Saturday, August 17, 2013
Below, we highlight seven insightful articles circulating around the financial space this week:
Is the buy-and-hold strategy effective? (Hussman Funds)Gold's downtrend could be tested soon (Andrew Thrasher)An interview with CME's Blu Putnam – US oil & gas boom driving the recovery (Phil Pearlman)Lumber futures rising – a good sign for construction? (Sober Look)Under the hood of highly-specialized "niche" ETFs (The Street)How to value speculative companies (The Aleph Blog)Troubled currencies – Iran, North Korea, Argentina, Venezuela, Egypt and Syria (CATO Institute)Follow me on Twitter @DPylypczak.
Disclosure: No positions at time of writing.
Think LocalOne of the key drivers of growth behind the ETF industry has been the sheer diversity of available offerings; investors both big and small can tap into virtually any asset class around the globe, and even more impressively, there's usually several products to choose between in the same niche. LocalShares has taken the theme of "targeted" exposure to a whole other level with the launch of the Nashville Area ETF, which is officially the first city-focused fund on the market .
The premise behind the Nashville ETF may seem outlandish and "too niche," but it's really rooted in business fundamentals. Elizabeth Courtney, CEO of LocalShares, notes that the city's leadership, transit infrastructure, and tax policy are just a few of the noteworthy value-add characteristics that businesses headquartered in Nashville take advantage of. In other words, the premise behind this ETF is that certain regions and communities are more pro-business than others, and Nashville is one of those "hot spots" so to speak .
So what is actually included in NASH? The methodology behind this ETF is fairly straightforward; NASH encompasses publicly traded companies that are headquartered in Davidson County, which is the formal government seat in the state, or one of the six bordering counties. Furthermore, the securities must have a minimum market capitalization of $100 million and average daily trade volumes of at least 50,000 shares. Some of the companies included in NASH are:
Tractor Supply Community Health Systems Healthcare Realty Trust At inception, all of the component sec! urities are assigned an equal weight, however, factors like growth, liquidity, yield, and ROI will be used to determine rankings and allocations in future quarterly rebalances. From a cost perspective, NASH's price tag of 0.49% falls in the middle of the cost spectrum for the All Cap Equities ETFdb Category, which features an average expense ratio of 0.47%.
Historically, hyper "geo-targeted" ETFs have not done so well. In 2009, Geary Advisors launched and soon thereafter announced the closure of the first two state-based funds, the Oklahoma ETF and the Texas ETF . Nonetheless, the Nashville Area ETF offers a compelling strategy for those looking to tap into a diverse portfolio of companies situated in a pro-business environment. LocalShares has also hinted that it is interested in developing other city-based ETFs down the road.
Follow me on Twitter @SBojinov
Disclosure: No positions at time of writing.
Morgan Stanley (NYSE:MS) delivered second-quarter earnings July 18 that beat analyst estimates. As part of its announcement it indicated that it would repurchase $500 million of its shares. Morgan Stanley's buying its stock--should you?
SEE: Very Weak Q2 Earnings Outside Finance
In March CEO James Gorman told investors that Morgan Stanley was moving away from its investment banking roots towards the wealth management business. Owning 100% of Morgan Stanley Smith Barney (MSSB) gives it the largest retail network in the world providing a huge audience for IPOs. municipal bonds, secondary offerings and other institutional products. Gorman's moves are meant to create three streams of income that are more stable in nature. In addition to wealth management, there will still be investment banking, which is incorporated into its institutional securities segment as well as investment management. Together, it's hoped the bank can become more profitable.
As mentioned previously, wealth management's pretax profit margin was 18.5%, its fifth consecutive quarter with a margin increase and its best rate since 2008. It expects to hit 20% or higher by 2015, which would get it closer to rivals such as Bank of America (NYSE:BAC). With the purchase of the remaining 35% of MSSB, Morgan Stanley moves from the 15th largest U.S.-based depository institution to the 10th biggest, leapfrogging BB&T (NYSE:BBT) and four others. Although cost reductions are a big part of why it wants 100% of MSSB, it's also a factor of retaining a greater portion of the former joint-venture's earnings. In Q1, if it had owned 100%, it would have retained $121 in pre-tax income instead went to Citigroup. By the end of fiscal 2013 it's possible that wealth management's pre-tax profit will be very similar to its institutional securities business on less revenue.
