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The Zacks Analyst Blog Highlights: U.S. Tax Reform Fund, First Trust Large Cap Growth AlphaDEX, iShares U.S. Dividend and Buyback, SPDR S&P Homebuilders

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Chicago, IL – November 20, 2017 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include U.S. Tax Reform Fund , First Trust Large Cap Growth AlphaDEX ETF (FTC - Free Report) , iShares U.S. Dividend and Buyback ETF (DIVB - Free Report) , SPDR S&P Homebuilders ETF (XHB - Free Report)  and Health Care Select Sector SPDR ETF (XLV - Free Report)

Here are highlights from Friday’s Analyst Blog:

House Passes Tax Bill: Likely ETF Winners and Losers

The big development that fueled the Wall Street rally was the passing of House Republicans’ tax plan in a 227-205 vote. This will cut the corporate tax rate, reduce burden for most individuals and add ‘an estimated $1.4 trillion to the federal deficit over the next decade’. The Senate is discussing its own version of the plan, wherein the Republicans hold thin majority. So, it is still unclear if the chamber will have sufficient votes to pass it.

The Senate plan also deviates from the House bill on some grounds. The Senate now wants to defer the corporate tax-rate cut by a year. It also intends to repeal a main provision of the Obamacare law — “saving the government $318 billion over 10 years to help pay for the tax cuts, but leaving 13 million Americans uninsured by 2027, according to official estimates.”

There are several hurdles in the way to tax cuts. Still, things are looking bright at this stage when it comes to tax reform and put these ETFs up for gains.

Winners                                                                              

U.S. Tax Reform Fund

This newly launched fund looks to offer capital gains by investing in market segments that the issuer thinks “will be impacted by the enactment of changes to the U.S. Tax Code.” It charges 85 bps in fees (read: GOP Nears Tax Reform: Buy These ETFs).

First Trust Large Cap Growth AlphaDEX ETF

Most analysts say that big corporates will benefit from these tax cuts. First, the House bill slashes the top rate of large companies’ tax payments from 35% to 20%, marking “the biggest one-time drop in the big-business tax rate ever.”

And then “more favorable treatment of income earned abroad, which is either not taxed or taxed at an even lower rate than 20 percent” should prove great for growth ETFs like FTC. Notably, large-cap stocks have considerable foreign exposure and are thus beneficiaries of such bills.

iShares U.S. Dividend and Buyback ETF

The new fund looks to track the Morningstar US Dividend and Buyback Index. The Trump administration is also proposing a move from the current worldwide tax system to a territorial system, letting companies to send their offshore profits back to the United States without extra taxes. This will result in extra cashes which may prove beneficial for shareholder value maximization.

Losers

SPDR S&P Homebuilders ETF 

The House tax plan rules out tax-exempt bonds that finance affordable housing. The House tax reform bill removes the bond, while the Senate bill sticks to it. As per Forbes, both tax plans invalidate “the benefits of the mortgage interest deduction for most homeowners by increasing the standard deduction and eliminating deductions for state-and-local income and sales taxes.”

Plus, while the House bill would permit up to $10,000 of property taxes on a home to be deducted, the Senate plan would tolerate no property tax deduction. So far, Americans resorted to this popular tax break to lower the purchase cost of home. The change may push up already-higher housing prices. As result, housing ETFs like XHB may come under pressure.

Health Care Select Sector SPDR ETF 

Republicans look to annual “all but a small handful of tax breaks.” Deduction for medical expenses is one of the to-be-expired tax breaks. Omitting the deduction will help Republicans with about $10 billionFunds like XLV could thus feel pressure (read: Healthcare ETFs Head to Head: XLV vs. VHT).

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