IB Traders Insight


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Stocks

ETF "Short" Report


Short Interest Can Distort Fund Flow Data

Many investors watch ETF money flow data in an effort to discern where the “smart money” is moving. Inflows into a certain area are generally viewed as bullish while outflows are perceived as bearish. One shortcoming of this approach however is that money flow data is often distorted by short interest in the ETF. This is because ETFs are often the “go-to” instrument for short sellers, and Authorized Participants can easily create more shares to satisfy demand from short sellers, which appear as bullish inflows but are really just creating larger short positions.

This was particularly acute during the Financial Crisis, when traders were prohibited from short selling stocks of large financial firms such as J.P. Morgan Chase (JPM) and Citigroup (C). Instead they shorted the Financial Select Sector SPDR (XLF), which saw its shares outstanding soar more than 10-fold between June 2007 and September 2008, even as prices plunged (Figure 1). The large inflows here clearly would not have been viewed as a bullish indicator.

Fortunately, FINRA requires member firms to report short interest positions in all securities—that is, the number of shares sold short—on a semi-monthly basis. Data from the many member firms is aggregated and then reported as a percentage of shares outstanding for each stock or ETF. This information, combined with the standard fund flow data we already have, can help give investors a clearer picture of investor sentiment. With it, we can calculate whether money flows are net long (i.e., bullish) or net short (bearish).

So what does recent data show? At the highest level, money flows look much the way investors might expect for the month of January, which was a rough period for stock investors. Money flowed out of equity ETFs and into Fixed Income funds. However, the net short flows of $25.7 billion away from equities were about 50% higher than the outflows calculated under the standard approach, which were about $16.8 billion, as the short interest in equity ETFs grew from 8.2% to 8.8% during the month (Figure 2). Meanwhile net long flows into Fixed Income funds were about $12.3 billion, just slightly below the standard flow measure of $12.7 billion, as short interest in the category rose from 3.3% to 3.5%.

Delving deeper into equity funds reveal some surprising data points. While Emerging Markets continued to see outflows along with the rest of the world, the net short flows were actually smaller, at $2.8 billion, than the $4.0 billion outflows seen by standard measures, as short interest in the category declined. This suggests that some short sellers see further downside as limited, and they may have decided to take some profits in anticipation of a possible rebound.

Energy is another area where flows were particularly distorted by changes in short interest. Money flows into the sector were a positive $400 million for January under standard measures, suggesting some bullishness on the part of investors. However, when we take into account the increase in short interest, those inflows turn into outflows, or net short flows, to the tune of $475 million.

While ETF money flows are helpful indicators of changes in investor sentiment, short interest in the underlying stocks of an ETF may tell us more about the levels of bearish sentiment, both because conviction levels are likely higher among investors shorting a single stock, and because the notional dollar amounts are typically far greater. The latter point is due to the fact that the combined market cap of any ETF’s constituents far exceed the ETF’s assets, so even a relatively low short interest in the underlying constituents likely represents a larger “bet” in dollar terms than whatever the short interest in the ETF equates to.

So where is short interest indicating the most bearishness? Table 1 below shows the ten ETFs with the highest percentage of short interest in their underlying constituents. A quick glance reveals that Biotech and Energy-related ETFs are heavily represented, suggesting these areas may see yet more subpar performance going forward. These ETFs have sizeable allocations to such heavily shorted stocks as Myriad Genetics (MYGN), United Therapeutics (UTHR) and Transocean Ltd. (RIG).

Ironically, this could actually redound to the benefit of investors who own any of these funds, since many funds earn extra income from lending securities in their portfolios. This extra income may lead to positive tracking error (that is, enable the ETF to beat its benchmark), thereby offsetting  the fund’s expense ratio borne by investors.

Short sellers aren’t always right, of course, but they don’t survive long without some skill in spotting losers. Short interest reflects the collective wisdom of the short-selling crowd, and therefore is another valuable data point to consider when evaluating ETFs.

Reprinted with permission from AltaVista Research
For more information go to www.etfresearchcenter.com
T 646.435.0569 | E info@altavista-research.com

About AltaVista

A better approach to ETFs. AltaVista’s ETF reports and ratings are built on a fundamentally-driven analysis of each fund’s underlying constituents, with the aim of helping investors make better fund selections based on forward-looking measures of investment merit.

This article is from AltaVista and is being posted with AltaVista's permission. The views expressed in this article are solely those of the author and/or AltaVista and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


8631




Macro

Crude Oil is a Live Grenade into Mid-Next Week


Let’s all agree that the new low in the front-month crude oil futures contract (CLH6) today formally negated the attempt to break the downtrend channel that began on January 20th.

