At the beginning of this month, I launched ETF Focus, my Marketplace premium research service here on Seeking Alpha. It's a service designed to help all investors develop ETF-based portfolio strategies, while targeting actionable trade opportunities and identify significant cost savings possibilities.
During the short time ETF Focus has been up and running, we've already profiled more than two dozen different ETFs, taken a deep into my personal portfolio to discuss what I own and why, and tried to build the "ultimate" dividend growth portfolio! And that's not even including our proprietary ETF power rankings that rate hundreds of different funds broken down into more than two dozen different segments, sectors and regions by factors, such as expenses, diversification, liquidity and tradeability.
Look at just a couple of the comments that have already appeared in the chat room.
You have been a great help and i really appreciate the effort you put into my request for direction.
many thanks Dave ... you made my day!!
Consider Joining Us Before Subscription Rates Increase on March 1st
During the month of February, subscribers have the opportunity to join ETF Focus for a special low introductory price. The "sale" will continue through February 28th, at which point prices will increase to their regular level.
- Monthly Rate: The rate will increase from $30/month to $35/month.
- Yearly Rate: The rate will increase from $270/year to $315/year.
Better yet, subscribers who join ETF Focus by February 28th will lock in the current low rates for as long as they stay subscribed! If you're interested in joining right now, be sure to click the link HERE to take you to the landing page to subscribe. If you need a little more convincing before signing up, keep reading...
Sample a Few Recent Exclusive Reports
For most people, I know it's difficult to commit their money to a product without knowing exactly what they're getting. So I wanted to give my real-time followers a sample of some of the reports that have been posted over the past couple of weeks, so you can get a better sense of what you'd receive as an ETF Focus subscriber.
ETF Power Rankings
The ETF rankings are meant to be used as a quick and easy way to identify the top funds within a given category and weed out some of the more unsavory types. They look at and weight a number of different factors in order to determine which ones offer the best combination of low fees, diversification, liquidity, etc. You’ll want to consider personal circumstances when choosing a final product (for example, whether or not your brokerage platform will charge a commission for buying or selling an ETF), but these rankings should help you identify the best of the best.
Here are the current top 10 consumer staples ETFs.
As mentioned above, we rank ETFs within a number of different groups, such as dividend, biotech, emerging markets and high yield bond ETFs, just to name a few. These rankings are typically updated on a monthly basis.
Actionable Trade Ideas
I'm not a huge ETF trader, but I know that some of you are. I post around 2-4 trade ideas every month, with a target time frame of usually one year or less. Recently, I posted a buy alert for the VanEck Vectors Oil Services ETF (OIH). Here's a sample of the report that subscribers received...
Target Price: $34 by 12/31/2018 (a gain of 24.5% compared to the price of $27.31 at the time of writing)
About the Fund
The Oil Services ETF seeks to replicate the performance of the MVIS® U.S. Listed Oil Services 25 Index. It’s intended to track the overall performance of U.S.-listed companies involved in oil services to the upstream oil sector, which include oil equipment, oil services, or oil drilling. The index is a basket of 25 of the largest companies in the sector. It carries an expense ratio of 0.35%.
OIH is a true all-cap fund, but leans heavily towards large-cap names. Two-thirds of the companies have a market cap of $5 billion or greater, with a weighted average market cap of around $30 billion.
Catalysts For A Bullish Move
The energy sector has been the market's worst performing group over the past 1-, 3-, 5- and 10-year periods. Since September 2017, however, energy has been one of the best performers, coinciding with the rebound in oil prices. The market environment for oil companies has improved sufficiently enough that it's now become a good time to buy this group.
Rising Oil Prices
One of the biggest factors in the decline of the oil services sector, and energy stocks in general, is the decline in oil. The United States and OPEC nations continued to overproduce and ended up creating a supply glut that helped drive the price of a barrel of WTI crude oil briefly below $30. The two sides engaged in a game of chicken, of sorts, to see who would slow production first in order to balance out supply and demand. OPEC announced an agreement towards the end of 2016 (with implementation in the beginning of 2017) to cut production and work towards clearing out some of the oversupply that was created. The production cut agreement has tentatively remained in place since, and the price of WTI crude has since risen to roughly $65. Brent crude has crossed the $70 mark.
Not surprisingly, the energy sector is expected to post the greatest year-over-year earnings growth of any of the major sectors. That, of course, is due to the fact that year-ago earnings in the group were so low. The percentages may be misleading, but the raw numbers are looking good.
This from Factset...
On a dollar level basis, the Energy sector is reporting earnings of $12.7 billion in Q4 2017, compared to earnings of $5.3 billion in Q4 2016. If the Energy sector were excluded, the blended earnings growth rate for the remaining ten sectors would decrease to 9.5% from 12.0%.
Subscribers to ETF Focus get a much more detailed breakdown of why I put a buy rating on the fund.
Portfolio Strategy Pieces
On of my main focuses here is building broader portfolio strategies, whether that's retirement income, transitioning into retirement, strategic long-term growth, factor tilting and more.
Here's a sample of a longer piece that was just posted about building the "ultimate" dividend growth portfolio.
Let's start by running down the list of dividend growth ETFs. Again, you could probably make an argument that others could be included, but this list makes a reasonable starting point.
On the table, I've included the number of consecutive years of dividend growth required to make the cut for each fund. This is simply the minimum number of years required. A fund, such as the iShares Core Dividend Growth ETF (DGRO), might require only a five-year minimum, but, in reality, most of the fund's holdings have dividend growth histories much longer than that.
Narrowing Down the List
When constructing the optimal portfolio, I think there are a few names that we can eliminate right off the bat. Reasons could include expense ratios, small asset bases, portfolio composition, etc. I'll run through a few of the funds I'm going to drop from consideration and why.
