Tag Archives: restaurants

Sector ETF Winners And Losers From The Winter Storm

Finally, the northeast U.S. encountered the winter storm Jonas defying widespread talks about a warmer winter this year. Freezing temperatures not only took the region under the quilt of heavy snow, but also left a deep impact on the U.S. economy. Though the snow storm has stopped, up to almost 30 inches of snow will likely paralyze economic activity for the coming few days. However, pros and cons are probably related to every event. Among all the sectors, there are a few that stand to gain from this blizzard, and others that are likely to be badly hit. Below we highlight some sectors which are in focus after the winter storm Jonas. Gainers Energy Why the energy sector is a clear winner of this weather disruption is anybody’s guess. As almost 50% of Americans use natural gas for heating purposes, expectations of higher usage of natural gas pushed up the commodity’s prices recently. Not only this, the positive side of increased heating demand was also felt in to the most beleaguered commodity – oil. As a result, the First Trust ISE-Revere Natural Gas Index Fund (NYSEARCA: FCG ) added over 5% on January 22 while the crude oil ETF, the United States Oil ETF (NYSEARCA: USO ) , advanced about 8.3% on the same day both on the cold snap and compelling valuation (read : Oil and Energy ETFs That Hit All-Time Lows ). Retail Retail sales have been a cause of concern for quite some time now. The key barometer of economic well-being is not keeping pace with economic growth. Retail and food services sales declined 0.1% in December, while the consensus had estimated the figure to remain unchanged. Meanwhile, retail sales increased 2.1% in 2015, its weakest yearly progress since 2009. One reason for this could be that after seeing one of the worst recessions few years ago, consumers are saving more and purchasing less. But the latest monthly slump was mainly due to the second-most mild December since late 1800s which debarred consumers to shell out on winter essentials like sweaters, coats or boots (read: Weak Retail Sales Hurt These ETFs; What Lies Ahead? ). So, the latest volley of snow and the expectation of chilly days ahead may boost sales of winter garments and benefit retailers. This theory put retail ETFs including the SPDR S&P Retail ETF (NYSEARCA: XRT ) , the Market Vectors Retail ETF (NYSEARCA: RTH ) and the PowerShares Dynamic Retail Portfolio ETF (NYSEARCA: PMR ) in focus. XRT, RTH and PMR were up 1.8%, 1.9% and 1.7%, respectively, on January 22. Losers Transportation Since roads, railways and runways are under the coverlet of almost record amounts of snow and people are locked inside, transportation stocks and the related ETFs are expected to be hurt. As per CNN , the Long Island Rail Road, suffered considerable damage during the storm and five out of its 12 branches- that make up about 20% of traffic in the rail network – will remain closed even after the storm, for repairs. Roadways are still not ready for communication and will likely leave an adverse impact on transportation ETFs like the SPDR S&P Transportation ETF (NYSEARCA: XTN ) and the iShares Transportation Average ETF (NYSEARCA: IYT ) . Though XTN and IYT added 1.9% and 1.3% respectively on January 22, 2016 in line with the broader market rally, their first-quarter results are likely to have a bearing of this cold snap. Both ETFs have a Zacks ETF Rank #4 (Sell). Airlines This sector is yet another victim of the whiteout. Such a momentous snow event has already cancelled about 10,000 flights. A rapid resumption seems implausible given the loads of snow on the runways and the still-unclear weather. Though airlines are trying to cope with storm-related losses by issuing weather waivers for fliers, we believe that airlines have to bear with some losses as travel demand has weakened. So, investors need to be watchful on the airline ETF, the U.S. Global Jets ETF (NYSEARCA: JETS ) . Like transportation ETFs, this airline ETF may also have to face some weakness in the Q1 earnings results. Hospitality