UBS (NYSE:UBS) banking analyst Brennan Hawken characterized the Federal Reserve's approval of its $500 million share repurchase plan as "an indication that the Fed believes the firm is well capitalized…They're not in the penalty box any more." At current prices that's slightly less than 1% of its 2 billion shares outstanding. This is one instance where the amount is immaterial. I'm sure the amount repurchased in future years will rise as it continues to improve its return on equity and profitability in general. Investors might not be happy with the speed of change at the bank in the past but now that it's happening, the future is brighter than it's been in a very long time.
Its fixed income, currencies and commodities (FICC) trading business, considered its weakest segment, increased 56% year-over-year to $1.2 billion. Although it was below its goal of at least $1.5 billion in quarterly revenue, it was a vast improvement from the second quarter in 2012. Its Q2 performance in terms of growth was better than all its rivals. Still, it's revenues are very volatile and the third quarter could be a downer. Analysts speculate that FICC would be the best business to sell at this point--especially if it's serious about generating stable and sustainable earnings. With big job cuts on the horizon I'd be surprised if it didn't entertain the idea of a sale before the end of 2013.
Although it's up 45% year-to-date through July 18, it's still 41% below its five-year high. While it hasn't turned itself completely around, I think there are enough positives to get in while the good news is still fresh in the mind of investors. It might be moving away from its past to a certain extent, but wealth management is the right business to focus on given future demographics.
Do I think you should be buying?
I do. Just remember that this turnaround has been ongoing since 2010. Its stock is not going to double overnight. However, if it delivers two or three more quarters with generally positive news, I think it will really start to shine in 2014. If you're a patient investor, this bet should work out for you.
AmeriGas Propane, the general partner of AmeriGas Partners (NYSE: APU ) and subsidiary of propane distributor UGI (NYSE: UGI ) , announced Monday that it has promoted its treasurer, Hugh J. Gallagher, to the position of company vice president for finance, and chief financial officer.
Current company CFO John Iannarelli is leaving the company, and so Gallagher will replace him effective May 20. Gallagher will simultaneously continue serving as company treasurer until a replacement can be named for that position.
Gallagher has a long history within the AmeriGas family of companies, first joining UGI in 1990 and serving in various executive positions both there and at AmeriGas. AmeriGas CEO Jerry Sheridan highlighted this breadth of experience as key to Gallagher's promotion, noting that his "demonstrated track record and hands-on business experience at both UGI and AmeriGas made him the perfect candidate."
Best High Tech Companies For 2014: Lifetime Brands Inc.(LCUT)
Lifetime Brands Inc. designs, sources, and sells branded kitchenware, tabletop, and other products primarily in the United States. It offers kitchenware products, including kitchen tools and gadgets, cutlery, cutting boards, bakeware, and cookware; and tabletop products, such as dinnerware, flatware, and glassware. The company also provides home solutions that comprise products, such as food storage, pantry ware, spices, and home d�or products. In addition, it manufactures sterling silver products. The company owns or licenses various brands, including Farberware, Mikasa, KitchenAid, Pfaltzgraff, Cuisinart, Elements, Melannco, Wallace Silversmiths, Kamenstein, Pedrini, Towle, V&A, and Royal Botanic Gardens Kew. Lifetime Brands Inc. serves mass merchants, specialty stores, national chains, department stores, warehouse clubs, supermarkets, off-price retailers, and Internet retailers, as well as direct consumers through its Pfaltzgraff, Mikasa, Housewares Deals, and Lifetim e Sterling Internet Websites. The company was founded in 1945 and is headquartered in Garden City, New York.