- ProShares MSCI Europe Dividend Growers ETF (EUDV) - A fund with only $8 million in assets is rarely, if ever, going to be an ideal choice from a cost standpoint. I also see little reason to put a Europe focused ETF in the portfolio when I can get broader exposure to the international and emerging markets through other vehicles. This ETF is ranked #100 on my dividend ETF rankings.
- ProShares MSCI Emerging Markets Dividend Growers ETF (EMDV) - This fund is also too small to consider right now, and has the highest expense ratio of any fund on the list. It would simply be too costly to own.
The Domestic Component
In the large-cap arena, the Vanguard Dividend Appreciation ETF (VIG) and the Schwab U.S. Dividend Equity ETF (SCHD) are widely considered two of the best dividend ETFs available. Both are large-cap focused, ultra-cheap and don't consider any company without a 10-year dividend growth history. VIG is more of a traditional dividend growth fund, where SCHD also screens for solid fundamentals and yield-weights the portfolio. The ProShares S&P 500 Dividend Aristocrats ETF (NOBL) is the true aristocrat fund on the list requiring 25+ years of rising dividends. The WisdomTree U.S. Quality Dividend Growth ETF (DGRW) works just like the other funds within that family in that they target future dividend growth instead of past.
On the all-cap side, the SPDR S&P Dividend ETF (SDY) requires a 20-year history, but is weighted by dividend yield. DGRO requires only a short dividend growth streak, but has an otherwise top-notch performance record (I have it at #2 in my dividend ETF rankings). The PowerShares High Yield Equity Dividend Achievers ETF (PEY) targets the high yielding end of the dividend grower universe. The First Trust Rising Dividend Achievers ETF (RDVY) is the equal-weighted alternative to the others, while the PowerShares Dividend Achievers ETF (PFM) is more in the traditional mold.
Conclusion: RDVY and PFM are out. They're the most expensive of the bunch and don't really offer anything unique enough that can't be found in a higher-rated fund with a lower expense ratio. Despite its strong record, I'm also going to remove DGRW for much the same reason I removed the other WisdomTree ETFs. Every holding in NOBL is also included in SDY, so there's little sense in owning both. It's just a matter of whether or not you want the companies with less than 25 years of history included (SDY dividend-weights, whereas NOBL equal-weights, so there's that difference too). I'm going to choose SDY over NOBL, it's a bit more broadly diversified and I like the higher yield without taking a lot of added risk. I'm going to hang on to VIG and SCHD because I think they complement each other nicely. I'm also keeping DGRO, which, despite requiring the least dividend history and still qualifying as a dividend growth fund, I love its track record and ultra-low expense ratio. I'm also going to keep PEY to add a little high yield zest to the portfolio.
These are several pieces of the entire report, but should give you a good example of what a broader strategy piece will look like.
Weekly "ETFs in Focus"
The weekly "ETFs in Focus" piece is designed to profile roughly 5-10 funds each week that are likely to be impacted by some shorter-term event. This could be a news release affecting an entire sector, quarterly earnings or a change in the economic environment.
Here's a sample of this from a few weeks ago.
iShares Interest Rate Hedged High Yield Bond ETF (HYGH)
If you haven't already, you should be bracing for higher interest rates. Back in September, the yield on 10-year Treasuries had dipped to around 2%. Today, the rate is up to 2.7%. Most fixed income products are negative on the year, and most watchers are expecting three more rate hikes in 2018, the first of which possibly coming at the Fed's March meeting.
High yield bonds have been able to buck the trend so far, posting minor gains, but the ones that have done best are the ones that have hedged their interest rate exposure. HYGH is already outperforming its unhedged counterpart, the iShares iBoxx $ High Yield Corporate Bond ETF (HYG), by around 120 basis points so far this year.
Other hedged ETFs, such as the ProShares High Yield Interest Rate Hedged ETF (HYHG), have also gotten off to a strong start. HYGH has nearly doubled in size in January taking in more that $100 million in flows. Flows in interest rate hedged products are up roughly 50% so far in 2018, with floating rate bond funds experiencing strong interest as well.
Guggenheim Solar ETF (TAN)
President Trump announced last week that he was imposing a 30% tariff on solar cells and modules (although it will decrease annually until it hits 15% in 2021). While the move is designed to provide a boost to U.S. solar manufacturing (it's estimated that nearly 95% of solar panels are currently imported), it has significant implications for the sector as a whole.
While it's true that U.S. solar manufacturers have been negatively impacted by imports, cheap imports have been good for installers and makers of other solar components. This could be a case of tariffs helping one part of the U.S. solar industry while harming another. My thought is that higher solar panel costs could depress the industry as a whole. Overall costs will at least be higher in the short-term as U.S. manufacturers struggle to ramp up, and that imbalance will result in lower overall solar sales (an 11% reduction in installations according to this study).
TAN is down more than 2% since the announcement. The fund only has 30% of assets in North American companies (First Solar (FSLR) is the fund's largest holding at 10% of assets), but these seems like an area that investors should avoid for now.
Subscribe Now Before Rates Go Up!
If you found the above sample reports useful and would be interested in receiving more comprehensive versions of reports like these (and more!) every month, I hope you'll consider becoming an ETF Focus subscriber! Remember that the current discounted rate is available through February 28th, after which time it will be increasing back to its normal rate.
- Monthly Rate: The rate will increase from $30/month to $35/month.
Yearly Rate: The rate will increase from $270/year to $315/year.
I invite you to comment down below or direct message me if you have any questions. If you'd like more info or are interested in subscribing, please click HERE.
Disclosure: I am/we are long VIG.