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PowerShares Leads The “Most Attractive” ETFs

|Includes: AWH, HDV, INTC, KBWP, PowerShares Buyback Achievers Portfolio ETF (PKW), PMA, STX, UEC, WDC, XLV

Pow­er­Shares Buy­back Achiev­ers (PKW) is the #1 “most attrac­tive” ETF out of the 375+ ETFs we ranked accord­ing to our pre­dic­tive rat­ing system.

These rank­ings come from the 375 reports we pub­lished today on ETFs. Each of our ETF reports pro­vides a pre­dic­tive rat­ing, just like a buy/hold/sell stock rating. We apply the same top-ranked rat­ing sys­tem we use for stocks to funds by com­bin­ing our mod­els for each of the stocks in the fund accord­ing to the fund’s allo­ca­tion to each stock.

To access our ETF reports, enter the ETF ticker on our home page.

Top 5 US Equity ETFs are below. Click on any of them for a free copy of our report:

  1. Pow­er­Shares Buy­back Achiev­ers (PKW)
  2. iShares High Div­i­dend Equity (HDV)
  3. Pow­er­Shares KBW Prop & Casu­alty Insur­ance (KBWP)
  4. Pow­er­Shares Active Mega Cap (PMA)
  5. Health Care Select Sec­tor SPDR (XLV)

The top 5 ETFs are the best because they allo­cate the most cap­i­tal to the best stocks, those with our “attrac­tive” or “very attrac­tive” rat­ings. We report our top 40 “most attrac­tive” stocks monthly. Five stocks from June’s newslet­ter are:

  1. Allied World Assur­ance (AWH)
  2. Sea­gate Tech­nol­ogy (STX)
  3. West­ern Dig­i­tal (WDC)
  4. Intel Cor­po­ra­tion (INTC)
  5. Net 1 Ueps Tech­nolo­gies (UEPS)

Fig­ure 1 details our rat­ings for all 375 ETFs we cur­rently cover. The pie chart on the left shows the allo­ca­tion of ETF assets by NAV accord­ing to our rat­ing sys­tem. The pie chart on the right shows the num­ber of ETFs that fall within each grade of our rat­ing sys­tem. Note that no funds get our best rat­ing: “most attrac­tive”. Our abil­ity to cover so many funds comes from the rig­or­ous research we per­form on 3000+ stocks.

Fig­ure 1: Break­ing Down the ETF Universe


Sources: New Con­structs, LLC and com­pany filings

Unlike the other fund rat­ing sys­tems that too often dom­i­nate the dia­logue on funds, our sys­tem is not backward-looking and does not rely on past price performance.

For proof that the backward-looking rat­ing sys­tem is becom­ing obso­lete look no far­ther than one of the biggest fund rat­ing firms in the world. Morn­ingstar recently announced that it was aug­ment­ing its entirely backward-looking “star” rat­ing sys­tem with an “ana­lyst” rat­ing sys­tem that observes expense ratios, man­ager and spon­sor gov­er­nance and past performance.

This new rat­ing sys­tem, accord­ing to Morn­ingstar, is expected to add more pre­dic­tive value to its rat­ings. More is def­i­nitely bet­ter in this case since the pre­dic­tive value of the “star” rat­ings were per­ceived across the wealth man­age­ment indus­try as very low and often counter-predictive.

Note that the under­ly­ing val­u­a­tion of the stocks held by a fund is not included any­where in the new “ana­lyst” rat­ing. There is no men­tion of the under­ly­ing prof­itabil­ity (or lack thereof) of the stocks held by the fund either.

Admit­ting that a backward-looking “star” sys­tem was in need of improve­ment is a step in the right direc­tion, but Morn­ingstar is still far from offer­ing investors the pre­dic­tive value research they deserve in fund research.

Investors deserve fund research that is rig­or­ous as indi­vid­ual stock research.

For fund research to match the qual­ity of stock research, one must ana­lyze the invest­ment merit of each and every indi­vid­ual stock held by a fund. There is no worth­while short-cut to this daunt­ing chal­lenge, which has, until now, gone unmet.

Let’s face it: high-quality research on one stock is dif­fi­cult and rare. The process of trans­lat­ing account­ing earn­ings into eco­nomic earn­ings, by itself, requires a great deal of work for every period of his­tory one cov­ers for a sin­gle company.

I am not sur­prised that no other firms have been able to muster the resources to pro­vide investors with fund research based on rig­or­ous analy­sis of the under­ly­ing hold­ings for a large num­ber of funds.

Most of the research firms that cover enough stocks to be able to per­form fund rat­ings based on a fund’s under­ly­ing hold­ings are Wall Street firms. And those firms are in the invest­ment bank­ing busi­ness, which has proven over time not to share the best inter­ests of the firms’ research clients.

New Con­structs abil­ity to cover 3000+ stocks enables us to cover so many funds. Our patented research plat­form for revers­ing account­ing dis­tor­tions and dis­counted cash flow analy­sis lever­ages data from the finan­cial foot­notes to deliver research of unri­valed qual­ity and accu­racy on both stocks and funds.

Today we pub­lished research reports with pre­dic­tive rat­ings for nearly 400 ETFs. And today investors have access to ETF research that is as rig­or­ous at stock research.

To access our reports, enter the ETF ticker on our home page.



Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in STX, WDC, INTC over the next 72 hours.