Best High Tech Companies For 2014: Scantech Ltd(SCD.AX)
Scantech Limited, through its subsidiaries, manufactures and markets scientific and industrial instruments for resource sector, including cement, coal, and minerals industries in Australia and internationally. It also offers consulting services to the coal industry and in-field support of scientific and industrial instruments. The company?s products include GEOSCAN?M, a real time elemental analyzer, for a range of industries, including iron, copper, phosphate, nickel, manganese, bauxite, and zinc. It also provides IRONSCAN and Model 1500 Natural Gamma Minerals Monitor, which is used for dilution monitoring, mine optimization, plant process control, uranium ore grade monitoring and control, and mineral sand grade monitoring; COALSCAN, a real time coal quality analyzer used for automated blending, sorting, washery optimization, loadout quality control, and moisture for coal production market, as well as for stockpile management, contract surveillance, automated blending, b unker-feed monitoring, and moisture applications for power generation sector. In addition, the company offers GEOSCAN-C for mine feedback and control, limestone sorting, stockpile building, and raw mix proportioning in cement manufacturing; CIFA for carbon in fly ash monitoring; and CM100 Moisture Monitor for use in moisture monitoring of coke and sinter feed for blast furnaces in steel production. Further, it provides TBM 200 Series Microwave Moisture Monitor for use in moisture monitoring, dust management, filter and dryer control, tonnage correction, and metal accounting. Additionally, the company offers a range of technical services, including installation support, commissioning, calibration, and maintenance of real time analyzers, as well as provides spare parts. Scantech Limited was founded in 1981 and is headquartered in Camden Park, Australia.
Hot Financial Companies To Invest In Right Now: ProShares UltraShort S&P500 (SDS)
ProShares UltraShort S&P500 (the Fund), formerly UltraShort S&P500 ProShares, seeks daily investment results that correspond to twice the inverse daily performance of the S&P 500 Index. The S&P 500 Index is a measure of large-cap United States stock market performance. The S&P 500 Index is a capitalization-weighted index of 500 United States operating companies and real estate investment trusts (REITs) selected by an S&P committee through a non-mechanical process that factors criteria, such as liquidity, price, market capitalization, financial viability and public float.
The S&P 500 Index is a price return index. Reconstitution of the Index occurs both on a quarterly and on an ongoing basis. The Fund takes positions in securities and/or financial instruments that, in combination, should have similar daily return characteristics as 200% of the daily return of the index. The Fund�� investment advisor is ProShare Advisors LLC.
Best High Tech Companies For 2014: Syms Corp(SYMS)
Syms Corp operates a chain of ?off-price? apparel retail stores under the Syms and Filene?s Basement names in the United States. Its stores offer a range of in-season merchandise for men, women, and children. The company?s in-season merchandise includes men?s tailored clothing and haberdashery; women?s dresses, suits, and separates; children?s apparel; and men?s, women?s, and children?s shoes. Its Filene?s stores also offer a selection of jewelry and home goods. As of August 28, 2010, the company operated a chain of 48 off-price apparel stores located predominantly on the east coast. Syms Corp was founded in 1959 and is headquartered in Secaucus, New Jersey.
Best High Tech Companies For 2014: Lantronix Inc.(LTRX)
Lantronix, Inc. designs, develops, markets, and sells networking and Internet connectivity products that are used to access, manage, control, and configure electronic products over the Internet, enterprise, and other networks worldwide. It provides device enablement solutions for products that are to be connected, securely accessed, managed, and controlled over networks to manufacturers, integrators, and end-users; and device management solutions, including single and multi-port products that offer information technology professionals with the tools need to remotely connect to the out-of-band management ports on computers and associated equipment. The company?s device management solutions also comprise console servers, remote keyboards, video, mouse servers, and managed power distribution products, which are used to monitor and run systems to ensure the performance and availability of critical business information systems, network infrastructure, and telecommunications eq uipment, as well as manages routers, switches, servers, phone switches, and public branch exchanges that are located in remote or inaccessible locations. It also provides legacy products, such as print servers, software, and other miscellaneous products. The company serves healthcare, security, industrial and building automation, energy, information technology and data centers, transportation, and government markets. It sells its products through distributors, manufacturer?s representatives, value added resellers, and other resellers. The company was founded in 1989 and is headquartered in Irvine, California.
