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The Zacks Analyst Blog Highlights CCOR, LETB PHDG, QRMI and HEQT
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For Immediate Release
Chicago, IL – May 15, 2023 – 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. ETFs recently featured in the blog include: Core Alternative ETF (CCOR - Free Report) , AdvisorShares Let Bob AI Powered Momentum ETF , Invesco S&P 500 Downside Hedged ETF (PHDG - Free Report) , Global X Nasdaq 100 Risk Managed Income ETF (QRMI - Free Report) and Simplify Hedged Equity ETF (HEQT - Free Report) .
Here are highlights from Friday’s Analyst Blog:
Low-Beta ETFs to Counter Market Volatility
Wall Street has been struggling to find footing even after cooling inflation and a pause in Fed rate hike bets. This is especially true given the fresh worries over U.S. debt default and the resumption of the regional bank turmoil. Additionally, an uncertain Fed policy and recession fears continued to make investors jittery.
The biggest concern right now is the debt ceiling fight in Washington, where lawmakers are fighting over whether to attach spending cuts as a condition to raising the limit. Biden administration officials have warned that the government might run out of options to pay its obligations as early as Jun 1 if Congress fails to raise or suspend the limit (read: ETFs to Win/Lose from the Debt Ceiling Drama).
Meanwhile, worries over regional banks once again flared up. PacWest Bancorp, the latest troubled bank in focus, said in a regulatory filing that deposits fell 9.5% during the week of May 5. PacWest shares dropped 22% on May 11.
In such a scenario, investors are seeking exposure to alternative sources of income rather than equity and bonds. For these investors, an allocation to low-beta ETFs could be the safest, for as long as the uncertainty lingers.
Why Low Beta?
Beta measures the price volatility of stocks or funds relative to the overall market. It has direct relationship to market movements. A beta of 1 indicates that the price of the stock or fund tends to move with the broader market. A beta of more than 1 indicates that the price tends to move higher than the broader market and is extremely volatile, while a beta of less than 1 indicates that the price of the stock or fund is less volatile than the market.
Investing in low-beta stocks during times of market volatility can offer several advantages:
Reduced Volatility: Low-beta stocks tend to have lower price fluctuations, making them more stable investments during turbulent market conditions.
Defensive Characteristics: Low-beta stocks are often found in defensive sectors like utilities, healthcare, and consumer staples. These industries tend to perform relatively well during economic downturns, as their products and services are still in demand.
Dividend Income: Low-beta stocks are often associated with established, mature companies that pay regular dividends. Dividend income can provide a steady cash flow to investors and help offset potential declines in the stock's price (read: 5 Market-Beating High-Dividend ETFs to Consider).
Capital Preservation: By investing in low-beta stocks, investors can aim to preserve their capital during market downturns due to the reduced volatility associated with these investments.
Diversification: Including low-beta stocks in a diversified portfolio can help balance out riskier, high-beta investments, potentially improving the overall risk-adjusted return of the portfolio.
That said, low-beta ETFs exhibit greater levels of stability than their market-sensitive counterparts and will usually lose less when the market is crumbling. Though these have lesser risks and lower returns, the funds are considered safe and resilient amid uncertainty. However, when markets soar, these low-beta funds experience lesser gains than the broader market counterparts and thus, lag their peers.
ETFs in Focus
Core Alternative ETF: Beta - 0.09
The Core Alternative ETF is an actively managed ETF aims to preserve potential long-term growth with "responsive" downside risk mitigation. It invests in U.S. large-cap stocks and actively balances the downside risk with a highly disciplined "protective-put" options strategy. The Core Alternative ETF holds 45 securities in its basket and charges a high expense ratio of 1.07%.
CCOR has amassed $483.2 million in its asset base and trades in a lower volume of 109,000 shares.
AdvisorShares Let Bob AI Powered Momentum ETF: Beta - 0.11
AdvisorShares Let Bob AI Powered Momentum ETF is an actively managed ETF that incorporates technology, automation, and access to unique data into its investment strategy to analyze a blend of fundamental data, including companies expected to exceed earnings estimates, digital sentiment, and strong technical price momentum. This results in a portfolio of select stocks the advisor believes will outperform. LETB can lower equity exposure depending on the market condition or move to cash for additional risk management in downward-trending markets.
AdvisorShares Let Bob AI Powered Momentum ETF has accumulated $26.2 million in its asset base and charges 1.07% in fees. It trades in an average daily volume of 3,000 shares.
