Tag Archives: top-ideas

VelocityShares 3X Long Crude ETN Hurts As Brent Dips Below $50

The price of Brent oil fell to less than $50 per barrel on Monday evening for the first time in six months. The move is being seen as confirmation that an era of moderate oil prices is taking over as world supply outstrips demand . Those with shares in some ETFs tracking the black liquid won’t be happy to hear it. The VelocityShares 3X Long Crude ETN (NYSEARCA: UWTI ) linked to the S&P GSCI Crude Oil Index Excess Return has lost more than 95 percent of its value over the last year. The ETF is leveraged and multiplies the gains or losses in the oil market by three times. It’s been all losses for the last twelve months, and traders have felt it. Oil prices head lower On Monday the price of a barrel of Brent hit below $50 for the first time in six months. Back in January the benchmark tested $45. David Hufton of PVM told the Wall Street Journal that: The prospects of a second half-year price rebound have evaporated and there is a clear and present danger of prices revisiting the previous lows of the year. Barclays says that there is little sign of a slow down in the production of oil by its metrics. Its index of oil-pumpers covers about 40 percent of the world supply. With the market moving in the wrong direction for those long the VelocityShares 3X Long Crude ETN linked to the S&P GSCI Crude Oil Index Excess Return, it’s clear that there could be further pain ahead. VelocityShares 3X Long Crude ETN pain mounts VelocityShares 3X Long Crude ETN linked to the S&P GSCI Crude Oil Index Excess Return is a popular instrument for betting on movement in the oil market, but those who were looking for gains have been badly wounded by the price movements in recent months. After the awesome fall in the price of oil at the end of 2014 and the beginning of 2015, many traders thought that closing rigs in the US and unrest in the Middle East, couple with higher demand from economic recovery in the US, would boost the price. That held true for a short period before expectations of supply from Iran, and a fall in activity in China this Summer brought about a run in the opposite direction. The price of a barrel of Brent tested a low of $45 the last time oil prices were compressed by the market outlook. It’s not clear if they’re heading toward that level again. Bank of America analyst Sabine Schels says “The market is very skeptical of shale production declines.” The price of oil is likely to fall further, says Schels, because pumpers don’t seem to be cutting down on their output. BMI research says “A retest of Brent crude’s 2015 low around $45 per barrel looks inevitable given current ample market supply and intensifying bearish market sentiment toward prices.” That’s bad news for any thinking about going long on the VelocityShares 3X Long Crude ETN linked to the S&P GSCI Crude Oil Index Excess Return. Share this article with a colleague

Lipper’s Q2 2015 U.S. Mutual Funds And Exchange-Traded Products Snapshot

By Tom Roseen Despite a jump in the VIX and ongoing global uncertainty, total net assets (TNA) in the conventional funds business (not including exchange-traded products [ETPs] and variable insurance products [VIPs]) remained above the $15-trillion mark for the fifth consecutive quarter. During Q2 2015 investors continued to shun U.S. equities, causing the multi-cap funds macro-group to suffer the largest relative (-8.61%) and absolute (-$110.4 billion) decline in total assets under management from the prior quarter-end. With the European Central Bank’s (ECB’s) providing quantitative easing during the first half of the year and U.K. stocks getting a big lift after David Cameron’s conservative party won its reelection bid in May, the developed international markets funds macro-group experienced the largest relative (+3.06%) and absolute (+$50.5 billion) increase in TNA for the quarter. TNA in U.S. ETPs remained above the $2.0-trillion mark for the third consecutive quarter. The long-term taxable bond ETPs macro-group witnessed the largest relative decline (-5.29%) in total assets under management from the prior quarter-end, while U.S. Diversified Equity ETPs experienced the largest absolute decline (-$19.0 billion) in TNA for the quarter. The developed international markets ETPs macro-group experienced the largest relative (+11.52%) and absolute (+$33.9 billion) increase in TNA for the quarter. In the current quarter’s issue of Lipper’s U.S. Mutual Funds and Exchange-Traded Products Snapshot, we feature a summary of total net assets, estimated net flows, and new fund creations for conventional funds and exchange-traded products for Q2 2015, comparing those changes to prior quarters and highlighting the largest individual gainers and losers of both groups. Lipper’s U.S. Mutual Funds and Exchange-Traded Products Snapshot provides readers a powerful, easy-to-use guide and quick reference tool to help them discern fund trends for the quarter. If you’d like to read the entire Q2 2015 Fund Industry Insight Report with all its tables and charts, please click here . Share this article with a colleague

