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The Zacks Analyst Blog Highlights: PowerShares Financial Preferred, Reaves Utilities ETF, iShares Edge MSCI Multifactor Consumer Staples ETF, Cambria Value and Momentum ETF and Reality Shares DIVCON Dividend Guard ETF
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For Immediate Release
Chicago, IL – September 8, 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 includePowerShares Financial Preferred Portfolio (NYSEARCA: (PGF - Free Report) – Free Report),Reaves Utilities ETF (NYSEARCA: (UTES - Free Report) – Free Report), iShares Edge MSCI Multifactor Consumer Staples ETF (BATS: – Free Report), Cambria Value and Momentum ETF (BATS: (VAMO - Free Report) – Free Report)and Reality Shares DIVCON Dividend Guard ETF (NYSE: – Free Report).
Volatility and uncertainty have shaken complacency from the stock market. A myriad of woes including the North Korea nuclear threat, Washington turmoil, doubts over Trump administration, uncertain Fed policy as well as Hurricane Harvey and its aftermath are currently acting as tailwinds.
Notably, North Korea tensions have been high as Trump threatened to slap a trade embargo on countries that do business with it. If this comes into effect, the result would be a trade war with China, causing massive turmoil in the U.S. economy which would have global repercussions. Further, warnings about Hurricane Irma barreling toward Puerto Rico and Florida also added to this week’s woes (read: ETFs to Lose If Trump Bans Trade With North Korean Partners).
If these weren’t enough, September is historically the worst month of the year for the stock market.
However, the news of the U.S. debt ceiling brought some relief. President Donald Trump has reached an agreement with Democratic congressional leaders for an extension of the debt limit until Dec 15.
Amid the uncertainties, investors are seeking exposure to the alternative sources of income rather than equity and bonds. For these investors, an allocation to low beta funds could be the safest, for as long as the disorder 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.
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 (read: 6 ETF Picks for September).
Given the huge levels of volatility in the market, investors could find the following ETFs intriguing options until the market track clears.
This fund tracks the Wells Fargo Hybrid and Preferred Securities Financial Index, which measures the performance of preferred securities traded in the U.S. market by financial institutions. It holds 92 securities in its basket with a slight tilt toward the top firm at 7.1% while other firms hold less than 3.3% share. The ETF has amassed $1.7 billion and trades in average volume of 286,000 shares per day. It charges 63 bps in annual fees and has added 0.3% in a month (see: all the Preferred Stock ETFs here).
This is the only actively managed ETF that seeks to provide returns through a combination of capital appreciation and income, primarily through investments in utilities stocks. It holds 24 stocks with heavy concentration on the top firm at 13.5% while the other firms hold no more than 8.2% of assets. UTES has AUM of $15.5 million and average daily volume of 1,000 shares. It charges 95 bps in annual fees and has gained 2.4% in a month.
This fund targets companies that have the potential to outperform the broad U.S. consumer staples sector and tracks the MSCI USA Consumer Staples Diversified Multiple-Factor Capped Index. Holding 28 stocks in its basket, it is guilty of concentration on the top firms. In terms of industrial exposure, about 60% of the portfolio is dominated by food beverage tobacco while food & staples retailing, and household and personal product take the remainder with a double-digit exposure each. This ETF debuted in the space 15 months ago and has attracted $2.5 million in its asset base. It trades in a meager volume of about 234 shares and charges 35 bps in fees per year. CNSF has lost 2.3% in the same time period and has a Zacks ETF Rank #2 (Buy).
This is an actively managed ETF providing exposure to a portfolio of companies that offer strong characteristics by focusing on all three factors — value, momentum, and tactical hedging — with the added benefit of lower volatility and protection from market downturns. It results in a basket of 101 securities with none holding more than 2.9% of assets. The fund has accumulated $9.4 million in its asset base while trades in average daily volume of 3,000 shares. Expense ratio comes in at 0.59%. VAMO is down 1.05% in a month’s time (read: ETF Investing Lessons from Warren Buffett).
This product seeks long-term capital appreciation by tracking the Reality Shares DIVCON Leaders Dividend Index. It invests in large-cap companies that are most likely to increase their dividend in the next 12 months based on their DIVCON scores. When the Guard Indicator forecasts a market downturn, the ETF dynamically reduces its long exposure to 50% while adding a 50% short position in the lowest-rated companies. This approach results in a basket of 50 stocks while charging 85 bps in annual fees. Industrials, consumer staples and information technology are the top three sectors. The long/short ETF has amassed $1.7 million in its asset base and shed 0.5% in a month.
Bottom Line
Investors should note that these products are not meant for generating 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. Get it free >>
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year.See these high-potential stocks free >>.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
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/performancefor information about the performance numbers displayed in this press release.