Tourism and hospitality sectors are also likely to be hit during this snow storm. So, the PowerShares DWA Consumer Cyclicals Momentum Portfolio (NYSEARCA: PEZ ) which invests over 25% in Hotels, Restaurants & Leisure and over 11% in Airlines, or the PowerShares Dynamic Leisure and Entertainment Portfolio ETF (NYSEARCA: PEJ ) having considerable weights in restaurants, resorts and airlines are likely to feel the brunt of the snow storm as the underlying companies will do less business as long as the freezing phase continues. The Restaurant ETF (NASDAQ: BITE ) , otherwise a strong bet on the improving restaurant sector, might also see some weakness thanks to a temporary slack in sales. Link to the original post on Zacks.com

Valuation Dashboard: Consumer Discretionary Sector

Summary 4 key fundamental factors are reported across industries in the Consumer Discretionary sector. They give valuation status of an industry relative to its historical average. They give a reference for picking stocks in each industry. This is part of a monthly series of articles giving a valuation dashboard in sectors and industries. The idea is to follow up a certain number of fundamental factors for every sector, to compare them to historical averages. This article covers Consumer Discretionary. The choice of the fundamental ratios used in this study has been justified here and here . You can find in this article numbers that may be useful in a top-down approach. There is no analysis of individual stocks. You can refine your research reading articles by industry experts here . A link to a list of stocks to consider is provided in the conclusion. Methodology Four industry factors calculated by portfolio123 are extracted from the database: Price/Earnings (P/E), Price to sales (P/S), Price to free cash flow (P/FCF), Return on Equity (ROE). They are compared with their own historical averages “Avg”. The difference is measured in percentage for valuation ratios and in absolute for ROE, and named “D-xxx” if xxx is the factor’s name (for example D-P/E for price/earnings). The industry factors are proprietary data from the platform. The calculation aims at eliminating extreme values and size biases, which is necessary when going out of a large cap universe. These factors are not representative of capital-weighted indices. They are useful as reference values for picking stocks in an industry, not for ETF investors. Industry valuation table on 11/26/2015 The next table reports the 4 industry factors. For each factor, the next “Avg” column gives its average between January 1999 and October 2015, taken as an arbitrary reference of fair valuation. The next “D-xxx” column is the difference as explained above. So there are 3 columns for each ratio.   P/E Avg D- P/E P/S Avg D- P/S P/FCF Avg D- P/FCF ROE Avg D-ROE Auto Components 15.13 15.33 1.30% 0.83 0.62 -33.87% 33.88 21.23 -59.59% 10.79 3.9 6.89 Automobiles 17.6 17.67 0.40% 1.19 1.06 -12.26% 16.17 21.97 26.40% 10.79 0.21 10.58 Household Durables 17.52 15.46 -13.32% 0.85 0.59 -44.07% 30.1 16.33 -84.32% 9.74 5.3 4.44 Leisure Equip.&Products 22.9 17.82 -28.51% 1.19 0.84 -41.67% 30.76 22.05 -39.50% 9.14 2.63 6.51 Textile,Apparel,Luxury 17.93 16.34 -9.73% 1.02 0.71 -43.66% 27.03 17.23 -56.88% 11.81 7 4.81 Hotels, Restaurants, Leisure 27.67 21.67 -27.69% 1.38 1.04 -32.69% 26.98 24.18 -11.58% 9.24 4.51 4.73 Div. Consumer Services* 27.49 21.49 -27.92% 1.37 1.4 2.14% 17.28 18.64 7.30% 0.36 11.35 -10.99 Media 21.27 23.31 8.75% 1.61 1.55 -3.87% 24.79 19.9 -24.57% 3.43 -3.45 6.88 Distributors 20.07 14.32 -40.15% 1.05 0.48 -118.75% 37.45 16.28 -130.04% 10.21 3.18 7.03 Internet&Catalog Retail 39.1 37.37 -4.63% 1.38 1.8 23.33% 38.36 32.11 -19.46% 5.83 -14.7 20.53 Multiline Retail 20.32 19.41 -4.69% 0.5 0.48 -4.17% 25.87 26.81 3.51% 7.04 10.44 -3.4 Specialty Retail 18.69 17.95 -4.12% 0.58 0.56 -3.57% 24.34 21.87 -11.29% 11.69 9.85 1.84 *Averages since 2005 Valuation The following charts give an idea of the current status of industries relative to their historical average. In all cases, the higher the better. Price/Earnings: