Holdings in NorthCoast Asset Management's ETF
in April stayed largely unchanged from March, and the commitment
paid off. The S&P 500 recovered from a midmonth pullback as
earnings season peaked. Overseas, European and emerging-market
plays benefited from improving fortunes in those regions.
Here are highlights from the month:
The Tactical Income portfolio saw widespread gains in
April.IShares International Select Dividend ETF (
) in particular was a cut above. "It uses a methodology that
selects stocks not only on dividend yield but also on dividend
growth rate, maximum payout ratio and liquidity," said Patrick
Jamin, chief investment officer for NorthCoast. "We believe this
combination of characteristics to be a superior approach to
dividend investing rather than simply screening for high
dividends, especially in an environment where rising interest
rates becomes a more pressing risk."
Shares of IDV climbed 3% during the month.
IShares iBoxx $
High Yield Corporate Bond ETF (
) held on to the top slot for Tactical Income. Jamin has an eye
on valuation risk with yields near all-time lows. "This bull
market can continue with tighter spreads as high yield still
provides better yields than alternatives," he said. "However,
more volatility should be expected as there is less margin of
safety at these spread levels."
HYG currently pays a yield of 5.9%.
IShares Core S&P 500
) has been a mainstay holding in three of the four portfolios. In
April, it was able to shake off a mixed bag of earnings results.
"Companies meeting expectations experienced a mild uptick, while
misses were severely punished," Jamin said. "This effect
partially explained a noticeable rotation out of momentum and
small caps, and into value and large caps."
Shares of IVV ended the month up 1%.
Promising trends across the pond have boosted returns of ETFs
with heavy exposure to Europe. "The eurozone remains attractive,"
Jamin said. "The weakening of the euro vs. the dollar is helping
rebalance the economic competitiveness of the eurozone. Also,
minutes from the Bank of England's monetary-policy committee
meeting this month did not show any signs of tightening, boding
well for risky assets."
MSCI EAFE ETF (
Europe ETF (
) notched respective gains of 2% and 3%.
Jamin says that leaders in Europe will continue to battle the
risk of deflation in the near term. "Thankfully, this threat has
been well identified by European policymakers," he said. "They
are focusing on generating inflation and stimulating the economy
with lenient monetary policies."
IShares MSCI Emerging Markets ETF (EEM) held on to most of its
gain from March. The holding has staged an impressive comeback
against strong head winds. "EEM has almost fully recovered from
an 11% trough this year," Jamin said. "This has happened despite
currency volatility in Turkey and Argentina, a potential slowdown
in China and political instability in Russia. Our main point of
comfort has been a very attractive valuation multiple entry
Jamin expects the path ahead to be anything but easy. He notes
that rising tension in Ukraine and political turmoil in Thailand
and Slovenia may add to investor anxiety. Jamin is also
monitoring growth concerns in China. "Recent economic releases
out of China have been disappointing," he said. "There is some
evidence of slowdown and lower inflation."
A 1% return in April now leaves EEM only 1% in the red for the