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The Zacks Analyst Blog Highlights: PowerShares Financial Preferred, Reaves Utilities ETF, iShares Edge MSCI Multifactor Consumer Staples ETF, Cambria Value and Momentum ETF and Reality Shares DIVCON Dividend Guard ETF
For Immediate Release
Chicago, IL – September 8, 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 includePowerShares Financial Preferred Portfolio (NYSEARCA: (PGF - Free Report) – Free Report),Reaves Utilities ETF (NYSEARCA: (UTES - Free Report) – Free Report), iShares Edge MSCI Multifactor Consumer Staples ETF (BATS: – Free Report), Cambria Value and Momentum ETF (BATS: (VAMO - Free Report) – Free Report)and Reality Shares DIVCON Dividend Guard ETF (NYSE: – Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Thursday’s Analyst Blog:
Low-Beta ETFs for a Volatile Market
Volatility and uncertainty have shaken complacency from the stock market. A myriad of woes including the North Korea nuclear threat, Washington turmoil, doubts over Trump administration, uncertain Fed policy as well as Hurricane Harvey and its aftermath are currently acting as tailwinds.
Notably, North Korea tensions have been high as Trump threatened to slap a trade embargo on countries that do business with it. If this comes into effect, the result would be a trade war with China, causing massive turmoil in the U.S. economy which would have global repercussions. Further, warnings about Hurricane Irma barreling toward Puerto Rico and Florida also added to this week’s woes (read: ETFs to Lose If Trump Bans Trade With North Korean Partners).
If these weren’t enough, September is historically the worst month of the year for the stock market.
However, the news of the U.S. debt ceiling brought some relief. President Donald Trump has reached an agreement with Democratic congressional leaders for an extension of the debt limit until Dec 15.
Amid the uncertainties, investors are seeking exposure to the alternative sources of income rather than equity and bonds. For these investors, an allocation to low beta funds could be the safest, for as long as the disorder 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.
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 (read: 6 ETF Picks for September).
Given the huge levels of volatility in the market, investors could find the following ETFs intriguing options until the market track clears.
PowerShares Financial Preferred Portfolio (NYSEARCA: (PGF - Free Report) – Free Report): Beta - 0.10
This fund tracks the Wells Fargo Hybrid and Preferred Securities Financial Index, which measures the performance of preferred securities traded in the U.S. market by financial institutions. It holds 92 securities in its basket with a slight tilt toward the top firm at 7.1% while other firms hold less than 3.3% share. The ETF has amassed $1.7 billion and trades in average volume of 286,000 shares per day. It charges 63 bps in annual fees and has added 0.3% in a month (see: all the Preferred Stock ETFs here).
Reaves Utilities ETF (NYSEARCA: (UTES - Free Report) – Free Report): Beta – 0.19
This is the only actively managed ETF that seeks to provide returns through a combination of capital appreciation and income, primarily through investments in utilities stocks. It holds 24 stocks with heavy concentration on the top firm at 13.5% while the other firms hold no more than 8.2% of assets. UTES has AUM of $15.5 million and average daily volume of 1,000 shares. It charges 95 bps in annual fees and has gained 2.4% in a month.
iShares Edge MSCI Multifactor Consumer Staples ETF (BATS: – Free Report): Beta – 0.28
This fund targets companies that have the potential to outperform the broad U.S. consumer staples sector and tracks the MSCI USA Consumer Staples Diversified Multiple-Factor Capped Index. Holding 28 stocks in its basket, it is guilty of concentration on the top firms. In terms of industrial exposure, about 60% of the portfolio is dominated by food beverage tobacco while food & staples retailing, and household and personal product take the remainder with a double-digit exposure each. This ETF debuted in the space 15 months ago and has attracted $2.5 million in its asset base. It trades in a meager volume of about 234 shares and charges 35 bps in fees per year. CNSF has lost 2.3% in the same time period and has a Zacks ETF Rank #2 (Buy).
Cambria Value and Momentum ETF (BATS: (VAMO - Free Report) – Free Report): Beta – 0.31
This is an actively managed ETF providing exposure to a portfolio of companies that offer strong characteristics by focusing on all three factors — value, momentum, and tactical hedging — with the added benefit of lower volatility and protection from market downturns. It results in a basket of 101 securities with none holding more than 2.9% of assets. The fund has accumulated $9.4 million in its asset base while trades in average daily volume of 3,000 shares. Expense ratio comes in at 0.59%. VAMO is down 1.05% in a month’s time (read: ETF Investing Lessons from Warren Buffett).
Reality Shares DIVCON Dividend Guard ETF (NYSE: – Free Report): Beta – 0.36
This product seeks long-term capital appreciation by tracking the Reality Shares DIVCON Leaders Dividend Index. It invests in large-cap companies that are most likely to increase their dividend in the next 12 months based on their DIVCON scores. When the Guard Indicator forecasts a market downturn, the ETF dynamically reduces its long exposure to 50% while adding a 50% short position in the lowest-rated companies. This approach results in a basket of 50 stocks while charging 85 bps in annual fees. Industrials, consumer staples and information technology are the top three sectors. The long/short ETF has amassed $1.7 million in its asset base and shed 0.5% in a month.
Bottom Line
Investors should note that these products are not meant for generating 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 >>
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year.See these high-potential stocks 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/performancefor information about the performance numbers displayed in this press release.