Price/Sales: Price/Free Cash Flow: Quality (ROE) Relative Momentum The next chart compares the price action of the SPDR Select Sector ETF ( XLY ) with SPY (chart from freestockcharts.com). (click to enlarge) Conclusion The Consumer Discretionary sector has outperformed the broad market by more than 4% in the last 3 months. It hit a new all-time high this week. The 5 most prominent S&P 500 consumer discretionary stocks in the recent rally are Amazon (NASDAQ: AMZN ), Cablevision Systems (NYSE: CVC ), General Motors (NYSE: GM ), Nike (NYSE: NKE ), Viacom (NASDAQ: VIAB ). AMZN and NKE have hit an all-time high this week. Car and motorcycle manufacturers (Automobiles) look the most attractive industry in the sector: it is fairly priced in P/E, under-priced in P/FCF, and ROE is above the historical average. The industries with an improvement in valuation factors since last month are Auto Components, Household Durables, Leisure equipment and products, Hotels and Restaurants, Specialty Retail. However, there may be quality stocks at a reasonable price in any industry. To check them out, you can compare individual fundamental factors to the industry factors provided in the table. As an example, a list of stocks in Consumer Discretionary beating their industry factors is provided on this page . If you want to stay informed of my updates on this topic and other articles, click the “Follow” tab at the top of this article.

Buy 4 Retail Funds As A Warm Up To The Black Friday Spree

Last Friday, the markets buoyed up on earnings results from certain retail primes. The Consumer Discretionary Select Sector SPDR ETF (NYSEARCA: XLY ) jumped 1.2% and was the biggest gainer among the S&P 500 components. Apart from positive results, the retail sector also has the upcoming holiday season to draw investor focus. The positives should boost retailers, translating into gains for the sector’s mutual funds as well. So, picking favorably ranked retail mutual funds will be prudent as these promise investors rich rewards this holiday season. Earnings Numbers Including releases before the opening bell on Nov. 18, 33 of the 43 retailers in the S&P 500 index have reported results. Total earnings for these retailers gained 4.4% year on year on 5.2% higher revenues. Of these companies, 57.6% beat EPS estimates and 42.4% surpassed on revenues. However, there were some robust results that came in afterward, which gave a boost to the growth numbers. Last Friday, Abercrombie & Fitch Co.’s (NYSE: ANF ) stock soared 25% after reporting quarterly adjusted earnings of 48 cents per share, significantly ahead of the Zacks Consensus Estimate of 19 cents. Moreover, earnings increased 14.3% year over year. Ross Stores Inc. (NASDAQ: ROST ) also reported better-than-anticipated top and bottom lines for the third quarter of fiscal 2015 and retained its outlook for the fourth quarter. Its shares jumped 10%. Foot Locker, Inc.’s (NYSE: FL ) shares gained 5.7% after its adjusted earnings of $1.00 per share came ahead of the Zacks Consensus Estimate of 94 cents, and jumped 20% year over year. Separately, Nike, Inc. (NYSE: NKE ) added 5.5% following its announcement of a new share repurchase program worth $12 billion, along with a hike in its dividend and a two-for-one stock split. Nike jumped to a 52-week high. Also, its weekly gain of 8.9% was the best since the week ended Sept. 26, 2014. In fact, the positive results were not a one-day event as it followed great earnings news from behemoths like Amazon.com (NASDAQ: AMZN ), Home Depot (NYSE: HD ), McDonald’s (NYSE: MCD ), BJ’s Restaurants (NASDAQ: BJRI ) and eBay Inc. (NASDAQ: EBAY ). These retail top performers have historically performed well and their stock prices have been on the rise. Upward estimate revisions based on their positive outlook should also translate into stocks moving up as the holiday season heats up. Holiday Season to be Positive Tomorrow is Thanksgiving Day. And after the turkey and prayers, America will loosen its purse strings for the year’s busiest shopping day on Black Friday. So we are on the verge of