In fact, the daily chart of the April futures (CLJ6) has completed a small 3-week H&S pattern. This is important to recognize as many were watching the move off the lows to gauge whether crude oil would indeed finally resolve the larger and more important 11-month continuation H&S pattern on the daily continuation chart.

The key point is that from a classical technical discipline, the barrel is now very vulnerable to the downside.

As well, the CME noted that on February 9th there was a record trading volume of 1,603,771 futures contracts in WTI crude oil – vs. the prior record of 1,585,710 contracts from December.

Intuitively, most would immediately extrapolate that the high volume was indicative of long selling by discretionary speculators (not CTAs) as the long position established over the last few weeks was at an 8-month high in WTI futures, according to the most recent CFTC data.

What we would say is that it exposed how many retail investors piled on with institutions attempting to get long.

As a reminder, the United States Oil Fund LP (USO) roll period is from February 8-11th. Approximately 75% of the underlying assets in that flawed ETF are/were in March futures and the shares outstanding on this ETF were at an ALL-TIME high on February 9th.

Sight Beyond Sight® is a global macro trading newsletter written daily by Neil Azous. With close to two decades of institutional experience across asset classes, Neil interprets the day-to-day economic, policy and strategy developments and provides actionable trading ideas for investors. We invite clients of Interactive Brokers to sign up for a free trial in Account Management. If you are not a client of IB, you can sign up for a free trial by visiting our website.

 
This article is from Rareview Macro and is being posted with Rareview Macro’s permission. The views expressed in this article are solely those of the author and/or Rareview Macro and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

8630




Options

Gold Has Its Day


The price of gold is catching a bid yet again as bulls struggle to maintain any composure in the face of ongoing selling. Once again there is no single catalyst souring the mood. Rather it is weakness in oil prices, fear of economic weakness, uncertainty over the outlook for monetary policy and selling of equities that is dragging down the mood. The trek towards negative interest rates across G7 nations is spooking investors wondering precisely what firepower central bankers have left and listening attentively for any utterance of calming words from a leading finance minister. Gold’s spot price is almost 6% higher Thursday at $1255.90 per troy ounce. Meanwhile implied volatility on SPDR Gold Shares (Ticker: GLD) has been boosted by the 4.6% surge in the price of the underlying stock as investors try to lock-in acceleration in the price of the ultimate safe haven metal. By lunchtime, more than 550,000 options contracts have traded on GLD led by demand for calls expiring in March and June. Implied volatility – a measure of future share price movements for the share price – is up by about 50% this week to 28.5% - about in line with the main stock market measure of the Vix index.

Chart – GLD implied volatility surging again

The analysis in this article is provided for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such investments. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


8629




Stocks

Nasdaq Market Intelligence Desk - Equity Market Insight February 11, 2016


Market Update:

Stocks across the globe are trading deep in the red, as central bank intervention and discussion of negative rates has investors fearing a global growth slowdown. Depressed commodity prices and an earnings slowdown are also factors in the malaise gripping the market. All 10 sectors are in the red, while the “flight to safety trade” remains true, and Gold extends its 2016 gains (+18% YTD). The Dow is lower by almost 400 points while the S&P 500 is below 1850 support and possibly eyeing 1800. The 10-year is up sharply with a corresponding yield decline to 1.58%. The yield was over 2% just over two weeks ago.   

  • Day two of Janet Yellen’s testimony to congress was highlighted by her belief that market conditions have suffered significantly recently, falling to levels last seen in August (China’s Yuan Devaluation). US employment remains a strong talking point, as companies haven’t been reducing their workforce during this volatile trading period (Initial jobless claims this morning came in at 269,000 so a somewhat better result than the 280,000 survey expectation). Lastly, the committee has anticipated Euro/dollar parity, but the precipitous decline in crude oil wasn’t on their radar.  
  • On the earnings front, Cisco (CSCO) is soaring this morning (+8.5%) after results that beat expectations, but a 24% increase in its quarterly dividend is catalyst behind today’s outperformance. TripAdvisor is also bucking the trend in the broader market, up +14% on the heels of Q4 revenue that beat expectations by the largest margin since 2013.
  • The IPO market is tough, as is the market for biotech stocks. Despite this fact, NASDAQ celebrated the opening of two IPOs today at our MarketSite location in Times Sq., New York. Proteostasis Therapeutics (PTI) opened on Nasdaq, with company executives on hand to watch the first trade, raising $50 million in the process. AVXS also raised $95 million. Congratulations to these two companies for getting deals done in choppy conditions. 