Invesco S&P 500 Downside Hedged ETF: Beta - 0.36
Invesco S&P 500 Downside Hedged ETF is an actively managed fund and seeks to deliver positive returns in rising or falling markets that are not directly correlated to broad equity or fixed-income market returns. Invesco S&P 500 Downside Hedged ETF tries to follow the S&P 500 Dynamic VEQTOR Index, which provides broad equity market exposure with an implied volatility hedge by dynamically allocating between different asset classes: equity, volatility and cash. The index allows investors to receive exposure to the equity and volatility of the S&P 500 Index in a dynamic framework (read: 5 Defensive Investment ETF Strategies for Your Portfolio).
Invesco S&P 500 Downside Hedged ETF has AUM of $193.8 million and charges 39 bps in fees per year from its investors. Volume is lower, exchanging 43,000 shares a day on average.
Global X Nasdaq 100 Risk Managed Income ETF: Beta – 0.39
Global X Nasdaq 100 Risk Managed Income ETF employs a protective net-credit collar strategy for investors seeking the income characteristics of a covered call fund, while mitigating the risks of a major market selloff with a protective put. QRMI seeks to achieve this outcome by owning the stocks in the Nasdaq 100 Index (NDX), while buying 5% out-of-the-money put options on NDX and selling at-the-money call options on the same index. Global X Nasdaq 100 Risk Managed Income ETF follows the Nasdaq-100 Monthly Net Credit Collar 95-100 Index and holds 105 securities in its basket.
Global X Nasdaq 100 Risk Managed Income ETF has gathered $9.4 million in its asset base and charges 60 bps in fees per year. The product trades in a lower average daily volume of 3,000 shares.
Simplify Hedged Equity ETF: Beta – 0.42
Simplify Hedged Equity ETF seeks to provide capital appreciation by offering U.S. large-cap exposure while investing in a series of put-spread collars designed to help reduce volatility. By deploying a ladder of collars that expire over three sequential months, the fund seeks to create a hedged equity experience that is additionally robust to rebalancing luck.
With AUM of $105.2 million, Simplify Hedged Equity ETF charges 53 bps in annual fees and trades in a volume of 45,000 shares.
Bottom Line
Investors should note that these products are not meant to generate outsized returns. Instead, these provide stability in the portfolio, protecting the initial investment. In particular, these products could be worthwhile for low-risk-tolerant investors looking to safeguard their portfolio in a rocky market and some outperformance, especially if market uncertainty prevails in the coming months.
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Zacks' free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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The Zacks Analyst Blog Highlights CCOR, LETB PHDG, QRMI and HEQT
For Immediate Release
Chicago, IL – May 15, 2023 – 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. ETFs recently featured in the blog include: Core Alternative ETF (CCOR - Free Report) , AdvisorShares Let Bob AI Powered Momentum ETF , Invesco S&P 500 Downside Hedged ETF (PHDG - Free Report) , Global X Nasdaq 100 Risk Managed Income ETF (QRMI - Free Report) and Simplify Hedged Equity ETF (HEQT - Free Report) .
Here are highlights from Friday’s Analyst Blog:
Low-Beta ETFs to Counter Market Volatility
Wall Street has been struggling to find footing even after cooling inflation and a pause in Fed rate hike bets. This is especially true given the fresh worries over U.S. debt default and the resumption of the regional bank turmoil. Additionally, an uncertain Fed policy and recession fears continued to make investors jittery.
The biggest concern right now is the debt ceiling fight in Washington, where lawmakers are fighting over whether to attach spending cuts as a condition to raising the limit. Biden administration officials have warned that the government might run out of options to pay its obligations as early as Jun 1 if Congress fails to raise or suspend the limit (read: ETFs to Win/Lose from the Debt Ceiling Drama).
Meanwhile, worries over regional banks once again flared up. PacWest Bancorp, the latest troubled bank in focus, said in a regulatory filing that deposits fell 9.5% during the week of May 5. PacWest shares dropped 22% on May 11.
In such a scenario, investors are seeking exposure to alternative sources of income rather than equity and bonds. For these investors, an allocation to low-beta ETFs could be the safest, for as long as the uncertainty lingers.
Why Low Beta?
Beta measures the price volatility of stocks or funds relative to the overall market. It has direct relationship to market movements. A beta of 1 indicates that the price of the stock or fund tends to move with the broader market. A beta of more than 1 indicates that the price tends to move higher than the broader market and is extremely volatile, while a beta of less than 1 indicates that the price of the stock or fund is less volatile than the market.
Investing in low-beta stocks during times of market volatility can offer several advantages:
Reduced Volatility: Low-beta stocks tend to have lower price fluctuations, making them more stable investments during turbulent market conditions.
Defensive Characteristics: Low-beta stocks are often found in defensive sectors like utilities, healthcare, and consumer staples. These industries tend to perform relatively well during economic downturns, as their products and services are still in demand.
