NorthCoast Asset Management stuck to its guns in July. The
commitment paid off as several top holdings for its ETF
retirement portfolios either set or moved within striking
distance of new 52-week highs.
A sound earnings season and better-than-expected economic
growth in Q2 provided support for domestically focused positions.
Encouraging economic data from the U.K. and China helped bolster
The NorthCoast team has been keeping a vigilant watch over its
holdings as these events have unfolded. "Our portfolios are
tactical," said Patrick Jamin, chief investment officer for
NorthCoast. "They are not set on a strategic path and blindly
stay the course. Every day we systematically analyze the
environment and adapt the portfolio to the latest market
Here are some highlights from the month:
Preferred Stock ETF (
) was among those positions hitting a new high. The No. 2 holding
of Tactical Income has risen steadily in 2014. "PFF has been a
consistent holding in our portfolio," Jamin said. "It has been
one of our top performers."
Shares of PFF edged slightly higher in July and have gained
11% so far this year when taking into account price appreciation
Jamin sees PFF as a natural holding for Tactical Income. "It's
a hybrid between debt and equity," he explained. "You are not
only positioned to benefit from the growth and appreciation of
equities, but also from a substantial yield."
PFF currently yields 6.6%.
IShares Core S&P 500
) marched to a new 52-week high in late July before pulling back
3%. Corporate earnings helped propel this ETF, which is the No. 2
holding of Diversified Core, Diversified Growth and Tactical
Growth. "Earnings have been a little bit better than
historically," Jamin said of Q2 earnings results. "The market is
keeping a watchful eye and is pretty sensitive to any misses, but
overall it has been a pretty decent earnings season."
IVV ended the month down 1% after sliding 2% Thursday.
IShares MSCI Emerging Markets ETF (
) also posted a 52-week high as the Shanghai Composite Index
recorded its largest monthly advance since December 2012. Chinese
equities have benefited recently from government stimulus efforts
and optimism among manufacturers. EEM does not account for more
than 5% of any one portfolio, but Jamin still views the ETF as
one of the vital components to manage the portfolios, which have
a global mandate. He points out that international holdings
represent about half of the weight of the MSCI All Country World
Index. "Being only invested in domestic assets will make you miss
out on a lot of opportunity," he said. "It's like having one hand
tied behind your back."
EEM shares ended July about 1% higher, after pulling back 3%
in the final three days of the month.
Jamin notes that emerging market equities are presently
offering an attractive value proposition. "Valuations are
becoming a bit stretched everywhere, but are more stretched in
the U.S. than in Europe and Japan and certainly even more so than
in emerging markets," he said.
IShares MSCI EAFE ETF (
) remained the top holding in three of the portfolios in July.
EFA fell 3% during the month as the eurozone waited for recent
European Central Bank stimulus measures to kick in. "Overall, our
indicators are positive on sentiment for the European region on a
macro level," Jamin said.