Friday, August 16, 2013
U.S.pork processor Smithfield Foods, Inc. (SFD) has announced that its chief executive officer (CEO) C. Larry Pope will reassure the U.S Senate Committee on Agriculture, Nutrition and Forestry that Smithfield's merger with Hongkong-based meat processor Shuanghui International Holdings Ltd. will not hurt the food safety standards of the U.S.
Per the deal signed on May 30, Shuanghui will acquire all of the outstanding shares of Smithfield for $34.00 per share totaling $7.1 billion, including Smithfield's debt. The deal will allow Smithfield to expand its footprint in China taking advantage of Shuanghui's solid distribution network. As far as Shuanghui is concerned, it will be able to meet the growing demand for pork in its domestic market by gaining control of Smithfield's brands, such as Smithfield, Armour and Farmland that meet food safety standards.
The deal is expected to close in the second half of 2013 and enjoys the support of local, state and national elected officials, industry labor unions, U.S. hog farmers, leading economic and international affairs academics and even U.S. based food industry peers. However, the transaction is yet to receive shareholder and related federal regulatory approvals.
The main concern for U.S. regulators is that the deal should not jeopardize the American food supply chain and harm the entire U.S. pork industry as they do not find Shuanghui's food safety practices in China acceptable.
Smithfield's CEO has thus confirmed that the transaction will have no impact on U.S. food supply and therefore it will continue to produce pork maintaining highest food safety standards for U.S. consumers and abide by the U.S. regulations.
In addition, Smithfield stated that it will continue its contracts with more than 2,000 family farmers even after the merger. Smithfield believes that the deal will create an opportunity for U.S. hog farmers to expand production.
Smithfieldalso assure! d U.S. regulators that there will be no change in the company's management team and all the employees of Smithfield will be retained, following the completion of the deal. Virginia will continue to remain the headquarters of Smithfield and C. Larry Pope will carry on in his responsibilities as the company's president and CEO.
Smithfield's results have been suffering since the last few years as a result of higher grain costs and declining pork demand. In addition, oversupply of hogs was resulting in lower hog prices, which along with higher grain costs led to margin declines.
We believe the deal will prove to be a boon for Smithfield, as it will provide opportunities to increase the presence of its brands in China. It will also be able to meet the rising demand for pork in China, which takes about 50% of the world's pork consumption.
Smithfieldholds a Zacks Rank #3 (Hold). Meat producers like Pilgrim's Pride Corp (PPC) and Sanderson Farms Inc (SAFM) and Tyson Foods Inc (TSN) are better placed and are worth considering. While Pilgrim's Pride and Sanderson carry a Zacks Rank #1 (Strong Buy), Tyson holds a Zacks Rank #2 (Buy).
In a bid to expand its footprint in the emerging markets, Smith & Nephew plc (SNN) recently decided to acquire certain assets of its Turkish distributor Plato Grup. The acquisition will promote distribution of Smith & Nephew's orthopedic reconstruction, trauma and sports medicine products in Turkey.
Financial terms of the deal have not been disclosed. However, the company expects to close this acquisition in the second half of 2013.
Smith & Nephew is encouraged by the potential of this deal, as Turkey is one of the fastest growing emerging markets. Furthermore, Plato's successful record as well as reputation and business relations will boost the company's growth in Turkey.
In recent times, Smith & Nephew has undertaken several initiatives to strengthen its product portfolio and expand its global foothold. In May 2013, the company announced an agreement to take over Adler Mediequip Private Limited and with it the brands and assets of Sushrut Surgicals Private Limited, a leader in mid-tier, orthopedic trauma products for the Indian market. The Adler Mediequip buyout gives Smith & Nephew an opportunity to gain a foothold in the growing trauma market in India.
