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Best And Worst Q4’15: Mid Cap Blend ETFs, Mutual Funds And Key Holdings

Summary The Mid Cap Blend style ranks eighth in Q4’15. Based on an aggregation of ratings of 18 ETFs and 344 mutual funds. IJH is our top-rated Mid Cap Blend style ETF and LSIRX is our top-rated Mid Cap Blend style mutual fund. The Mid Cap Blend style ranks eighth out of the twelve fund styles as detailed in our Q4’15 Style Ratings for ETFs and Mutual Funds report. Last quarter , the Mid Cap Blend style ranked ninth. It gets our Dangerous rating, which is based on aggregation of ratings of 18 ETFs and 344 mutual funds in the Mid Cap Blend style. See a recap of our Q3’15 Style Ratings here. Figures 1 and 2 show the five best and worst-rated ETFs and mutual funds in the style. Not all Mid Cap Blend style ETFs and mutual funds are created the same. The number of holdings varies widely (from 21 to 3330). This variation creates drastically different investment implications and, therefore, ratings. Investors seeking exposure to the Mid Cap Blend style 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 ProShares S&P MidCap 400 Dividend ETF (NYSEARCA: REGL ) and the Validea Market Legends ETF (NASDAQ: VALX ) 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 Boston Trust & Walden Funds SMID Cap Fund (MUTF: BTSMX ), the Nationwide Herndon Mid Cap Value (MUTF: NWWQX ) (MUTF: NWWPX ), and the Boston Trust & Walden Funds MidCap Fund (MUTF: BTMFX ), are excluded from Figure 2 because their total net assets are below $100 million and do not meet our liquidity minimums. The iShares Core S&P MidCap ETF (NYSEARCA: IJH ) is the top-rated Mid Cap Blend ETF and the Legg Mason Partners ClearBridge Mid Cap Core Fund (MUTF: LSIRX ) is the top-rated Mid Cap Blend mutual fund. IJH earns a Neutral rating and LSIRX earns a Very Attractive rating. The State Street SPDR Russell Small Cap Completeness ETF (NYSEARCA: RSCO ) is the worst-rated Mid Cap Blend ETF and the Satuit Capital Management US SMID Cap Fund (MUTF: SATDX ) is the worst-rated Mid Cap Blend mutual fund. RSCO earns a Neutral rating and SATDX earns a Very Dangerous rating. Cullen/Frost Bankers (NYSE: CFR ) is one of our favorite stocks held by Mid Cap Blend ETFs and mutual funds and earns our Attractive rating. Since 2010, Cullen/Frost has grown after-tax profits ( NOPAT ) by 8% compounded annually and improved its NOPAT margin from 25% to 28%. The company currently earns a return on invested capital ( ROIC ) of 9%. CFR has been beaten down 15% this year despite solid fundamentals. At its current price of $64/share, CFR has a price to economic book value ( PEBV ) ratio of 1.2. This ratio implies the market expects Cullen/Frost to grow its NOPAT by only 20% over the remainder of its corporate life. If Cullen/Frost can continue to grow NOPAT by 8% compounded annually for the next five years , the stock is worth $78/share today – a 13% upside. Cavium Inc. (NASDAQ: CAVM ) is one of our least favorite stocks held by Mid Cap Blend ETFs and mutual funds and earns our Dangerous rating. After turning a $10 million profit in 2010, Cavium’s NOPAT has fallen to -$23 million on a trailing-twelve-month basis. Cavium currently earns a bottom quintile ROIC of -7%, which is a significant decline from the 7% earned in 2010. Despite the deteriorating fundamentals, CAVM is up 15% on the year and the expectations baked into the current stock price leave shares with significant downside risk. To justify its current price of $71/share, Cavium must immediately achieve pre-tax margins of 6.5% (same margin as 2010) and grow revenue by 20% compounded annually for the next 26 years . Given the competitive semiconductor industry in which Cavium operates, it seems highly optimistic to expect double-digit revenue growth for nearly three decades. Figures 3 and 4 show the rating landscape of all Mid Cap Blend 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 Funds (click to enlarge) Sources: New Constructs, LLC and company filings D isclosure: David Trainer and Kyle Guske II receive no compensation to write about any specific stock, style, or theme.

