Tag Archives: united-states

Playing The Santa Rally With ETFs And Stocks

After a spectacular six-year bull run, the U.S. stock market got caught up in a nasty web of never-ending worries. It all started with the collapse in oil prices. Then came the instability in Greece, global growth concerns and the uncertainty of the Fed rate hike. Persistent weakness in China and the slump in commodities aggravated the woes. As a result, the S&P 500 and Dow Jones indices are trading in the red in the year-to-date frame, losing 1% and 2.3%, respectively. But the trend might reverse heading into the winter holidays if Santa pays a call. A Santa rally has gained coinage in the investment world, referring to the increase in stock prices in the final week of the calendar year (i.e. between Christmas and New Year’s Day) and extending into the first two days of the New Year. According to the 2016 Stock Trader’s Almanac , the Santa Claus rally has yielded average positive returns of 1.4% in 34 of the past 45 holiday seasons since 1969. Other research also confirmed this trend. If we dig into historical data dating back to 1896, the Dow Jones Industrial Average has a track record of gaining an average of 1.7% during this seven-day trading period. And this has happened 77% of the time. Santa on The Way! The Fed has raised interest rates for the first time in nearly a decade with a dovish view for future hikes. It is a clear signal that the U.S. economy has largely emerged from the impact of a financial crisis supported by solid labor market fundamentals and a gradually increasing inflation rate. This in turn has lifted consumer confidence, providing a boost to the stock market, setting the tune for a Santa rally. This is especially true as the stock market gained momentum at the start of this week with both the S&P 500 and Dow Jones gaining 1.7% each. Further, year-end seasonal factors such as holiday optimism, tax-related affairs, people investing their Christmas bonuses, short sellers going on vacation, and the “January effect” added to the strength. As such, Santa seems to be just round the corner but the rout in commodities and the resultant stress in the junk bond space could block its way. Nevertheless, the oil price has rebounded slightly from their 11-year low, bolstering hopes of a bullish market. As hopes start building for a Santa rally, we have highlighted a trio of ETFs and stocks that could provide investors with happy returns in the coming days and weeks. ETFs to Buy While there are a number of ETFs that are expected to benefit from the Santa Claus rally, we have highlighted three growth funds that have a higher potential to move upward when the markets go up. These products have been leading the broad market by a wide margin and have a top Zacks ETF Rank of 1 or ‘Strong Buy’. Further, these provide a broad play across various sectors rather than specific ones. PowerShares Dynamic Large Cap Growth Portfolio (NYSEARCA: PWB ) This ETF provides a pure exposure to the large cap growth segment of the broad U.S. equity market by tracking the Dynamic Large Cap Growth Intellidex Index. The fund is widely diversified across 50 securities with each holding less than 3.5% of total assets. From a sector look, consumer discretionary takes the top spot at 32% while information technology, healthcare and consumer staples round off the next three spots. The product has accumulated around $415.3 million in its asset base and charges 58 bps in fees per year. It gained 6.4% so far this year. iShares Russell Top 200 Growth ETF (NYSEARCA: IWY ) This fund offers exposure to 139 large U.S. companies whose earnings are expected to grow at an above-average rate relative to the market. It is concentrated in the technology sector and the top firm – Apple (NASDAQ: AAPL ) – occupies 8.2% of the basket while the other firms hold no more than 3.4% share. Consumer discretionary, healthcare and consumer staples also receive double-digit allocation each. The fund has amassed $559.3 million in AUM and has an expense ratio of 0.20%. IWY is up 5.6% in 2015. First Trust Large Cap Growth AlphaDEX Fund (NYSEARCA: FTC ) This fund provides a slightly active choice as it uses the AlphaDEX methodology to select the stock. The methodology seeks to narrow the large cap space to only the best positioned growth companies, eliminating the bottom ranked 25% of the stocks. This approach results in a basket of 177 stocks, which are widely spread across various securities with none holding more than 1.21% share. More than one-fourth of the portfolio is skewed toward consumer discretionary, followed by information technology (19.5%), healthcare (13.5%), consumer staples (13.0%) and industrials (12.8%). The product has $714.8 million in AUM and charges 63 bps in annual fees. It added 3.2% in the year-to-date time frame. Stocks to Buy For stocks, we have chosen three top picks using the Zacks Screener that fits our six criteria: a Zacks Rank #1, a Growth Style Score of ‘A’, Zacks Industry Rank within the top 15%, positive estimate revision for the current year, market cap of over 1 billion and year-to-date price performance in excess of the broad market returns. Here are the three chosen stocks. American Woodmark Corp. (NASDAQ: AMWD ) Based in Winchester, VA, American Woodmark is a major manufacturer and distributor of kitchen cabinets and vanities for the remodeling and home construction markets in the United States. The company has seen solid earnings estimate revisions of 8 cents for the current quarter over the past 30 days and delivered positive earnings surprises in the last four quarters, with an average beat of 35.40%. The stock has a solid Zacks Industry Rank in the top 5% and has doubled its returns in the year-to-date time frame. Integrated Device Technology Inc. (NASDAQ: IDTI ) Based in San Jose, CA, Integrated Device is engaged in designing, developing, manufacturing, and marketing a wide range of high-performance semiconductor products and modules for the communications, computing, and consumer industries worldwide. The company has seen earnings estimates rising by a penny for the current quarter over the past 30 days and delivered average positive earnings surprises of 10.04% in the last four quarters. Further, Integrated Device has an Industry Zacks Rank in the top 15% and gained over 37% this year. Leidos Holdings Inc. (NYSE: LDOS ) Based in Reston, VA, Leidos Holdings delivers solutions and services in the national security, health, and engineering markets in the United States and internationally. It has seen earnings estimate revision of 3 cents for the current quarter over the past 30 days and generated an average earnings surprise of 22.44% in the last four quarters. The stock is up 27.3% this year and has an Industry Zacks Rank in the top 15%. Bottom Line As the positive momentum starts to build in the market this week, Santa might definitely be on the way to give bountiful gifts to investors and set the tone for the New Year. Original Post