Last month, Smith & Nephew unveiled a strategic partnership to promote its IV3000 range of cannula dressings from its Advanced Wound Management (AWM) franchise in U.K. The company's persistent focus on the AWM franchise has already begun to yield positive results.
Smith & Nephew also stands to gain from an improved economic overview in the U.S. and stability in the orthorecon market. Meanwhile, the trauma and extremity businesses represent high-growth avenues.
Smith & Nephew currently carries a Zacks Rank #2 (Buy). Other medical stocks such as Natus Medical (BABY), Wright Medical Group Inc. (WMGI) and ResMed Inc. (RMD) appear impressive. These stocks carry a Zacks Rank #1 (Strong Buy).
Below is the verbatim transcript of the interview
Q: Many people begin investing without having any real objective. How important is it to invest with financial goals in mind? Does it change in any way, your asset allocations or what kind of return anyone could make?
A: Investing without a goal is like shooting in the dark. Many people come to financial markets chasing the hot assets, chasing the returns but never look at what they really want from themselves. So, I think the first and the most important thing that goals help you in doing is that goals help you avoid bad investment decisions.
If you have put down your goals, the first thing that you do when you are looking at financial instruments or savings is that whenever somebody comes and tells you that - should you be investing in this product, will it help you achieving your goals. If not then this product is not for you. So, that is the most important thing that financial goals help you to figure out.
Apart from that, there are three other important reasons of how financial goals can help you in your investment decision making. First and by far the more important one of it is that it tells you the kind of risk appetite that you have. People very often have certain goals but the goals and the kind of savings that they do are not linked to the kind of risks that they are willing to take. That is where it helps you.
Secondly, it helps you to decide the kind of asset allocation that you should be going for. Let's say a particular individual can save Rs 10,000 a month, he is not willing to take risk with that investment and let's say that particular value grows at 8%. Now, at 8%, the value can grow to a certain amount during the investment horizon. Now, if investor's goal is higher than that then he has to obviously take higher amounts of risk. So, not only does it tell you what is the kind of risk appetite you have, it also tells you how your asset should be distributed.
Also Read: Why should you prefer SIP than equity funds?
Finally, it helps you in the emotional aspect of investing. People are very emotional. We are always driven by either greed or fear. Let me relate a story from 2007. Many people in 2007 had more money in their corpus, in their savings than they needed for their retirement but because of the way market were, people were very bullish and they wanted to basically hold on.
If at the same time you had a corpus target, if you know you need Rs 2 crore for retirement and you saw that your assets were higher than Rs 2 crore, you would have then not risked anymore or you would have at least partially booked your profits. So, if this is how you think about your investments where you have a goal linked to your savings, it helps you to take a decision as to when is a good time to get out of your investments.
How should you go about this whole process of framing goals for your investments? Framing goals is basically asking four simple easy questions to yourself. The first question - is what is this goal that you are talking about? Is this a goal of going for a holiday six months down the line, is it a goal of buying a car three years down the line or is it a goal of retiring after 20 years? So, the goals could be of different types. It could be a short term goal, it could be a long term goal. So, first what you need to decide is that what is this goal that you are aiming.
Secondly, you need to figure out if you are going to use up or basically plan for this goal what is the kind of money that you are willing to spend on that goal. You need to figure that value as of today. So, if you were to plan for your kid's education and if you were to send him for an engineering education, that would cost you Rs 10 lakh today. If this goal is due 10 years from now then possibly you will need Rs 20 lakh. So, you need to start saving for that goal doing calculations on Rs 20 lakh and not on Rs 10 lakh. That is the second thing that you need to ask yourself.
The third thing that you need to ask yourself is that - how much are you currently saving towards this goal? This is very important because that gives you a real picture of where you should be and where you are. So, these are the three-four important things that you need to ask yourself to figure out whether you are progressing towards your goal or you are not progressing towards your goal. We are very certain that having goals, financial objectives towards your investments will definitely help you reap better investment decisions from your savings.