Best And Worst Q4’15: Large Cap Growth ETFs, Mutual Funds And Key Holdings

Summary The Large Cap Growth style ranks fifth in Q4’15. Based on an aggregation of ratings of 24 ETFs and 604 mutual funds. QUAL is our top-rated Large Cap Growth style ETF and MIGNX is our top-rated Large Cap Growth style mutual fund. The Large Cap Growth style ranks fifth out of the twelve fund styles as detailed in our Q4’15 Style Ratings for ETFs and Mutual Funds report. Last quarter , the Large Cap Growth style ranked fourth. It gets our Neutral rating, which is based on an aggregation of ratings of 24 ETFs and 604 mutual funds in the Large Cap Growth style. See a recap of our Q3’15 Style Ratings here. Figures 1 and 2 show the five best and worst-rated ETFs and mutual funds in the style. Not all Large Cap Growth style ETFs and mutual funds are created the same. The number of holdings varies widely (from 20 to 647). This variation creates drastically different investment implications and, therefore, ratings. Investors seeking exposure to the Large Cap Growth style 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 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 Destra Investment Trust II: Focused Equity Fund ( DFOIX , DFOCX ) is excluded from Figure 2 because its total net assets are below $100 million and do not meet our liquidity minimums. iShares MSCI USA Quality Factor ETF (NYSEARCA: QUAL ) is the top-rated Large Cap Growth ETF and Massachusetts Investors Growth Stock Fund (MUTF: MIGNX ) is the top-rated Large Cap Growth mutual fund. Both earn a Very Attractive rating. Columbia RP Focused Large Cap Growth ETF (NYSEARCA: RWG ) is the worst-rated Large Cap Growth ETF and Quaker Strategic Growth Fund (MUTF: QUAGX ) is the worst-rated Large Cap Growth mutual fund. RWG earns our Neutral rating while QUAGX earns our Very Dangerous rating. The Travelers Companies (NYSE: TRV ) is one of our favorite stocks held by Large Cap Growth ETFs and mutual funds and earns our Very Attractive rating. Over the past decade, Travelers has grown after-tax profits ( NOPAT ) by 14% compounded annually while improving NOPAT margins from 4% to 14%. Travelers currently earns a return on invested capital ( ROIC ) of 12%, up from 4% in 2004. Despite the stock gaining 5% year-to-date, shares remain undervalued. At its current price of $112/share, TRV has a price to economic book value ( PEBV ) ratio of 0.7. This ratio implies that the market expects Travelers NOPAT to permanently decline by 30%. If Travelers can grow NOPAT by just 1% compounded annually for the next five years , the stock is worth $172/share today – a 53% upside. Palo Alto Networks (NYSE: PANW ) is one of our least favorite stocks held by Large Cap Growth ETFs and mutual funds and earns our Very Dangerous rating. Palo Alto Networks went public in 2012 and since then its NOPAT has fallen from $2 million to -$106 million in 2015. The company currently earns a bottom quintile ROIC of -51%. Despite the downward spiral in profits, PANW has risen on investor exuberance in the cyber security sector, and shares are now significantly overvalued. To justify the current share price of $157/share, Palo Alto Networks must immediately achieve 5% pre-tax margins (-13% in 2015) and grow revenues by 31% compounded annually for the next 16 years. These expectations seem unrealistic given Palo Alto’s inability to grow profits since 2012. Figures 3 and 4 show the rating landscape of all Large Cap Growth 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 Funds (click to enlarge) Sources: New Constructs, LLC and company filings D isclosure: David Trainer and Thaxston McKee receive no compensation to write about any specific stock, style, or theme.

Best And Worst Q4’15: Utilities ETFs, Mutual Funds And Key Holdings

Summary The Utilities sector ranks fifth in Q4’15. Based on an aggregation of ratings of nine ETFs and 25 mutual funds. RYU is our top-rated Utilities sector ETF and BULIX is our top-rated Utilities sector mutual fund. The Utilities sector ranks fifth out of the ten sectors as detailed in our Q4’15 Sector Ratings for ETFs and Mutual Funds report. Last quarter , the Utilities sector ranked eighth. It gets our Neutral rating, which is based on an aggregation of ratings of nine ETFs and 25 mutual funds in the Utilities sector. See a recap of our Q3’15 Sector Ratings here . Figure 1 ranks from best to worst the nine Utilities ETFs that meet our liquidity standards and Figure 2 shows the five best and worst-rated Utilities mutual funds. Not all Utilities sector ETFs and mutual funds are created the same. The number of holdings varies widely (from 20 to 81). This variation creates drastically different investment implications and, therefore, ratings. Investors seeking exposure to the Utilities sector should buy the Attractive rated mutual fund from Figure 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 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 Guggenheim S&P Equal Weight Utilities ETF (NYSEARCA: RYU ) is the top-rated Utilities ETF and the American Century Quantitative Equity Funds Utilities Fund (MUTF: BULIX ) is the top-rated Utilities mutual fund. RYU earns a Neutral rating and BULIX earns an Attractive rating. The PowerShares S&P SmallCap Utilities Portfolio ETF (NASDAQ: PSCU ) is the worst-rated Utilities ETF and the Rydex Utilities Fund (MUTF: RYUTX ) is the worst-rated Utilities mutual fund. Both earn a Very Dangerous rating. 79 stocks of the 3000+ we cover are classified as Utilities stocks, but due to style drift, Utilities ETFs and mutual funds hold 81 stocks. PPL Corporation (NYSE: PPL ) is our favorite stock in the Utilities sector and is the only Utilities stock that earns an Attractive-or-better rating. Since 2010, PPL has grown after-tax profit ( NOPAT ) by 9% compounded annually. While PPL’s 6% return on invested capital ( ROIC ) may not seem impressive, it ranks among the top in the Utilities sector. At its current price of $34/share, PPL has a price to economic book value ( PEBV ) ratio of 0.7. This ratio implies that the market expects PPL’s NOPAT to permanently decline by 30%. This expectation seems unlikely considering PPL’s profit growth over the life of its business. If we assume that PPL can only grow NOPAT by 3% compounded annually for the next decade , which is well below the historical profit growth rate for PPL, the company is worth $51/share – a 50% upside. Dominion Resources (NYSE: D ) is one of our least favorite stocks held by Utilities ETFs and mutual funds. We’ve previously highlighted the unrealistic pension assumptions Dominion uses to boost earnings but that is not the only problem in the business. The company’s NOPAT has declined by 2% compounded annually since 2010. Over the same period, the company’s ROIC has fallen to 5% and Dominion earns a -11% free cash flow yield . Despite these poor fundamentals, D remains overvalued. To justify its current price of $70/share, Dominion must grow NOPAT by 6% compounded annually for the next 14 years . This expectation is rather optimistic given that Dominion has failed to grow profits at all over the past five years and that the company operates in a sector where profit growth rates are rarely that high for any sustained amount of time. Figures 3 and 4 show the rating landscape of all Utilities 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 and Thaxston McKee receive no compensation to write about any specific stock, sector or theme.