Technical Take:

As of 11:15 AM EST
Nasdaq Composite:
Advancers: 366
Decliners: 1862
Advance Volume: 26MM shares
Decline Volume: 216MM shares
New 52 week Highs (prior close): 8
New 52 week Lows (prior close): 221


As a result of the growing idea of an impending global recession we continue to see money flow out of equities and into Bonds (pushing yields to multi-year lows), as well as defensive proxies like Utilities, Telco, Staples and Gold. This comes as a collective reaction to a perceived failure of monetary and fiscal policy, where the Fed has not only turned course to tightening (at the wrong time) but also has done little to assuage fears while congress has done absolutely nothing in terms of implementing a new course of fiscal policy necessary to sustain economic growth over the long duree. The grinding punishment stocks have thus far taken during this sector by sector rout reminds us that rule #1 of bear markets is the same as in boxing; always protect yourself.  Whether you’re a long term investor or a trader, know that the directional bias of the market, no matter what you want to believe, is to the downside and one must manage risk accordingly on an intermediate term basis. Today’s chart shows the flight to safety YTD.   

  • Another day and another new closing low, fading an advance for the S&P 500 Index (SPX) with a close at 1850 support. The next support is 1810 on further weakness, then appreciably lower if we confirm that breakdown. For the Nasdaq Composite Index (CCMP), much of the same floundering and inability to hold any gains whatsoever.  Small support today at 4220 should be watched. After that it’s the Ebola lows of 2014 at 4130.      
  • Our colleagues at Dorsey Wright have echoed our similar observations; systematically increasing their recommended weightings for Cash, Bonds and defensive sectors for their managed accounts. They further site that: “In times like this where it can be easy to get caught in the emotions of following the headlines, it is more important than ever to follow the indicators and take defensive action when the indicators suggest doing so. We will continue to work the game plan and not let subjectivity rule our investment process. We would rather lose opportunity than money.” See full commentary in Dorsey Wright’s monthly update HERE.


Nasdaq's Market Intelligence Desk (MID) Team includes:  

Michael Sokoll, CFA is a Senior Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over 25 years of equity market experience. In this role, he manages a team of professionals responsible for providing NASDAQ-listed companies with real-time trading analysis and objective market information.
Jeffrey LaRocque is a Director on the Market Intelligence Desk (MID) at Nasdaq, covering U.S. equities with over 10 years of experience having learned market structure while working on institutional trading desks and as a stock surveillance analyst. Jeff's diverse professional knowledge includes IPOs, Technical Analysis and Options Trading.
Vincent Randazzo, CMT is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over 13 years of experience in equity markets having served in equity research sales and desk analyst roles at major banks. Vincent’s specific expertise is in technical analysis and has been a Chartered Market Technician (CMT) since 2007.
Steven Brown is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq with over twenty years of experience in equities. With a focus on client retention he currently covers the Financial, Energy and Media sectors.
Christopher Dearborn is a Managing Director on the Market Intelligence Desk (MID) at Nasdaq. Chris has over two decades of equity market experience including floor and screen based trading, corporate access, IPOs and asset allocation. Chris is responsible for providing timely, accurate and objective market and trading-related information to Nasdaq-listed companies.

This article is from Nasdaq and is being posted with Nasdaq’s permission. The views expressed in this article are solely those of the author and/or Nasdaq and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


8628




Stocks

Fear of Fear Itself Spooks Global Markets


The Fed’s Janet Yellen warns of global risks amid anxiety over more easy money in Japan and Europe.

 

Poor Janet Yellen can’t win for losing. The U.S. Federal Reserve chair did her best yesterday in testimony to Congress that she, too, was mindful of slowing global growth and how it might hurt the American economy. But she wasn’t gloomy enough to suit investors hoping for a new fix of cheap-money morphine.

Markets in Asia were already tolling their unhappiness Thursday morning. Stocks in South Korea, a bellwether for global trade, were down as much as 2.5% and Taiwan’s dollar and Malaysia’s ringgit were leading what seemed likely to be another bad day for currencies in Asia’s smaller, export-dependent economies.

If you’re perplexed how the Fed saying the world’s largest economy is holding up pretty well sends global markets into a new tailspin, join the club. But try this explanation on for size: markets are bracing for a scenario in which the Fed continues to raise interest rates while central banks in China, Europe, Japan and emerging markets have to keep lowering them.

That would mean a continued torrent of funds out of those economies and their currencies into the U.S. and its dollar. As Fitch analyst James McCormack explains, that would be bad news for Asian borrowers: “If the dollar continues to strengthen this year, emerging-market sovereign credits will continue to face stress.” A rising dollar is also kryptonite for big multinationals that dominate the S&P500. Their global sales are likely to get hit by a higher dollar. Markets would love it if Yellen threw her hands in the air and sobbed that the Fed’s rate hike last December, its first in nearly a decade, was a tragic mistake.

But Fed watchers and fund managers are saluting Yellen’s bravery in standing up to the market’s tantrums: “Yellen did not appear to be intimidated by the turmoil in financial markets and the economic developments abroad.,” wrote Rabobank’s senior U.S. strategist Philip Marey.

