NorthCoast ETF Top Holdings Edge Higher In November


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NorthCoast Asset Management stood pat on its ETF retirement portfolios in November.

An unexpected interest rate cut by the European Central Bank brought its benchmark rate to a record low. The S&P 500 witnessed new heights as Federal Reserve chair nominee Janet Yellen defended the central bank's easy-money policies.

These events were at center stage as ETF retirement portfolios of NorthCoast maintained sizable stakes in U.S. and European equities.

Tapered Expectations

The Tactical Income portfolio stayed in position to weather the impact of an end to quantitative easing.

"There will be several stages with still undetermined horizons," Patrick Jamin, NorthCoast's chief investment officer, said of the potential for a tapering of the Fed's bond-buying program and the higher interest rates that's expected to bring. "It is difficult to envision a scenario where traditional fixed income fares well, especially long-duration Treasuries. This is why our portfolios are positioned away from those holdings."

IShares iBoxx $ High Yield Corporate Bond ( HYG ) remained the top holding of the portfolio in November. HYG notched a 0.5% gain during the month. Its dividend yield sits at 6.1%.

IShares Core S&P 500 ( IVV ) rose 2.9% in November as the S&P 500 hit a new record high. The NorthCoast team expects the stock market to climb at a slower pace in the months ahead. "Our methodology relies not only on valuation metrics, which are currently indicating an overvalued market, but also on technicals, sentiment and macroeconomic data," Jamin said. "Once we incorporate those other metrics, we can make a more supportive case for the equity markets."

Small- and midcap plays also continued to climb higher last month.IShares Core S&P Small-Cap ( IJR ) andiShares Core S&P Mid-Cap ( IJH ) gained 4.5% and 1.5% respectively. The funds are up 39.4% and 29.6% so far this year.

IShares MSCI EAFE ( EFA ) held on to its top billing in three of the four portfolios. EFA ticked up by 0.5% in November.

More Upside Seen

Jamin sees more upside potential. "The eurozone can be qualified as being in overvalued territory, but to a lesser extent than its U.S. brethren," he said. "Again here, we assess the prospects of the international equity markets by relying on data with a similar methodology as in the U.S. Overall, our assessment points to more appreciation ahead and more than in the U.S."

The NorthCoast team kept a significant position iniShares MSCI Emerging Markets (EEM) for its Tactical Growth portfolio. Shares of EEM slid 0.3% during the month.

Jamin says emerging market stocks are priced cheaper than the S&P 500. "Valuation metrics tend to favor China and the emerging markets, but we have to account for other factors which justify some of that premium," he said. "There is more perceived risk in those markets. After accounting for those risks we see emerging markets on par with other equity regions and China as offering a slightly better risk-reward."

The portfolios have been designed to keep risk in check and hold up under varying conditions. "We rely on data to obtain a market outlook and select holdings that are the most appropriate for the environment," Jamin said. "Because alternative scenarios can develop, we take into account the most likely scenario, but also the smaller probability of some more extreme scenarios when building a portfolio."

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

This article appears in: Investing ETFs
Referenced Stocks: EFA , HYG , IJH , IJR , IVV

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