Best And Worst Q3’15: Materials ETFs, Mutual Funds And Key Holdings

Summary Materials sector ranks sixth in Q3’15. Based on an aggregation of ratings of 12 ETFs and 15 mutual funds. FMAT is our top-rated Materials ETF and FSCHX is our top-rated Materials mutual fund. The Materials sector ranks sixth out of the 10 sectors as detailed in our Q3’15 Sector Ratings for ETFs and Mutual Funds report. It gets our Neutral rating, which is based on an aggregation of ratings of 12 ETFs and 15 mutual funds in the Materials sector. See a recap of our Q2’15 Sector Ratings here. Figures 1 ranks all nine ETFs and Figure 2 ranks the five best and five worst mutual funds in the sector. Not all Materials sector ETFs and mutual funds are created the same. The number of holdings varies widely (from 27 to 139). This variation creates drastically different investment implications and, therefore, ratings. Investors seeking exposure to the Materials sector should buy one of the Attractive-or-better rated ETFs or mutual funds from Figures 1 and 2. Figure 1: ETFs with the Best & Worst Ratings – Top 5 (click to enlarge) * Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity. Sources: New Constructs, LLC and company filings The PowerShares DWA Basic Materials Momentum Portfolio ETF (NYSEARCA: PYZ ), the ProShares Ultra Basic Materials ETF (NYSEARCA: UYM ) and the Guggenheim S&P Equal Weight Materials ETF (NYSEARCA: RTM ) are excluded from Figure 1 because their total net assets are below $100 million and do not meet our liquidity minimums. Figure 2: Mutual Funds with the Best & Worst Ratings – Top 5 (click to enlarge) * Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity. Sources: New Constructs, LLC and company filings The Fidelity MSCI Materials ETF (NYSEARCA: FMAT ) is the top-rated Materials ETF and the Fidelity Select Chemicals Portfolio (MUTF: FSCHX ) is the top-rated Materials mutual fund. FMAT earns a Neutral rating and FSCHX earns an Attractive rating. The iShares Goldman Sachs Natural Resources ETF (NYSEARCA: IGE ) is the worst-rated Materials ETF and the Rydex Series Basic Materials Fund (MUTF: RYBMX ) is the worst-rated Materials mutual fund. IGE earns a Neutral rating and RYBMX earns a Very Dangerous rating. 172 stocks of the 3000+ we cover are classified as Materials stocks. Compass Minerals International, Inc. (NYSE: CMP ) is one of our favorite stocks held by Materials ETFs and mutual funds and earns our Attractive rating. Since 2012, Compass Minerals has grown after-tax profit ( NOPAT ) by 18% compounded annually. The company’s return on invested capital ( ROIC ) has also improved the past three years and is currently a top-quintile 18%. In spite of Compass Minerals’ impressive fundamental performance, the stock remains undervalued. At its current price of ~$80/share, CMP has a price to economic book value ( PEBV ) ratio of 1.0. This ratio implies that the market expects NOPAT to never grow from its current level. However, if Compass Minerals can grow NOPAT by 6% compounded annually for the next six years , the stock is worth $104/share today – a 30% upside. Hecla Mining Company (NYSE: HL ) is one of our least favorite stocks held by Materials ETFs and mutual funds and earns our Very Dangerous rating. Since 2011, Hecla’s NOPAT has declined by 46% compounded annually while revenue has only grown by 1% compounded annually. Hecla’s bottom quintile ROIC of 1% is well below the 14% it earned in 2011 as well. Unfortunately for investors, despite the stock price being down 14% YTD, it remains overvalued. To justify its current price of ~$2/share, Hecla must grow NOPAT by 14% compounded annually for the next 21 years . Two decades of double digit profit growth is a hurdle for even the best of companies and even more so for one that hasn’t grown NOPAT over the past four years. Figures 3 and 4 show the rating landscape of all Materials ETFs and mutual funds. Figure 3: Separating the Best ETFs From the Worst ETFs (click to enlarge) Sources: New Constructs, LLC and company filings Figure 4: Separating the Best Mutual Funds From the Worst Mutual Funds (click to enlarge) Sources: New Constructs, LLC and company filings D isclosure: David Trainer, Kyle Guske II, 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.