Thursday, August 15, 2013
Below is the verbatim transcript of Mathpal's interview with CNBC-TV18.
Q: Are inflation-indexed bonds better hedge against inflation than gold and can you comment on inflation-indexed bonds at this juncture or would you wait to see the fine print?
A: Inflation-indexed bonds by definition are good because these bonds offer inflation adjusted return for example, if one buys a normal bond and it offers 10 percent fix coupon, it will remain throughout the term of that bond. However, inflation may change. Therefore, inflation adjusted real rate will be lower for example if returns are 10 percent and inflation is 7 percent then it comes to 2.80, if inflation goes to 8 percent then it come to 1.85. So, with increase in inflation the real rate comes down.
4.8%-deficit tough; OMOs, rate-cut to buoy bonds: StanChart
In these bonds because returns are inflation adjusted so throughout the term of this the real rate will remain same. So, it is good for the investors but (1) whether this return will be taxable or tax free (2) these bonds will be linked to wholesale price index, which is not the reflection of retail index and if returns are taxable in that case tax free bonds will be a better choice. So, we will have to wait for sometime and then we will see whether these bonds will be helpful for the investor to get good real rate.
Wednesday, August 14, 2013
In an attempt to foster a new generation of financial advisors, private businesses and associations in the finance industry have developed scholarships and grant programs. There are several ways for future financial advisors to find funding for training and professional development.
Education Needed to Become a Financial Advisor
One of the most obvious paths to becoming a financial advisor is to earn a degree in business with an emphasis in finance. College and universities offer degrees in finance from the associate level to doctorate level. However, you don't have to have a degree in finance to become a financial advisor. According to a 2009 poll by The Financial Planning Association, 88% of financial planners and advisors started out with a different day job.
To get an entry-level position, you'll need at least an associate's degree, but a bachelor's degree is preferred by most employers. There are also a number of certifications and licenses that financial advisors need to obtain. Depending on the area of financial advising that you want to go into, the exams for these credentials can cost hundreds of dollars.
Scholarships from Private Businesses
Graduates in finance and related fields are in high demand, which is why corporations and endowments have funds set aside for undergraduate and graduate students who are pursing degrees in these areas. The TD Ameritrade Institutional NextGen Scholarship is one example. Each year, the company awards $5,000 scholarships to 10 students. The recipients must be current freshman, sophomores or juniors who are pursing a bachelor's degree in financial planning at an accredited four-year college or university. The students must maintain a GPA of at least 3.0.
Some of the top academic programs for financial advisors offer both a solid curriculum and a wealth of scholarship money. For instance, The College for Financial Planning offers scholarships based on merit to graduate-level students who are new to financial planning and those who already have experience in the field.
The Robert J. Glovsky Scholarship Fund provides money for graduate-level students who are enrolled in the financial planning program at Boston University's Metropolitan College Center for Professional Education. The $2,000 merit-based awards are given out annually. Texas Tech University and Virginia Tech University also offer several scholarships for financial planning majors.
Organization/Association Scholarships and Grants
Networking and continuing education are two common reasons for professionals to join organizations that are made up of people in their field. Another benefit is to become eligible for scholarships that are only available to members. The National Association of Personal Financial Advisors offers a Certificate in Financial Planning (CFP) Scholarship that reimburses the recipients for the full fee of taking the CFP exam after they pass. The group also awards scholarships to attend their two annual conferences. The scholarships cover all costs including registration fee, travel and hotel.
The American Institute of CPAs (AICPA) and their partner organizations offer scholarships every year for undergraduate and graduate accounting students. Finance majors who want to use their degrees for a career in local or state government can get financial assistance from the Government Finance Officer Association (GFOA). The GFOA awards $10,000 and $5,000 scholarships to full-time undergraduate and graduate students annually.
The Bottom Line
Financial advisors are in demand, and the industry's businesses and associations are willing to pay to help recruit new people to this profession. Aspiring advisors should take advantage of all of the free money that is available on their path to building a successful career.