NorthCoast ETF Retirement Portfolios Tweak Some Allocations

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Patrick Jamin has a big-picture focus. After capping a banner year in 2013, the chief investment officer for NorthCoast Asset Management tweaked allocation to some of the four NorthCoast ETF Retirement Portfolios, while holding others steady.

In January, some of Jamin's big winners from 2013 faced short-term resistance. Valuation concerns for domestic stocks and volatility in emerging markets have tested investor resolve. Jamin is up for the challenge as his holdings have remained largely intact. Here are highlights from the first month of 2014:

IShares Core S&P 500 ETF ( IVV ) remained a staple NorthCoast holding in January as attention shifted to corporate earnings results.

Nearly 80% of companies that have reported have topped analysts' predictions. "It is still relatively early in the earnings season," Jamin said. "The average reaction of the stock price of companies on the day of their earnings reports has been slightly below that of the market on those days. This trend is suggesting a relative disappointment of investors."

IVV has pulled back to the tune of 5% so far this year.

IShares MSCI EAFE ( EFA ) held on as the top holding in three of the four portfolios. In Tactical Growth, the position in iShares Europe ( IEV ) was bumped up 6% to 11% and in iShares MSCI EAFE 5% to 30%. Both funds are rich with U.K. stocks. "We see two main risks in Europe at the moment," he said. "The first is the health of the banking system, which is still undergoing an asset-quality assessment from the European Central Bank, and the second is the end of several bailout programs."

These risks have not dampened Jamin's favorable outlook for the region as U.K. consumer confidence rose to its highest level since 2007 in January. "The data is pointing to a recovery with these readings," he said. "The ECB is expected to remain supportive, with room to further stimulate growth by loosening monetary policy."

Shares of both EFA and IEV posted declines of 5% during the month.

IShares MSCI Emerging Markets ( EEM ) experienced head winds in January. A report that Chinese manufacturing might contract for the first time in six months highlighted concerns about growth. "We have been surprised by the weaker-than-expected Chinese economic data," Jamin said. "There has been a substantial outflow from emerging market equity funds this year." EEM fell 9% during the month.

Tactical Growth's position in Barclays Short Treasury was slashed by 13% to 8%.

IShares iBoxx $ High Yield Corporate Bond ( HYG ) continued to anchor the Tactical Income portfolio as its top holding. HYG ticked up 0.4% in January. "While we have stayed away from mid- and long-term government bonds, we see some opportunities in the credit sectors where higher yield and lower durations can be attractive," Jamin said.

Jamin also likes the prospects of iShares National AMT-Free Muni Bond (MUB), up 3% this year and a new addition to Tactical Income. "Beyond the preferential tax treatment, it can benefit from improvements in the fundamentals of the municipal markets as well as rising taxes," he said.

Positions in iShares Barclays MBS Bond and 1-3 Year Credit Bond were trimmed by 5% each.

IShares U.S. Preferred Stock (PFF), up 3% this year, has surged out of the blocks for Tactical Income. "In the current environment of stretched equity valuations and Fed tapering, we believe PFF sits at the sweet spot between appreciation potential and yield," 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: EEM , EFA , HYG , IEV , IVV

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