this year’s mega shopping spree, and thanks to a rebounding economy, a falling unemployment rate and improved consumer sentiment, sales should see a rise. Several factors indicate that there will be an uptrend in holiday sales this year. According to the National Retail Federation, holiday sales, excluding gasoline, restaurants and cars, will increase 3.7% on a year-over-year basis. A yearly increase of 3.7% is substantially higher than the average increase of 2.5% recorded over the last 10 years. Data compiled by eMarketer suggests a 5.7% jump in holiday sales (November and December) to $885.7 billion against 3.2% growth projected earlier. Retail e-commerce holiday season sales are anticipated to increase 13.9%, and represent approximately 9% of total sales this season (or $79.4 billion), up from 8.3% last year. Moreover, the increase in seasonal hiring by retailers, the slump in fuel prices and record wage growth are all in favor of consumers. These factors are likely to result in a strong holiday shopping season. A significant improvement in the labor market situation and lower fuel costs have increased disposable incomes. Another major factor encouraging spending this holiday season is the continued slump in fuel prices. The ability and willingness to spend should lead to jingling cash registers this time. Separately, retailers are efficiently allocating their capital toward a multi-channel growth strategy focused on improving merchandise offerings, and developing IT infrastructure to enhance web and mobile experiences of customers among others. Retail Mutual Funds in Focus Below we present 4 mutual funds from the retail sector that should be on investors’ radar now. They carry either 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 also on the likely future success of the fund. Putnam Global Consumer Fund A (MUTF: PGCOX ) invests in mid to large companies that are involved in the manufacture, sale or distribution of consumer staples and consumer discretionary products and services. PGCOX uses the “blend” strategy to invest in common stocks of companies. PGCOX currently carries a Zacks Mutual Fund Rank #1. PGCOX has gained, respectively, 6% and 7% in the year-to-date and 1-year periods. The 3- and 5-year annualized returns are 14.9% and 11.1%, respectively. Annual expense ratio of 1.26% is, however, higher than the category average of 1.21%. Fidelity Advisor Consumer Discretionary Fund A (MUTF: FCNAX ) seeks growth of capital. The fund invests mostly in securities issued by firms that are involved in manufacture and distribution of consumer discretionary products and services. The fund uses fundamental analysis and also looks into economic and market conditions for investment decisions. FCNAX currently carries a Zacks Mutual Fund Rank #1. The fund has gained 7% and 11.3%, respectively, over year-to-date and 1-year periods. The 3- and 5-year annualized returns are 18.6% and 15.1%, respectively. Annual expense ratio of 1.14% is lower than the category average of 1.41%. Rydex Retailing Fund A (MUTF: RYRTX ) invests most of its assets in retailers that are traded in the US and also in derivatives. RYRTX invests significantly in small to mid-sized retail companies. RYRTX currently carries a Zacks Mutual Fund Rank #2. RYRTX has lost 0.1% year to date, but is up 3.5% over the last 1-year period. The 3- and 5-year annualized returns are 14.2% and 14%, respectively. Annual expense ratio of 1.58% is, however, higher than the category average of 1.41%. Fidelity Select Retailing Portfolio (MUTF: FSRPX ) seeks growth of capital. FSRPX invests a large chunk of its assets in securities of retailing companies that are traded within the domestic boundary. These firms are involved in merchandising finished goods and services to consumers. FSRPX currently carries a Zacks Mutual Fund Rank #1. FSRPX has gained, respectively, 20.3% and 26.4% in the year-to-date and 1-year periods. The 3- and 5-year annualized returns are 25.1% and 21.3%, respectively. Annual expense ratio of 0.81% is higher than the category average of 1.41%. Original Post