NorthCoast ETF Portfolios Remain Resolute In July

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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 foreign ETFs.

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 conditions."


Here are some highlights from the month:

Hybrid Versatility

IShares U.S. Preferred Stock ETF ( PFF ) 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 and dividends.

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 ETF ( IVV ) 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.

Value Play

IShares MSCI Emerging Markets ETF ( EEM ) 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 ( EFA ) 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.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.




This article appears in: Investing , ETFs

Referenced Stocks: PFF , IVV , EEM , EFA

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