Dividend Income: Low-beta stocks are often associated with established, mature companies that pay regular dividends. Dividend income can provide a steady cash flow to investors and help offset potential declines in the stock's price (read: 5 Market-Beating High-Dividend ETFs to Consider).
Capital Preservation: By investing in low-beta stocks, investors can aim to preserve their capital during market downturns due to the reduced volatility associated with these investments.
Diversification: Including low-beta stocks in a diversified portfolio can help balance out riskier, high-beta investments, potentially improving the overall risk-adjusted return of the portfolio.
That said, low-beta ETFs exhibit greater levels of stability than their market-sensitive counterparts and will usually lose less when the market is crumbling. Though these have lesser risks and lower returns, the funds are considered safe and resilient amid uncertainty. However, when markets soar, these low-beta funds experience lesser gains than the broader market counterparts and thus, lag their peers.
ETFs in Focus
Core Alternative ETF: Beta - 0.09
The Core Alternative ETF is an actively managed ETF aims to preserve potential long-term growth with "responsive" downside risk mitigation. It invests in U.S. large-cap stocks and actively balances the downside risk with a highly disciplined "protective-put" options strategy. The Core Alternative ETF holds 45 securities in its basket and charges a high expense ratio of 1.07%.
CCOR has amassed $483.2 million in its asset base and trades in a lower volume of 109,000 shares.
AdvisorShares Let Bob AI Powered Momentum ETF: Beta - 0.11
AdvisorShares Let Bob AI Powered Momentum ETF is an actively managed ETF that incorporates technology, automation, and access to unique data into its investment strategy to analyze a blend of fundamental data, including companies expected to exceed earnings estimates, digital sentiment, and strong technical price momentum. This results in a portfolio of select stocks the advisor believes will outperform. LETB can lower equity exposure depending on the market condition or move to cash for additional risk management in downward-trending markets.
AdvisorShares Let Bob AI Powered Momentum ETF has accumulated $26.2 million in its asset base and charges 1.07% in fees. It trades in an average daily volume of 3,000 shares.
Invesco S&P 500 Downside Hedged ETF: Beta - 0.36
Invesco S&P 500 Downside Hedged ETF is an actively managed fund and seeks to deliver positive returns in rising or falling markets that are not directly correlated to broad equity or fixed-income market returns. Invesco S&P 500 Downside Hedged ETF tries to follow the S&P 500 Dynamic VEQTOR Index, which provides broad equity market exposure with an implied volatility hedge by dynamically allocating between different asset classes: equity, volatility and cash. The index allows investors to receive exposure to the equity and volatility of the S&P 500 Index in a dynamic framework (read: 5 Defensive Investment ETF Strategies for Your Portfolio).
Invesco S&P 500 Downside Hedged ETF has AUM of $193.8 million and charges 39 bps in fees per year from its investors. Volume is lower, exchanging 43,000 shares a day on average.
Global X Nasdaq 100 Risk Managed Income ETF: Beta – 0.39
Global X Nasdaq 100 Risk Managed Income ETF employs a protective net-credit collar strategy for investors seeking the income characteristics of a covered call fund, while mitigating the risks of a major market selloff with a protective put. QRMI seeks to achieve this outcome by owning the stocks in the Nasdaq 100 Index (NDX), while buying 5% out-of-the-money put options on NDX and selling at-the-money call options on the same index. Global X Nasdaq 100 Risk Managed Income ETF follows the Nasdaq-100 Monthly Net Credit Collar 95-100 Index and holds 105 securities in its basket.
Global X Nasdaq 100 Risk Managed Income ETF has gathered $9.4 million in its asset base and charges 60 bps in fees per year. The product trades in a lower average daily volume of 3,000 shares.
Simplify Hedged Equity ETF: Beta – 0.42
Simplify Hedged Equity ETF seeks to provide capital appreciation by offering U.S. large-cap exposure while investing in a series of put-spread collars designed to help reduce volatility. By deploying a ladder of collars that expire over three sequential months, the fund seeks to create a hedged equity experience that is additionally robust to rebalancing luck.
With AUM of $105.2 million, Simplify Hedged Equity ETF charges 53 bps in annual fees and trades in a volume of 45,000 shares.
Bottom Line
Investors should note that these products are not meant to generate outsized returns. Instead, these provide stability in the portfolio, protecting the initial investment. In particular, these products could be worthwhile for low-risk-tolerant investors looking to safeguard their portfolio in a rocky market and some outperformance, especially if market uncertainty prevails in the coming months.
Want key ETF info delivered straight to your inbox?
Zacks' free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week.
Get it free >>
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.