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3 ETFs To Buy As Housing Picks Up

Though the U.S. housing market saw a rough first quarter, sales are picking up as the spring selling season gets into full swing. The season usually warms up in March and sees maximum business till the back-to-school season in September. The spring selling season generally brings in improving sales trends. Higher job numbers, a reassuring economy, moderating home price gains, affordable interest/mortgage rates, rising rentals, recent federal initiatives to increase mortgage availability and a limited supply of inventory point to an inevitable pickup in the housing market. Even though the U.S. economy faltered in the first quarter of the year, this can mostly be attributed to the strong dollar and a harsh winter. The economy is expected to improve later this year. Rising consumer confidence, a reassuring economy and improving employment trends should lead to better home sales as the year progresses. Last year saw slowing housing price gains on stabilizing demand. The trend is expected to continue in 2015 as well. Moreover, housing should remain an affordable option in 2015, as mortgage rates are still below historical levels. Even if mortgage rates rise in the latter half of the year – as is widely anticipated – housing will likely remain reasonable. Apartment rental rates have also continued to move up, making home buying more attractive than renting. To add to the positives, plans from the White House to cut premiums on mortgage insurance should increase mortgage availability and thereby encourage home buying among first-time homebuyers. With oil prices continuing their downward journey and the economy largely on the mend, the desire to own new homes should get a shot in the arm. ETFs to Tap the Sector Given the improving fundamentals, the homebuilding sector deserves a closer look. For investors willing to play the space in a less risky way, an ETF approach can be a good idea. This technique can help to spread out assets among a wide variety of companies and reduce company-specific risk at a very low cost. Below, we have highlighted three ETFs that are worth looking into. SPDR Homebuilders ETF (NYSEARCA: XHB ) XHB is one of the more popular homebuilding ETFs in the market today, with assets under management of around $1.58 billion and a trading volume of roughly 4.28 million shares a day. The fund has an expense ratio of 35 basis points. The fund holds 37 stocks in its basket, with 50% of the assets going to mid caps and 6% comprising large-cap stocks. Despite the smaller holding pattern, the fund does not appear to be concentrated in the top 10 holdings. The fund has just 33.9% in the top 10, with Aaron’s Inc. (NYSE: AAN ), A. O. Smith Corporation (NYSE: AOS ) and Tempur Sealy International Inc. (NYSE: TPX ) occupying the top 3 positions with asset allocation of 3.84%, 3.54% and 3.41%, respectively. The fund’s assets include 32.83% homebuilders, 29.27% building products and 15.59% home furnishing retail stocks. The fund carries a Zacks Rank #3 (Hold), with a high level of risk. iShares U.S. Home Construction ETF (NYSEARCA: ITB ) Another popular choice in the homebuilding sector is ITB, which tracks the Dow Jones U.S. Select Home Construction Index. It has $2.03 billion in assets, with a trading volume of roughly 4.1 million shares a day, while its expense ratio is just 45 basis points. The fund holds 37 stocks in its basket, of which only 11% are large cap securities. The fund has a concentrated approach in the top 10 holdings, with 57.7% of its asset base invested in them. Among individual holdings, the top stocks in the ETF include D. R. Horton, Inc. (NYSE: DHI ), Lennar (NYSE: LEN ) and Pulte (NYSE: PHM ), with asset allocation of 10.61%, 10.45% and 8.30%, respectively. Homebuilders accounts for around 65% of this fund. The fund carries a Zacks Rank #3 (Hold), with a high level of risk. PowerShares Dynamic Building & Construction Portfolio ETF (NYSEARCA: PKB ) This ETF comprises around 30 housing companies, and has its assets invested across all classes of the market spectrum. Engineering and construction stocks comprise 21% of the fund, followed by building materials companies that account for 17%. A look at the style pattern reveals that the fund has a preference for growth stocks. The fund manages an asset base of $56.4 million, and has an expense ratio of 63 basis points. The fund has only 15% in large cap securities and 46.3% in the top 10 holdings. The fund carries a Zacks Rank #3 (Hold), with a high level of risk. To Sum Up While the housing market slowed down in the first quarter, homebuilders are increasingly optimistic of the spring selling season. However, increasing competitive pressure and rising land and construction cost amid moderating home price increases are the headwinds in the housing market. Original Post