4 Top-Ranked Mid-Cap Growth Mutual Funds

Mid-cap funds are ideal investment options for investors looking for high return potential that comes with lower risk than small-cap funds. Mid-cap funds are not very susceptible to volatility in broader markets, making it an ideal bet given that the macroeconomic conditions have generally offered a roller-coaster ride in recent years. Meanwhile, when capital appreciation over the long term takes precedence over dividend payouts, growth funds become a natural choice for investors. These funds focus on realizing an appreciable amount of capital growth by investing in stocks of firms whose value is projected to rise over the long term. However, a relatively higher tolerance to risk and the willingness to park funds for the longer term are necessary when investing in these securities. This is because they may experience relatively more fluctuations than other fund classes. Below we share with you 4 top-rated, mid-cap growth mutual funds. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy), and we expect the fund to outperform its peers in the future. T. Rowe Price Mid-Cap Growth (MUTF: RPMGX ) maintains a diversified portfolio by investing a large chunk of its assets in companies having market capitalizations similar to those listed in the S&P MidCap 400 Index or the Russell Midcap Growth Index. RPMGX invests in companies having above-average growth potential. Though RPMGX focuses on acquiring common stocks of domestic companies, RPMGX may also invest in companies located outside the U.S. The T. Rowe Price Mid-Cap Growth fund has a three-year annualized return of 17.8%. Brian W.H. Berghuis is the fund manager of RPMGX since 1992. Principal MidCap A (MUTF: PEMGX ) seeks capital appreciation over the long run. PEMGX invests a lion’s share of its assets in equity securities of companies with medium size market capitalizations. Though PEMGX invests in both value and growth stocks of companies, PEMGX currently emphasizes on growth stocks. The Principal MidCap A fund has a three-year annualized return of 14.4%. As of November 2015, PEMGX held 94 issues with 4.46% of its assets invested in Brookfield Asset Management Inc. Class A. DF Dent Midcap Growth (MUTF: DFDMX ) invests majority of its assets in equity securities including common and preferred stocks of mid-cap firms. DFDMX primarily focuses on acquiring securities of companies listed in the U.S. market. DFDMX may also invest in ADRs, ETFs and REITs. The Principal MidCap A is a non-diversified fund and has a three-year annualized return of 13.5%. DFDMX has an expense ratio of 1.10% as compared to the category average of 1.28%. Vanguard Mid-Cap Growth Investor (MUTF: VMGRX ) seeks long-term capital growth. VMGRX invests a major portion of its assets in the securities of mid-cap companies. VMGRX primarily emphasizes acquiring common stocks of companies having above-average growth potential. The Vanguard Mid-Cap Growth Investor fund has a three-year annualized return of 14%. As of September 2015, VMGRX held 100 issues with 2.83% of its assets invested in Old Dominion Freight Line, Inc. (NASDAQ: ODFL ). Original Post

