trend. However, an ETF approach may be better; at least it can cover up eBay’s short-term weakness with some other components’ strength.

Europe’s QE Experiment: Adding Stock ETF Exposure And Hedging Against The Unforeseen

The scope and size of the European Central Bank’s latest stimulus effort has delighted the worldwide investing community. The countries/regions that are in the process of actively weakening their currencies are seeing the greatest pop in near-term equity prices. All of the safer haven currency proxies have gained ground in 2015, whereas the overwhelming majority of global growth-oriented currency ETFs are hittng 52-week lows. The scope (current euro-zone member nations) and size ($1.1 trillion euros) of the European Central Bank’s latest stimulus effort has delighted the worldwide investing community. In fact, many began betting on a monumental quantitative easing “project” the minute that Europe registered year-over-year deflation of -0.2% for the month of December. This can be seen in dollar-denominated ETF performance since the start of the 2015. The Anticipation Game: Investors Bet On Most Recent “QE” Beneficiaries Approx YTD% iShares Currency Hedged MSCI Germany ET F (NYSEARCA: HEWG ) 8.5% Deutsche X-trackers MSCI Europe Hedged Equity ETF (NYSEARCA: DBEU ) 4.3% WisdomTree Korea Hedged Equity ETF (NASDAQ: DXKW ) 0.9% WisdomTree Japan Hedged Equity ETF (NYSEARCA: DXJ ) 0.3% SPDR S&P 500 Trust ETF (NYSEARCA: SPY ) 0.0% The outperformance by Germany as well as Europe over less recent “quantitative easers” is worthy of note. It tells us that the countries/regions that are in the process of actively weakening their currencies – the ones that are actively lowering the costs of servicing their sovereign debt by the most significant amounts via ultra-low yields – are seeing the greatest pop in near-term equity prices. Indeed, the vast majority of currency ETFs are hitting 52-week lows. The ones that are not? The safer haven currency proxies which include the CurrencyShares Swiss Franc Trust ETF (NYSEARCA: FXF ), the CurrencyShares Japanese Yen Trust ETF (NYSEARCA: FXY ), the PowerShares DB USD Bull ETF (NYSEARCA: UUP ) and SPDR Gold Trust ETF (NYSEARCA: GLD ). All of these safer haven currency proxies have gained ground in 2015, whereas the overwhelming majority of global growth-oriented currency ETFs are hittng 52-week lows. Safer Haven Proxies Are Flourishing, Global Growth Proxies Are Languishing Approx YTD % FXF 13.5% GLD 9.1% UUP 4.8% FXY 1.7% CurrencyShares Australian Dollar Trust ETF (NYSEARCA: FXA ) -2.5% CurrencyShares British Pound Sterling Trust ETF (NYSEARCA: FXB ) -3.6% CurrencyShares Canadian Dollar Trust ETF (NYSEARCA: FXC ) -6.3% CurrencyShares Euro Trust ETF (NYSEARCA: FXE ) -7.0% For those who do not understand why the yen strengthens in risk-off environments, you may need a refresher on the “carry trade.” Investors borrow the low yielding yen to invest in higher yielding assets or higher appreciating assets. However, there is a serious consequence for playing the game at the wrong time; specifically, the yen rise in value when institutions and hedge funds rapidly sell stocks, higher-yielding bonds and higher-yielding currencies to avoid paying back loans in a more expensive yen. The Japanese currency can rise rapidly and the reverse carry trade can take on a life of its own. During January’s volatility in U.S. stock assets, FXY has crossed above its 50-day moving average. If the risk off volatility has truly run its course due to the European Central Bank’s mammoth QE promise and the Bank of Japan’s existing promises, FXY should stabilize rather than climb. Conversely, additional gains for FXY would suggest additional unwinding of the yen carry trade as well as a high probability of heavy volume selling of stock assets. The potential for the carry trade to unwind and the yen’s historical record as a safer haven currency is the reason for its inclusion in the FTSE Custom Multi-Asset Stock Hedge Index. This index that my Pacific Park Financial colleague and I created with FTSE-Russell- the one that many are already calling “MASH” – holds the franc, yen, dollar and gold. It also owns long maturity treasuries, zero coupon bonds, inflation-protected securities, munis, German bunds and Japanese government bonds. Year-to-date, the FTSE Custom Multi-Asset Stock Hedge Index is up 4.5%. Shouldn’t investors just play market-based securities in a way that has worked so well during the Federal Reserve’s QE3? The shock-and-awe, 1.5 trillion dollar, open-ended, bond-buying bazooka that gave U.S. stocks double-digit percentage gains in 2012, 2013 and 2014? After all, the European Central Bank (ECB) is proffering $1.1 trillion euros into 2016. The problem in the comparison between these programs is that 80% of the sovereign bonds are being bought by the national central banks and not the the ECB itself. This means that each country (e.g., Austria, Belgium, France, Germany, Greece, Italy, Spain, etc.) is responsible for its own default risk. It follows that I might be willing to add a fund like HEWG to my barbell portfolio , alongside several existing components such as the iShares S&P 100 ETF (NYSEARCA: OEF ), the Health Care Select Sect SPDR ETF (NYSEARCA: XLV ) and the Vanguard Dividend Appreciation ETF (NYSEARCA: VIG ). I might be a bit more skeptical of the i Shares Currency Hedged MSCI EAFE ETF (NYSEARCA: HEFA ), simply because of the drag of extreme debtors on the periphery of Europe (e.g., Spain, Portugal, Greece, etc.). By the same token, I have slowly increased exposure over the last three months to a number of existing holdings on the other side of the barbell. They include GLD, the i Shares 10-20 Year Treasury Bond ETF (NYSEARCA: TLH ), the Vanguard Extended Duration Treasury ETF (NYSEARCA: EDV ) and, more recently, FXY. Remember, multi-asset stock hedging does not mean that your dynamic hedging loses when riskier stock assets win. On the contrary. Both sides of the barbell tend to perform in late-stage bulls. Disclosure: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships.