Ultimately, higher U.S. rates and a stronger dollar would be good for the global economy. Not only would they herald a more powerful U.S. engine for global growth, but they would help end what fund managers and economists decry as an era of excessively cheap credit that has encouraged bad investors to reward badly run companies and badly run economies with cheap funds.

Unwinding all that is driving markets into the tizzy we’ve seen so far this year. The problem now is that, while Yellen’s statements suggest to Fed watchers like Marey that she’s backing away from plans to hike again in March, the market has already decreed there should be no rate hike until next year. That leaves a huge gap in perceptions between when the Fed might hike and when the market thinks the global economy will be ready for it.

Those concerns might not be so severe if investors thought efforts elsewhere to cut rates were doing any good. But Bank of Japan Gov. Haruhiko Kuroda’s surprise attack on deflation last month has clearly backfired. Declaring he would charge, rather than pay, interest on new commercial bank deposits failed to release any new money into the Japanese economy.

Instead, Kuroda’s move fueled a global retreat from risk, pulling cash back into Japan and the relative safety of bonds. Yields on Japanese government bonds have sunk below zero, which is good for the heavily indebted Japanese government. But the yen has soared more than 5% since Kuroda announced his negative interest rate policy. That’s sent Japanese stocks down more than 9%.

Worse, it’s given investors something more to worry about than a Trump vs. Sanders U.S. presidential race: NIRP raised questions about how Japan’s big banks and insurers would maintain margins if the safest investment in town yields a negative return. In a market racked with fear, those concerns have fed worries that falling prices for assets, notably oil, are forcing leveraged investors to liquidate to meet margin calls. That could undermine the collateral European banks having against loans, sparking a wave of defaults, forcing banks to shed assets and raise capital…

So markets have thus managed to work themselves into a full-fledged hissy fit over global liquidity, forced selling and asset quality – what AMP Capital’s Shane Oliver calls fear of fear itself. That is causing some quizzical moves in the market: the dollar, for instance has fallen this month against other major currencies like the yen, the Euro and the Swiss franc as leveraged bets unwind. And gold, traditionally a hedge against inflation rather than deflation, has soared 8%.

And all of this while China was closed for its long Lunar New Year holiday! The only peep from the People’s Republic in the past week was Sunday’s disclosure of a continued, 3% slide in China’s foreign-currency reserves in January as the People’s Bank of China struggled to keep capital outflows from pulling the yuan down faster than it wants.

Jefferies strategist Sean Darby has joined Bank of America Merrill Lynch in predicting another big devaluation could come as part of a coordinated stimulus when the Group of 20 finance ministers and central bankers meet at the end of the month in Shanghai.

Either way, more investors are lining up with this column’s prediction that the PBoC will eventually let the yuan slide further. Hayman Capital Management’s Kyle Bass, who’s hedge fund is betting billions against the yuan, wrote to clients this week he reckons the PBoC’s $3.2 trillion in published reserves overstates how much it has in liquid assets to defend the yuan.

Given how much central banks despise being front-run by speculators, Bass’ big mouth may have just boosted the odds against devaluation. As wild as markets will go if and when it does, it could go worse for China and global markets if it doesn’t.

Get investing analysis that moves stocks and markets—Subscribe to Barron’s for just $1 a week.
 
This article is from Barron's and is being posted with Barron’s permission. The views expressed in this article are solely those of the author and/or Barron's and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

8627




Stocks

The Best and Worst of the Industrials Sector 1Q16


Sector Analysis 1Q16

The Industrials sector ranks second out of the ten sectors as detailed in our 1Q16 Sector Ratings for ETFs and Mutual Funds report. Last quarter, the Industrials sector ranked third. It gets our Neutral rating, which is based on aggregation of ratings of 20 ETFs and 23 mutual funds in the Industrials sector as of January 22, 2016. See a recap of our 4Q15 Sector Ratings here

Figures 1 and 2 show the five best and worst-rated ETFs and mutual funds in the sector. Not all Industrials sector ETFs and mutual funds are created the same. The number of holdings varies widely (from 20 to 348). This variation creates drastically different investment implications and, therefore, ratings.

Investors seeking exposure to the Industrials sector should buy one of the Attractive-or-better rated ETFs or mutual funds from Figures 1 and 2.

Figure 1: ETFs with the Best & Worst Ratings – Top 5

* Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

US Global Jets ETF (JETS), Guggenheim S&P 500 Equal Weight Industrials ETF (RGI), and Huntington EcoLogical Strategy ETF (HECO) are excluded from Figure 1 because their total net assets (TNA) are below $100 million and do not meet our liquidity minimums.

