We often say our models will not pick all the winners, some sectors or regions that do not score well can rally anyway. One such sector this year has been financials but we have been glad in recent days to see the PowerShares KBW Insurance Portfolio Fund (KBWI) ranking as high as today’s 5th place. Glad to have a financial fund in our elite ranks and glad to see that KBW name living on after its acquisition by Stifel Financial, another good guy firm. The fund jumped from 106th place to 7th last Friday and we were not sure if it was a mistake. Three days holding the 10 Green Diamond distinction allayed that concern and it still gets an impressive 9.69 Green Diamond Reward Rating today.
Many financial funds are not scoring well in our models because despite recent outperformance, their charts still bear the bruises of the 2008 crash, as do their fundamental metrics. KBWI’s young year and a half age unburdens it from those comparisons. That jump last Friday is something that happens during earnings season as our models pick up and process the results, KBWI had a composite P/E over 13 before earnings season and it is less than 10 now. Such a big drop, and the fund’s short life, drove Quant’s PE and PB scores from 45.6 to 97 in each case last Friday where they remain today. Technical scores were already high as its mountain chart has yet to see a meaningful valley but sentiment scores are restrained by the lack of options and low trading volume. That low volume need not be a worry as the 24 constituents you can see on its tear sheet are plenty liquid, if you need to buy a block your PowerShares representative should be able to arrange appropriate liquidity.
Although some risk measures go into the high 72.5 Quant score, the separate Red Diamond Risk model rates KBWI at 6.41, among the highest 13% of all equity ETFs. That is driven by its 9.29 deviation and 8.54 liquidity scores, where the former has been upwardly biased. So if you are bullish the high risk is the favorable kind but if you are bearish this may not be the fund to outperform a falling market. That is for you to decide, we are here to support that decision and since the suits don’t give us good enough spell check let us correct yesterday’s error, the email is firstname.lastname@example.org.