GAMCO Global Gold, Natural Resources & Income Trust And GAMCO Natural Resources, Gold & Income Trust: Is It Time To Sell?

Summary The discounts at GGN and GNT have booth narrowed since I highlighted them. If you were looking for a quick gain, it might make sense to take or at least look at taking profits. With recent history as a guide, however, there could be a little more narrowing to go. I wrote articles about GAMCO Global Gold, Natural Resources & Income Trust (NYSEMKT: GGN ) and GAMCO Natural Resources, Gold & Income Trust (NYSE: GNT ) earlier this month, highlighting an opportunity to take advantage of discounts that appeared likely to narrow. That’s started to happen. If you were looking for a quick gain, now is the time start thinking about a sale. This pair of closed-end funds, or CEFs, from Gabelli invest in exactly what their names suggest, precious metals and other natural resources. The big difference is that Natural Resources, Gold & Income Trust has a broader mandate, so it includes specialty chemicals, agriculture, and machinery. That makes it a little more diversified, though not by much. In addition, Global Gold, Natural Resources & Income makes use of leverage, something that its sibling does not do. Both CEFs use options to generate income, their main goal. The quickie When I wrote about GGN and GNT on the seventh and eighth of January, respectively, their discounts were roughly 5% and 6%. At the close of trading on the 21st, those discounts had narrowed to around 1% for GGN and 4% for GNT. This is in keeping with recent history. Toward the end of the year, this pairs’ discounts have widened only to narrow as the new year progresses. At this point, the price of GGN has increased around 8% and the price of GNT has advanced about 5.5%. There was also a $0.07 per share dividend that I didn’t included in either return figure. On an absolute basis those aren’t numbers to write home about. However, if the goal was a short term trade, that quick bounce happened in about two weeks. Annualized, that’s a great return. If you were looking to benefit from the discount narrowing, you should be thinking about selling. That said, there could be a little more upside. Based on the price performance of GGN over the last 18 months, it looks like a 3% premium would be a good selling point. Selling GNT when the discount narrows to zero looks about the right point for that CEF. Clearly, I can’t guarantee that either fund will get to those points, but that’s what a rough average of the three narrowest discounts (or widest premiums, as the case may be) over the past year and half suggest as sell targets. That said, if you want the quick gain, you might want to just lock in now. Longer term? There’s another angle here, however, that could merit you sticking around longer. Both GGN and GNT provide exposure to hard assets. This can provide a safe haven during turbulent times. If you think the market is at or nearing a turning point, either of these funds could be a ballast for your portfolio. And if you include distributions into returns (essentially looking at total return), the funds have solid track records. Both have outperformed Vanguard Precious Metals and Mining Fund (MUTF: VGPMX ) over the trailing three year period through year-end 2014, according to Morningstar. And GGN, which has been around longer, also outperformed Vanguard’s offering over the trailing five year period. So, comparatively speaking, they are a decent way to get exposure to this sector. Note that all of the funds lost ground over the trailing three- and five-year periods, so I am discussing relative performance not absolute performance. So, at the end of the day, there’s a reason to sit tight if you bought GGN or GNT for exposure to gold and natural resources. However, if the potential narrowing of the discount was your reason for buying either of these, you could lock in quick gains now. If you are hoping for a little more gain, you should, at the very least, start thinking about when you want to get out. For GGN I think a 3% premium could be a good selling point. For GNT I would be looking to sell when the discount narrows to 0%.