Tuesday, July 2, 2013

Recent volatility around the world has exposed some actionable opportunities in the predictive ETFGsm models.  When we look among Quant’s big movers this morning we see the SPDR DJ Global Dow Fund (DGT) rocketing 116 positions into 7th place.  Moves like that usually result from a large option trade moving the sentiment score which can prove fleeting but this move results from the more durable Fundamental side.

The essence of our models is their integration of modern behavioral finance with traditional fundamental analysis.  They look at the former through two lenses; the technical scores are based on various relative strength and moving average statistics while the sentiment scores are contrarian views on option activity, short interest and volatility.  DGT does OK on the technical but nothing special at a blended 67.7 and even worse on the sentiment side with a 48.1 reflecting a lack of interest in this fund which has lagged the market this year.  They combine for a Behavioral Score of 57.9 which ranks 369th out of the 726 funds getting Quant scores today.  However, as it has lagged, DGT has become relatively cheaper which helps its Fundamental Score. 

The four fundamental subcategories show some dispersion with its 64.2 P/E score suggesting valuation is better than most of its life since September 2000 but not spectacularly cheap.  Many of the dominant global brands which populate its constituent list have better looking balance sheets than income statements which we see in its Price/Book Value above 96, matched by its Price/Cash Flow score.  Today’s big move is a result of its largest dividend ever paid yesterday.  This dividend tends to be its highest of the year but yesterdays was the first to exceed the June 2008 dividend generating a yield score of 98.8, compared to yesterday’s 32.3.  The four combine for a Fundamental Score of 88.8 which leads to an 8.98 Green Diamond Reward Rating, its first above 8 since last fall which preceded a period of solid outperformance.

The fund tracks a committee based index with 150 constituents selected for future growth and rebalances to an equal weight every September.  Its pie charts show it covering plenty of bases with about 45% of AUM in the US and all sectors represented.  We hope DGT performs as well as the last time it got 8 Green Diamonds but keep an eye on its higher than average 5.83 Risk Rating.  And thanks for keeping an eye on ETF Globalsm

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