Oneok: Some Perspective After The Massive Fall

Oneok provided solid guidance for 2016 that boosted the stock over the last two trading days. The energy infrastructure play is positioned to meet distribution goals next year without an equity offering. The high yield at Oneok highlights the risk, but the company is positioned to survive in the current environment. Anybody reviewing the chart of Oneok (NYSE: OKE ) will see a stock that recently completed a round trip over the last four years. The stock went from roughly $20 to start 2011 to over $65 by 2014 and all the way back to below $20 recently. (click to enlarge) The company is the general partner of Oneok Partners, L.P. (NYSE: OKS ) , one of the largest publicly traded MLPs. With the sector under pressure after several years of strong performance, an opportunity likely exists in the sector now. The stock got a big bump on Monday and early Tuesday from positive 2016 guidance that claims the distribution is safe. With a dividend yield sitting at 13% prior to the announcement, a big rally isn’t a huge surprise. The question now is whether investors should chase the new 10.5% yield? On the surface, the guidance for 2016 suggests stability and the ability to cover distributions. The key tenants of the guidance were these points: FCF after dividends for Oneok. Cash on hand of $250 million at Oneok to support Oneok Partners. No public equity offering for Oneok Partners until well into 2017. Oneok Partners’ distribution coverage at 1.0x or better in 2016. The key to the whole distribution forecast is that NYMEX future strip pricing of $40 to $45 per barrel of crude doesn’t slip lower. The current price of oil won’t support the distributions. As with most energy plays including some infrastructure plays that have recently cut dividends, the whole issue of forecasts are the reliance on unstable commodity prices. With a 41.2% ownership stake in Oneok Partners, Oneok is highly reliant on the business that obtains the majority of profits from natural gas liquids. The remaining business comes from the gathering, processing and transmission of natural gas via pipelines. As with most domestic energy infrastructure plays, the business is set up for long-term growth. Low natural gas prices are set to fuel demand growth and facilitate the export of LNG around the globe. The company expects to see immediate growth from the Williston Basin where a substantial amount of gas is flared due to a previous lack of pipelines. At the same time, one-third of all ethane being rejected comes from the Oneok Partners system again providing more upside when petrochemical plants on the Gulf Coast are completed by 2017. The whole problem with an investment in Oneok is surviving the drastic fall in energy prices combined with sizable debt loads. With the shift to more fee-based contracts in 2016 and the extra cash at Oneok to support Oneok Partners survive the brutal pricing environment for commodities, the stock is a solid long-term investment in a very diversified portfolio that can absorb the risk. The recommendation is for investors to not chase Oneok higher today. Let the stock come back down before starting a position as the MLP sector likely faces more strains as other industry players undoubtedly cut dividends.