Figure 2: Mutual Funds with the Best & Worst Ratings – Top 5

* Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

Fidelity Select Environment and Alternative Energy Portfolio (FSLEX) is excluded from Figure 2 because its total net assets (TNA) are below $100 million and do not meet our liquidity minimums.

iShares Transportation Average ETF (IYT) is the top-rated Industrials ETF and Fidelity Select Transportation Portfolio (FSRFX) is the top-rated Industrials mutual fund. Both earn a Very Attractive rating.

PowerShares Dynamic Building & Construction Portfolio (PKB) is the worst-rated Industrials ETF and ICON Industrials Fund (ICIAX) is the worst-rated Industrials mutual fund. PKB earns a Neutral rating and ICIAX earns a Dangerous rating.

409 stocks of the 3000+ we cover are classified as Industrials stocks.

Landstar System (LSTR) is one of our favorite stocks held by IYT and earns an Attractive rating. Over the past decade, Landstar has grown after-tax profit (NOPAT) by 7% compounded annually. LSTR improved its already high 18% return on invested capital (ROIC) in 2004 to a top-quintile 22% ROIC on a trailing twelve months basis. Despite the consistent strength in its business, LSTR is undervalued. At its current price of $55/share, LSTR has a price to economic book value (PEBV) ratio of 1.1. This ratio means that the market expects Landstar to grow NOPAT by only 10% over its remaining corporate life. If Landstar can continue to grow NOPAT by just 7% compounded annually over the next decade, the stock is worth $72/share today – a 31% upside.

Celadon Group (CGI) is one of our least favorite stocks held by Industrials ETFs and mutual funds. Celadon was placed in the Danger Zone in November 2015 and is a competitor to Landstar. Since 2009, Celadon’s reported earnings have been extremely misleading. Despite net income growing from $2 million in 2009 to $37 million in 2015, Celadon’s economic earnings have declined from -$16 million to -$25 million over the same timeframe. The disconnect comes from Celadon’s failed acquisitions, which have helped grow EPS while destroying shareholder value, something known as the high-low fallacy. Even though CGI is down 50% since our initial Danger Zone report, it still remains overvalued. To justify its current price of $7/share, Celadon must grow NOPAT by 8% compounded annually for the next 11 years. While this may not seem like a high rate of profit growth, keep in mind that over the past decade, CGI has only grown NOPAT by 3% compounded annually.

Figures 3 and 4 show the rating landscape of all Industrials ETFs and mutual funds.

Figure 3: Separating the Best ETFs From the Worst ETFs

Sources: New Constructs, LLC and company filings

Figure 4: Separating the Best Mutual Funds From the Worst Mutual Funds

Sources: New Constructs, LLC and company filings

Disclosure: David Trainer and Kyle Guske II receive no compensation to write about any specific stock, sector or theme.

 

About New Constructs

QUESTION: Why shouldn’t ETF research be as good as stock research? Why should ETF investors rely on backward-looking price trends?
ANSWER: They should not.

Don’t judge an ETF by its cover. Take a look inside at its holdings and understand the quality of earnings and valuation of the stocks it holds. We enable you to choose the best ETF based on its stock-picking merits so you do not have to rely solely on backward-looking technical metrics. 

The figure below details the drivers of our forward-looking Rating system for ETFs. The drivers of our predictive rating system are Portfolio Management and Total Annual Costs. The Portfolio Management Rating (details here) is the same as our Stock Rating (details here). The Total Annual Costs Rating (details here) captures the all-in cost of being in an ETF fund over a 3-year holding period, the average period for all fund investors.

Cutting-edge technology enables us to scale our forensics accounting expertise so that we can cover enough stocks to cover the ETFs that hold them as well. Learn more about New Constructs. Get a free trial. See what Barron’s has to say about our research.

This article is from New Constructs, LLC and is being posted with New Constructs, LLC’s permission. The views expressed in this article are solely those of the author and/or New Constructs, LLC and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

 


