The Zacks Analyst Blog Highlights: WisdomTree Earnings 500 Fund, WisdomTree MidCap Earnings ETF, WisdomTree SmallCap Earnings ETF, WisdomTree Total Earnings ETF and Reliance Steel & Aluminum
CHICAGO, Aug. 6, 2014 /PRNewswire/ -- 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 the WisdomTree Earnings 500 Fund (AMEX: EPS-Free Report), WisdomTree MidCap Earnings ETF (AMEX: EZM-Free Report), WisdomTree SmallCap Earnings ETF (AMEX: EES-Free Report), WisdomTree Total Earnings ETF (AMEX: EXT-Free Report) and Reliance Steel & Aluminum Co. (NYSE: RS-Free Report).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Tuesday's Analyst Blog:
4 Ways to Play Earnings Growth with ETFs
Q2 earnings growth has been impressive so far and is far better than recent quarters. In fact, total earnings for Q2 are on track to outpace the all-time quarterly record reached two quarters ago.
According to the Zacks Earnings Trend, total earnings for 81.9% of market cap for the S&P 500 companies are up 9.3% with a beat ratio of 66.8% while revenues increased 4.8% on revenue beat of 56.1%. Despite robust earnings, the stocks and the ETFs are seeing rough trading over the past one month due to risk-off trade.
This is because concerns over the ongoing violence in the Middle East, rising Russian sanctions, Argentina default, Portuguese banking woes, uncertainty over the timing of the Federal Reserve's rate hike and an aging bull market resurfaced lately, pushing the stocks down (read: Safe Haven ETFs to Evade Geopolitical Tensions).
In such a backdrop, many investors are seeking to tap earnings growth opportunities, setting aside the geopolitics. Further, the pace of earnings growth is expected to accelerate from 4.2% gain in the first half of this year to 7.2% in the second half and 12.3% next year.
While there are several options in the ETF world, investors should consider earnings-focused ETFs rather than market cap counterparts to play this trend. These funds include those companies that generated positive cumulative earnings over the most recent four fiscal quarters.
Why are Earnings ETFs Better?
Since earnings have been the most important drivers of stock performance over the longer period, earnings-weighted ETFs seem more compelling than the ETFs that utilize a market capitalization approach. This is especially true, as these are less volatile and may not experience as big a boom or bust as its market cap focused peers in an uncertain environment.
Earnings are the lifeblood of any business that determine the ability and soundness of the company, and its growth prospects. Earnings producing companies generally catch investors eye due to their solid financial position and growth potential, thereby leading stock prices higher.
On the other hand, market cap ETFs not only include all the profitable companies but also focus on companies that have not found a way to turn a profit and may never be able to do so. This strategy increases the risk in the portfolio and is more vulnerable to political or economic turmoil when compared to earnings-focused ETFs (see: all the total market cap ETFs here).
As a result, tilting toward this key metric is a sensible choice. For investors seeking to do this, there is a small lineup of U.S. focused ETFs that accomplishes this task. Below, we have highlighted the funds that could be great choices for investors seeking to make money in a rocky market while at the same time focusing on one of the most important aspects of stock investing. These products have a favorable Zacks Rank of 3 or 'Hold' rating.
This fund provides exposure to the earnings-generating companies within the large-cap segment of the broad U.S. stock market by tracking the WisdomTree Earnings 500 Index. Holding 506 stocks in its basket, the fund is well spread out across each component as none of these holds more than 4.53% share.
Additionally, the product has diverse exposure to a number of sectors with information technology, financials and consumer discretionary occupying the top three positions. The ETF has amassed $110.9 million in its asset base and charges 28 bps in annual fees. Volume is light trading in less than 6,000 shares a day. The fund is up 5.4% in the year-to-date time frame.
This ETF tracks the WisdomTree MidCap Earnings Index, providing exposure to the 606 earnings generating mid cap companies. The fund is widely spread out across each component as each holds less than 1.3% of assets (read: 3 Impressive Mid Cap ETFs to Buy Now).
From a sector look, financials and industrials take the top two spots with 22.4% and 20.1% share, respectively, followed by consumer discretionary (16.8%) and information technology (12.7%). The fund charges 38 bps in fees per year while trades in average daily volume of nearly 28,000 shares. It has accumulated over $575 million in AUM and has added 2.6% so far in the year.
This fund targets the small cap segment of the U.S. equity market. It follows the WisdomTree SmallCap Earnings Index and holds 874 stocks. It provides a nice balance across various securities but is slightly tilted toward financials sector at 23%. Other sectors make up for a nice mix in the portfolio.
The product has managed assets worth $435.3 million and sees light volume of 33,000 shares per day. It charges 38 bps in fees and expenses and is down 3.7% year-to-date (read: Guide to Small Cap Growth ETFs Investing).
For a broader exposure to earnings generating stocks across market cap levels, investors should look at EXT. With AUM of $86.6 million, the fund tracks the WisdomTree Earnings Index and charges 28 bps in fees per year. Volume is paltry as it exchanges less than 5,000 shares a day.
The product holds a large basket of 1,420 stocks, which are pretty well spread out across each component like the other earnings counterparts. The top three sectors include information technology, financials and consumer discretionary. While the ETF is spread out across various market caps, it is still focused on large caps as these account for nearly 78% of the total. EXT is up 5.5% in the year-to-date time frame.
Reliance Steel Acquires UK Aluminum Company
Reliance Steel & Aluminum Co. (NYSE: RS-Free Report) announced that it has acquired Aluminium Services UK Limited, the holding company of All Metal Services. All Metal Services is the largest independent raw material service provider to the aerospace and defense industries globally.
All Metal Services offers total material management solutions to leading Original Equipment manufacturers (OEM) and their subcontractors in more than 40 nations around the world. The company operates from nine strategically located sites, each situated to best serve the needs of its customers in the UK and abroad. The company's sites in London, Bolton, Belfast, Bristol and Birmingham are complimented by its global service centers in France, China, India and its latest facility in Malaysia.
All Metal Services offers a vast range of aerospace metals including aluminum, steel, titanium, nickel alloys and aluminum bronze, providing full or cut to size materials. It also provides in-house machining and water-jet cutting for more complex requirements.
All Metal Services will now operate as a fully-owned subsidiary of Reliance Steel through UK holding companies. According to Reliance Steel, the acquisition will enable it to expand its presence in the aerospace market. Reliance Steel will continue to support the existing global customer base of All Metal Services and maximize opportunities for growth.
Recently, Reliance Steel released its second-quarter 2014 results. The company saw higher profit in the quarter on increased sales, but its earnings missed expectations. Profit, as reported, moved up roughly 19% year over year to $96.5 million or $1.22 per share in the quarter from $81 million or $1.05 per share a year ago.
Barring one-time items including costs related to sale of non-core assets, earnings were $1.30 per share, a 14% rise from $1.14 recorded a year ago. However, it missed the Zacks Consensus Estimate of $1.39. Adjusted earnings were at the bottom end of the company's expectations, impacted by lower-than-expected volume improvements.
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today.
Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978. The later formation of the Zacks Rank, a proprietary stock picking system; continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros.
Follow us on Twitter: http://twitter.com/zacksresearch
Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
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 http://www.zacks.com/performance for information about the performance numbers displayed in this press release.
SOURCE Zacks Investment Research, Inc.