Thursday, February 7, 2013

There was very little movement in the overnight rankings but one fund returns to the top 10 and brings with it another Red Diamond Risk Rating below 4. We last wrote about the iShares Dow Jones U.S. Technology Index Fund (IYW) when it got as high as 8th place on January 11th. It has lagged the S&P 500 since then as it has been weighed down by almost 18% of AUM in Apple Inc. It fell down to 94th place but got back into the top 10 on January 29th when it equaled today’s 7th place rank and it has begun to outperform since that recent date.

When we highlighted it on January 11th we said it isn't often that we wrote about a fund with a 27.9 technical score, today’s is only slightly better at 29.2. As it was then, the flip side of that is a very high Fundamental Score of 97.2. Apple has caught a bid over the last couple of weeks and so has IYW, a look at the other top holdings shows a list of fortress balance sheets in the tech space. IBM, Microsoft, Google and Oracle round out the top 5 holdings and nobody thinks these companies are going away if we go into another recession. Despite those behemoths, someone thinks these names could be vulnerable as the fund gets a decent 76.4 sentiment score driven by high short interest and low implied volatility which are both scored in a contrarian way.

As more and more Wall Street greybeards sound cautionary alarms, the names that have already taken it on the chin could be good places to hide. Apple’s 35% decline and single digit P/E would put it in that category. IYW saw a 15% decline from September’s high to November’s low and has gotten about half of that back. Maybe Quant thinks it’s going to get the rest back in coming weeks or isn’t going to lose much more if the market does. Its low 3.9 risk rating comes mostly from the structure and sponsor of the fund whereas its volatility and deviation scores fall more in the middle, so its 1.07 beta could render it vulnerable. We like to say that Quant moves in mysterious ways but it has been very clear this week preferring the lower risk names for now. We’re glad you prefer us and we appreciate the time you spend here, thanks for reading.

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