8625




Stocks

Sector News Breakdown


Consumer

  • Tesla (TSLA) Q4 EPS loss (87c)/$1.51B vs. est. 10c/$1.81B; sees 1Q deliveries ~16K, vs. est. 15.2K; sees 2016 deliveries 80k-90k, vs. est. 76.2k; sees Model 3 unveiling March 31st, launch in 2017; said Q4 capex $411M and gross margin 20% (vs. est. 23%); planning for full year 2016 non-GAAP profitability, GAAP profit in Q4 2016
  • PepsiCo (PEP) Q4 EPS $1.09/$18.59B vs. est. $1.06/$18.51B; sees FY16 core EPS $4.66, consensus $4.76; expects over $10B in cash flow from operating activities and more than $7B in free cash flow and net capital spending of approximately $3B
  • Advance Auto Parts (AAP) Q4 EPS $1.22/$2.03B vs. est. $1.21/$2.05B; reports Q4 comparable store sales (2.5%). 
  • Whole Food (WFM) Q1 EPS 46c/$4.83B vs. est. 40c/$4.81B; boosts year EPS view to $1.53 or greater from $1.50; reaffirms year sales growth view $15.85B-$16.16B; said Q1 gross margin 34.0% and comps fell (-1.8%) vs. est. (-2.2%)
  • O'Reilly Automotive (ORLY) Q4 EPS $2.19/$1.95B vs. est. $2.08/$1.91B; reports Q4 comparable store sales increase of 7.7%; increases share repurchase program $750M to $6.25B; sees FY16 EPS $10.10-$10.50 on revs $8.4B-$8.6B vs. est. $10.39/$8.50B
  • HNI Corporation (HNI) Q4 non-GAAP EPS 91c/$596.9M vs. est. 89c/$608.95M; sees FY16 non-GAAP EPS $2.20-$2.60 vs. consensus $2.75
  • Pilgrim's Pride (PPC) Q4 EPS 26c/$1.96B vs. est. 40c/$1.99B; raises share repurchase program to $300M from $150M
  • Skecher’s (SKX) Q4 EPS 19c/$722.7M vs. est. 20c/$693.48M; sales int’l business grew to 41% of total sales, closer to co.’s goal of 50% in next 2-3 years
  • iRobot (IRBT) Q4 EPS 65c/$206.4M vs. est. 56c/$202.25M; sees 2016 EPS $1.20-$1.40 below est. $1.96 and revs $630M-$642M vs. est. $680.3M
  • LifeLock (LOCK) Q4 EPS 30c/$156.2M vs. est. 29c/$154.72M; Sees 2016 revs $660M-$670M vs. est. $677M

Energy

  • Pioneer Natural Resources (PXD) Q4 EPS loss (18c) vs. est. loss (34c); sees 2016 production up 10%; sees 1Q production avg. 211-216 Mmboe/d; said to cut Eagle Ford shale rig count to 0; to cut Southern Wolfcamp JV rigs to zero; also cutting horizontal drilling activity by 12 rigs
  • Oceaneering (OII) Q4 EPS 58c/$722M vs. est. 58c/$695.99M

Financials

  • Societe Generale SA, France’s second-largest bank, posted Q4 profit that missed analysts’ estimates as earnings at the investment bank dropped 35%
  • Prudential Financial (PRU) Q4 EPS $1.94/$13.2B vs. est. $2.30/$11.6B; said 4Q adjusted operating income included items with net unfavorable impact of 13c per share
  • Primerica (PRI) Q4 EPS $1.01/$354.1M vs. est. 98c/$360.14M; Q4 operating revenue $357.5M; said ROAE up 160 basis points to 16.9%

Healthcare

  • Generic drug maker Mylan NV (MYL) said it would buy Sweden's Meda AB for about $9.9 billion, including debt, in a combination of cash and stock; said the offer, recommended by Meda's board, was for 165 Swedish crowns per share http://goo.gl/6A8Imw
  • Mylan (MYL) Q4 EPS $1.22/$2.49V vs. est. $1.28/$2.70B; sees year total revs of $10.5B-$11.5B with or without Meda and sees 2016 EPS $4.85-$5.15
  • Bruker (BRKR) Q4 EPS 38c/$478.2M vs. est. 27c/$469.98M; sees 2016 EPS 97c-$1.02 vs. est. 91c and sees 2016 organic revs growth ~3%
  • Ligand (LGND) Q4 EPS 66c/$21.2M vs. est. 64c/$24.7M; sees year EPS $3.37-$3.42, from prior $3.33-$3.38 vs. est. $3.34; also raises year revs slightly above

Industrials & Materials

  • The Pentagon said it expects to reach agreement with Lockheed Martin Corp (LMT) in March on contracts for the next two batches of F-35 fighter jets, orders worth about a combined $15B that will lower the cost of each warplane to below $100M http://goo.gl/T8E2I2
  • Rayonier (RYN) Q4 EPS 8c/$137.1M vs. est. 6c/$128.59M
  • FMC Corporation (FMC) Q4 EPS 77c/$899.3M vs. est. 63c/$951.38M; sees FY16 EPS $2.50-$2.80 vs. consensus $2.95
  • Franco-Nevada (FNV) announces $550M common stock offering at $47.85 per share
  • Agnico Eagle (AEM) Q4 EPS 2c/$482.93M vs. est. loss (1c)/$496.56M
  • Rio Tinto Group (RIO) scrapped its progressive dividend policy and set out new spending cuts