3 Small-Cap Growth ETFs To Buy For Q3

Contrary to popular believe, the Fed dove is still to fly far from the border of the U.S. economy. In its latest June meeting, the Fed remained accommodative and hinted at a slower rate hike trail when the step is actually taken. To add to this, the Fed slashed its projection for the benchmark interest rate for 2016 and 2017, though the guidance for the ongoing year was kept unchanged. This indirectly promised investors a few more months of cheap money inflows. On the other hand, the U.S. economy is taking root. Fed officials even went on to say that the rebounding U.S. economy is strong enough to endure one or two rate hikes this year and insisted that the rate hike decision will be solely economic data reliant. The ”soft patch” of Q1 has disappeared with “moderate” economic growth momentum in Q2. The economy wrote a turnaround story with better than expected job growth data along with strong construction spending, automobile sales and housing numbers. Some dampeners of Q1 including a harsh winter and strikes at the Western Coast ports will not be present in Q3, though a relatively stronger greenback (against a basket of currencies) might cause occasional threats to U.S. exports and the large-cap stocks. This economic development set the stage for the small-cap growth ETF’s outperformance. Small cap stocks are broadly leading the market higher this year and are comfortably surpassing their large cap cousins. The ultra-popular small cap ETF iShares Russell 2000 ETF (NYSEARCA: IWM ) is up 6.9% year to date (as of June 19, 2015) against 2.4% gains in the SPDR S&P 500 ETF Trust (NYSEARCA: SPY ) . This trend will likely continue in the coming quarter, presuming that a risk-on sentiment will hang on in the marketplace and the focus will stay on the domestically exposed stocks. Investors should note that small-cap stocks are seen as an indicator of the domestic economy. These pint-sized companies deal mainly with the domestic economy. Due to their less global exposure, these stocks remain relatively less ruffled by a strong dollar. So this part of capitalization would be one of the best bets if the Fed takes the rate hike plunge later on the year. Moreover, indecisiveness is prevalent in the global markets due to Greek debt worries, slowdown in China and Japan, rate issues in the U.S. and the consequent movement in the greenback and finally the volatility in oil prices. These happenings might weigh on large-cap stocks leaving small-cap growth stocks and ETFs as intriguing choices. These growth focused small caps have actually outperformed the broad market small cap ETFs lately by a pretty wide margin and have the potential to carry forward the trend. Small-Cap Growth ETFs Upgraded to Buy Rating Below, we highlight three small-cap growth ETFs all with Zacks Rank #1 (Strong Buy) or #2 (Buy), any of which could be an excellent play in the third quarter. Investors should note that each of these ETFs went through a Zacks rank upgrade recently. SPDR S&P 600 Small Cap Growth ETF (NYSEARCA: SLYG ) This ETF was upgraded from Zacks ETF Rank #3 (Hold) to Zacks ETF Rank #1. The ETF tracks the S&P SmallCap 600 Growth Index. Holding 351 securities, this fund is also well spread out across each sector and security. Each security accounts for less than 1.27%, while sector wise, Financials, Consumer Discretionary, Healthcare, Information Technology and Industrials take the top five spots each with double-digit exposure, leaving a decent allocation for the utilities and telecom sectors. This $575 million fund trades at a paltry volume of 20,000 shares a day suggesting additional cost beyond the expense ratio of 0.15%. The ETF is up 9.6% year to date (as of June 19, 2015). iShares Morningstar Small-Cap Growth ETF (NYSEARCA: JKK ) The product was upgraded from Zacks ETF Rank #3 to #2. This is an overlooked choice in the small cap space with AUM of $141.5 million and average trading volume of close to 2000 shares a day. The 252-stock fund tracks the Morningstar Small Growth Index. It is well spread out across components as none of these holds more than 1.15% of assets. Sector wise, information technology (28.90%), and healthcare (22%) take the top two spots. The fund charges 30 bps in annual fees from investors and has gained 10.4% so far this year. Guggenheim S&P SmallCap 600 Pure Growth ETF (NYSEARCA: RZG ) This ETF was upgraded from Zacks ETF Rank #3 to #1. The fund targets the small cap U.S. market and follows the S&P SmallCap 600 Pure Growth Index. Holding 132 securities in its basket, it is well spread out across components with each holding less than 2.17%. Financials, Healthcare, Consumer Discretionary, Information Technology, and Industrials are the top five sectors with double-digit allocation each. The fund has amassed $166 million in its asset base and trades in light volume of about 20,000 shares a day on average. Expense ratio comes in at 0.35%. The product has surged 14.5% so far in the year. Original Post

GREK ETF Surging On Hopes Of A Deal

The latest proposals by the Greek government have raised hopes that a deal might be struck soon with the country’s creditors to stop Greece from defaulting on its debt. Greece’s Prime Minister Alexi Tsipras is expected to meet Christine Lagarde, the head of the International Monetary Fund, Mario Draghi, the president of the European Central Bank, and the Dutch finance minister today to finalize the proposals in the agreement. The Greek government has come out with a slew of measures that will focus on fiscal consolidation and tax increases to attain a surplus of 1% this year, followed by 2% and 3% surpluses over the next two years. According to the new proposal, there will be some changes in the VAT structure and the main rate would be fixed at 23%. Also, the corporate tax rate would be increased from 26% to 29% in 2016 and companies will have to pay a surcharge of 12% on profits over €500,000. Additionally, the retirement age would be slowly raised, which is expected to result in savings of €60 million this year. Moreover, workers’ and employers’ contributions to the pension system would also be hiked. The recent euphoria about the deal has led to a rally in Greece stocks and its related ETF. The Greek ETF – Global X FTSE Greece 20 ETF (NYSEARCA: GREK ) – has gained roughly 15% in the past one week. The rally might continue if the deal is indeed sealed and Greece manages to avert its default. Below, we have highlighted the GREK ETF in detail for investors keen on enjoying the Grecian ride. GREK ETF in Focus The ETF tracks the FTSE/ATHEX Custom Capped Index that is designed to reflect the performance of the 20 largest securities listed on the Athens Stock Exchange. The product holds 22 stocks in the basket and is heavily concentrated in the top 5 holdings that make up for a combined 48% of assets. Coca-Cola (NYSE: KO ), Hellenic Telecommunications ( OTCPK:HLTOY ) and National Bank of Greece (NYSE: NBG ) are the top three holdings. Financials dominates the fund with one-fourth assets, followed by Consumer Discretionary with 17.6% and Consumer Staples with 16.6%. The ETF has around $327.1 million in its asset base and sees a moderate trading volume of more than 800,000. The fund charges 55 bps in annual fees from investors and has a dividend yield of 1.17%. GREK currently has a Zacks Rank #4 (Sell) with a High-risk outlook. Bottom Line The condition of Greek banks is worsening by the day and it is almost on the brink of a collapse as savers have lost all confidence and continue to pull out money. In fact, the European Central Bank has sanctioned a release of more than €900 million to Greek banks on Tuesday so as to enable them to remain open. Some economists fear that these austerity measures are not feasible and it might worsen the recession that Greece re-entered last quarter. Lagarde also believes the measures are only a stopgap solution and are inadequate to bring Greece out of the crisis. Original Post