Hits & Misses Of 7 Alpha Seeking ETFs

August 04, 2015

4. Guggenheim Raymond James SB-1 Equity ETF (RYJ | B-63)

Wall Street is filled with analysts. No matter the sector or stock, there's probably an analyst out there covering it and offering a buy, sell or hold recommendation, along with a price target. The Guggenheim Raymond James SB-1 Equity ETF (RYJ), with $267 million in assets, attempts to capitalize on these experts' recommendations by purchasing the stocks rated as “Strong Buy” by Raymond James analysts.

The Market Vectors Morningstar Wide Moat ETF (MOAT | B-62), with $868 million in assets, employs a similar strategy, but uses recommendations from Morningstar analysts.

Of course, skeptics will argue that stock analysts are not particularly good market timers, and that such a strategy will tend to underperform over time. At least based on the recent history of RYJ, the skeptics seem to have the upper hand in the argument. The fund has been unable to deliver the significant outperformance it has promised. The ETF returned 2.7 percent so far in 2015, matching SPY, and 110 percent during the past five years, just a hair above SPY's 106 percent.

5. Direxion All Cap Insider Sentiment ETF (KNOW | B-83)

Who knows better about the prospects of a company than the CEO and other top executives? That's the thesis underlying an investment in the Direxion All Cap Insider Sentiment ETF (KNOW) and its rival the Guggenheim Insider Sentiment ETF (NFO | C-57), both with around $120 million in assets.

The two ETFs closely follow and mimic insider-buying trends seen in public disclosures. Both funds hold stocks in 100 companies and consider earnings when deciding on what to buy.

Year-to-date, KNOW has outperformed the market, with a gain of 4.6 percent, almost double that of SPY. It has also delivered outperformance since its inception in December 2011 with a gain of 101 percent versus 82 percent for SPY.

6. Guggenheim Spin-Off ETF (CSD | C-56)

One way in which a company with multiple businesses or segments may try to unlock value for shareholders is through a spinoff. By spinning off one of these segments into its own separate company, the hope is that the new firm (and old) will be more focused on its core business.


The Guggenheim Spin-Off ETF (CSD), which has accumulated a solid $500 million in assets, holds stocks of "a group of companies that have recently been spun off from larger corporations and have the opportunity to better focus on their core market segment and outperform."

Since the start of the year, CSD has failed to deliver on its promise, with a mere 0.6 percent return. However, over the past five years, it's done well, with a 132 percent return, beating the S&P 500.

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