Media & Telecom

  • CenturyLink (CTL) Q4 EPS 80c/$4.48B vs. est. 65c/$4.42B; sees Q1 EPS 67c-73c on revs $4.4B-$4.45B vs. est. 62c/$4.41B; sees FY2016 EPS $2.50-$2.70 on revs $17.55B-$17.8B vs. est. $17.66B
  • General Cable (BGC) Q4 EPS 5c/$913.3M vs. est. 13c/$919.77M; sees Q1 adjusted EPS (5c)-15c on revs $825M-$875M vs. est. 12c/$866

Technology

  • Cisco (CSCO) Q2 EPS 57c/$11.8B vs. est. 54c/$11.76B; approves $15B boost to stock buyback plan; boosts dividend to 26c from 21c; sees 3Q adj. EPS 54c-56c vs. est. 55c and revs up 1%-4% y/y, vs. est. down 0.8%; sees 3Q gross margin 64.2%
  • Twitter (TWTR) Q4 EPS 16c/$710.5M vs. est. 12c/$709.94M; sees Q1 revs $595M-$610M vs. est. $627.6M; said Q4 total monthly active users 320M vs. est. 324M
  • Amazon.com (AMZN) authorizes $5B stock repurchase program
  • Expedia (EXPE) Q4 EPS 77c/$1.699B vs. est. $1.00/$1.71B; 4Q adj. Ebitda $280M below est. $303.4M; said Q4 gross bookings up 40%; sees 2016 adj. Ebitda growth of 35%-45%
  • Cornerstone OnDemand (CSOD) Q2 EPS loss (2c)/$95.9M vs. est. 2c/$97.7M; said Q4 bookings at $142M, up 24% YoY
  • CSRA Inc. (CSRA) Q3 EPS 48c/$1.27B vs. est. 42c/$1.32B; reports Q3 pro forma bookings of $1.8B; sees Q4 EPS 45c-49c on revs $1.28B-$1.33B vs. est. 41c/$1.37B
  • HubSpot (HUBS) Q4 EPS loss (12c)/$53.1M vs. est. loss (18c)/$50.34M; sees Q1 EPS loss (20c)-(16c) on revs $54.7M-$55.7M vs. consensus loss (20c)/$52.39M
  • Zynga (ZNGA) reports Q4 EPS 0c/$185.77M vs. est. 0c/$178.67M; Q4 bookings of $182M and Mobile bookings of $134M or 73% of overall bookings, up 21% year-over-year and up 10% sequentially; sees 1Q adj. loss break-even to loss of 1c; est. break-even
  • J2 Global (JCOM) Q4 EPS $1.29/$204.8M vs. est. $1.17/$202M; sees 2016 revs $830M-$860M, vs. est. $828.2M
  • Cognex (CGNX) Q4 revs $97.8M vs. est. $95.3M; sees 1Q revs $91M-$94M vs. est. $94.8M
  • Hortonworks (HDP) Q4 EPS loss (72c)/$37.4M vs. est. loss (80c)/$35.7M; sees 1Q revs $39.5M, vs. est. $39M and year revs $188M vs. est. $189.4M
  • MINDBODY (MB) Q4 EPS loss (17c)/$28.3M vs. est. loss (20c)/$27.58M; end of year subscribers grew 27% YoY to 51,481. Average monthly revenue per subscriber (ARPS) grew 13% Yo

 

The content of this post was created by the Hammerstone Group. The Hammerstone Institutional Forum, a chat-based platform for traders, provides subscribers with up-to-the-minute breaking news headlines and instant analysis that drive the market. For more information please visit www.thehammerstone.com. For more information on the stocks mentioned in the Hammerstone Recap, please contact Brian Ducey at brian@thehammerstone.com.



This article is from the Hammerstone Group and is being posted with the Hammerstone Group's permission. The views expressed in this article are solely those of the author and/or the Hammerstone Group and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


8626




Futures

Global Fed Policy Impacts to Risk-Off Assets Gold & Rates


Jim Iuorio, CNBC Contributor & TJM Institutional Services

This video is from CME Group and is being posted with CME Group’s permission. The views expressed in this video are solely those of the author and/or CME Group and IB is not endorsing or recommending any investment or trading discussed in the video. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


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Stocks

The Hammerstone Report


U.S. stock index futures are under pressure early with global stock markets in turmoil once again, as Fed Chair Yellen's comments yesterday failed to comfort markets. Fed Chair Yellen will appear before the Senate Committee on Banking, Housing and Urban Affairs today in round two of testimony on monetary policy. Dow Futures are pointing to a drop of around 300 points in pre-market trading, while most of Europe was down over 3%. Given the sharp decline in equities globally, we are seeing another spike in “safe haven” assets such as bonds and gold futures. The yield on the 10-year has dropped 10 bps to below 1.60%, while gold spikes to $1,227, up over 2.7%. The Japanese yen also providing a flight to safety, jumping 1.7% against the U.S. dollar, down to 111.50 (lowest since early 2014). On Wednesday Yellen told the committee that the Fed was not sure it could legally take rates negative as Europe and Japan have. She also said it was unlikely the Fed would cut rates, having just raised them. It is also another busy day for earnings with results from PEP, K, GNC, AIG and ATVI among others. In Asian markets, the Hang Seng Index resumed trading after being closed for the Lunar New Year holiday, falling 3.85% or 742 points to settle at 18,545. In Japan the Nikkei was closed for National Foundation Day, while markets remained closed in mainland China. It appears that financial markets are repricing for a global growth slowdown.

As for yesterday, the Dow industrials and S&P 500 relinquished gains in late-afternoon trade to end lower, leaving the benchmark indexes with their longest stretch of consecutive losses in months. However, the tech heavy NASDAQ managed to eke out a gain. Only two of the S&P 500’s 10 sectors finished in the green: health care was up 0.9% and technology up 0.4%. Stocks had climbed early as Federal Reserve Chairwoman Janet Yellen delivered testimony and answered monetary-policy questions in front of a congressional committee. But stocks abruptly turned lower in afternoon trading and momentum has carried over into today’s trade.

Market Closing Prices Yesterday

  • The S&P 500 Index dipped -0.35 points, or 0.02%, to 1,851.86
  • The Dow  Jones Industrial Average fell -99.64 points, or 0.62%, to 15,914.74
  • The Nasdaq Composite climbed 14.83 points, or 0.35%, to 4,283.59
  • The Russell 2000 Index dropped -0.41 points, or 0.04% to 963.48

Events Calendar for Today

  • 8:30 AM ET            Weekly Jobless Claims…est. 280K
  • 8:30 AM ET            Continuing Claims…est. 2.248M
  • 9:45 AM ET            Bloomberg Consumer Comfort Index…prior 44.2
  • 10:00 AM ET          Fed’s Yellen to appear before Senate Banking Committee
  • 10:30 AM ET          Weekly EIA Natural Gas Inventory Data
  • 1:00 PM ET            U.S. Treasury to sell 30-year notes in auction

World News

  • Sweden’s central bank lowered its key interest rate even further below zero as it cut the repo rate to minus 0.50% from minus 0.35%
  • German government bonds rallied, pushing note yields to record lows to 0.16%


The content of this post was created by the Hammerstone Group. The Hammerstone Institutional Forum, a chat-based platform for traders, provides subscribers with up-to-the-minute breaking news headlines and instant analysis that drive the market. For more information please visit www.thehammerstone.com. For more information on the stocks mentioned in the Hammerstone Recap, please contact Brian Ducey at brian@thehammerstone.com.


This article is from the Hammerstone Group and is being posted with the Hammerstone Group's permission. The views expressed in this article are solely those of the author and/or the Hammerstone Group and IB is not endorsing or recommending any investment or trading discussed in the article. This material is for information only and is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad-based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation by IB to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.


 


8623




Technical Analysis

VIX (VX) Testing Weekly Chart Upchannel Resistance


The VIX (VX) closed barely higher yesterday after some initial profittaking, and is now testing upchannel resistance (on the weekly chart).  The VX is also within a session or so of hitting the January high, and should be targeting the daily chart upchannel resistance shortly after.  Weekly, daily and 4hr RSI, Stochastics and MACD are mostly rallying.  I am flat and am looking to go long intraday on any dip towards 25-26 today.

 

VIX (CFE VX Feb16) Weekly/Daily/4hr/Hourly

 

Click here for today's technical analysis on Euro Stoxx 50, DAX, Nikkei, S&P500, Nasdaq100, GBPUSD, Natural Gas, Silver

 

Tradable Patterns was launched to demonstrate that the patterns recurring in liquid futures, spot FX and equity CFD markets can be traded consistently profitably. Tradable Patterns’ daily newsletter (blog) provides technical analysis on a subset of ten to twelve CME/ICE/Eurex futures (commodities, equity indices, interest rates), spot FX and US equity markets, which it considers worth monitoring for the day/week for trend reversal or continuation. For less experienced traders, tutorials and workshops are offered online and throughout Southeast Asia.

 

This article is from Tradable Patterns and is being posted with Tradable Patterns’ permission. The views expressed in this article are solely those of the author and/or Tradable Patterns and IB is not endorsing or recommending any investment or trading discussed in the article. This material is not and should not be construed as an offer to sell or the solicitation of an offer to buy any security. To the extent that this material discusses general market activity, industry or sector trends or other broad based economic or political conditions, it should not be construed as research or investment advice. To the extent that it includes references to specific securities, commodities, currencies, or other instruments, those references do not constitute a recommendation to buy, sell or hold such security. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

 


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