29 year old Edward Snowden says the US government has a program that enabled him to secretly wiretap anyone he wanted, even the President of the United States.  Such government power may not surprise you but did you know that Mr. Snowden isn’t even a government employee?  The high school dropout with such awesome power is an employee of Booz Allen Hamilton, an information technology company giving new meaning to its sector.  If you are wondering how yesterday’s 2.5% drop in the company’s stock price may have impacted your ETFs, enter its symbol, BAH, in the upper right search box.

The answer is probably not too much.  Underneath the data box and interactive price chart you will see the equity’s ETP Grey Market Summary showing that 0.57% of BAH’s market capitalization is exposed to exchange traded products.  We say exposed because some of the 42 listed products track indices of which it is a member without actually holding the equity.  They include leveraged and inverse funds that use futures and swaps to achieve their stated exposure.  Investors who believe those derivatives ultimately get hedged with the underlying like to look at our implied exposure among those products calculated to the position amount based on its index weight, fund size and leverage factor.

BAH is somewhat unique in that its $2.44 billion market cap straddles different segmentations.  Small, mid and large cap funds all appear on the list of 42 at the bottom of the report, albeit with mostly low weights.  Larger exposures can be found among the constituents of the S&P 500 and we have compiled a concise list just for that that group.  Found under the Research button, the S&P Grey Market Report lists all 500 companies in one place, sortable by any column.  Clicking on a symbol brings up that company’s individual Grey Market Report which is available for any equity.

You can express your view of Mr. Snowden as a hero or traitor at the ballot box but in the meantime you can use the power of Big Data to identify those equity ETFs that are most likely to outperform the rest.  The ETF Global^sm Quant and Green Diamond Reward models have consistently done just that and unlike other ratings providers, we don’t keep their performance secret.  We will highlight each monthly performance report when they are published in coming days, thanks for checking in today.

Two hot areas in 2013 that have not caught much of Quant’s affection have been Japan and financials.  The former has proven beneficial but financials have continued to outperform the S&P 500.  The Big Daddy financial ETF, the SPDR Financial Select Sector Fund (XLF), has begun to score better in June and is at 8^th place to start this week.  Some of its outperformance stems from its 8.55% weighting in Berkshire Hathaway and its insurance positions but having almost 30% in the big four US banks hasn’t hurt performance either.

There has been some recent press about the quality of bank earnings and while we have seen XLF’s P/E score rise as the ratio has come down, its other fundamental sub scores have not risen as much.  Its overall Fundamental Score of 65.4 is good enough to get it in the top 10 today because its Behavioral Score is a very solid 81.1.  All three technical sub categories show strength over the short, intermediate and long term at close to 80 for each and the three sentiment sub categories are similarly strong led by a 99.8 short interest score.  Its substantial size, liquidity and sponsor combine for an 80.3 Quality Score but the financial sector is not Quant’s favorite, leading to a middling 49.1 Global Theme Score. Those latter two categories do not get factored into its 8.11 Green Diamond Reward Rating because some of their components are part of the ETFG^sm risk model.  Even considering 2008, XLF gets a low 2.16 Red Diamond Risk Rating, which is more a reflection of its gradual and steady recovery over the last four years.

XLF’s 83 constituents are not all banks and insurance companies as brokers, REITs and consumer finance make up another 30% of AUM with other colorful slices of its pie charts too.  We’ll let the analysts and columnists debate earnings quality and when the Fed will turn the tables on these companies but nobody thinks Bernanke is going to send the industries he oversees into cold turkey withdrawal spasms.  It may be too easy, but like the late Marty Zweig used to say, “Don’t fight the Fed”.  Quant is finally dipping its cup into the punchbowl suggesting XLF will continue to outperform over coming months.  Thanks for checking in with ETF Global^sm this morning and good luck this week.

They say today’s job report has to be just right, too hot and the Fed will take the needle out of the market’s arm and too cold will expose monetary policy as pushing on a string, call it the inverse Tepper trade.  Quant suggests Goldilocks is going to find that perfect job as 8 of today’s top 10 are US funds with Switzerland’s EWL and the gold miners in GDX rounding out the group.  It could be a flight to quality ahead of a storm but we see a growth bias in today’s top selections with technology, energy, mid caps and small caps appearing atop the Quant page.  Most are familiar to this space but we have not written about the 7^th place Powershares Fundamental Pure Mid Growth Portfolio (PXMG).

The fund tracks a fundamentally weighted Research Affiliates index and its substantial annual turnover suggests some smart beta component of the index strategy.  So far in 2013 it has outperformed the S&P 500 during rallies but given much back in the few minor selloffs seen in February, April and the last few weeks.  The full breakout of its low 3.86 Red Diamond Risk Rating shows a nice spread between a 5.34 volatility score and a 3.79 deviation score so if you think the market is ready to rally again this could be a good way to ride it.  That choppy performance hasn’t helped its low Behavioral Score at 52.5 but it scores very well on the other side with a 97.8 Fundamental Score.  The colorful pie charts on its Tear Sheet resemble Elvis’ morning medications with every sector but utilities represented and three pages of industry exposures within its 107 constituents.

Today is the second time this year that PXMG has made the top 10 and its 9^th place rank on April 18^th proved to be a good entry point.  Getting back up top may signal a resumption of the rally or its strong fundamentals may be a safe harbor in case Goldilocks doesn’t get that job or if it’s only part time flipping burgers.  Maybe the small and mid caps are scoring better because they are less susceptible to the currency volatility rattling world markets.  We’ll let you decide but whether you think we are heading up or down, take a look at PXMG for your equity allocation.  Thanks for taking a look at ETF Global^sm Daily Perspectives and have a nice weekend.

If you don’t know the significance of June 6th, ask an old man.  If he’s in his 90s he will tell you about the Normandy Landings and how it marked the birth of the US superpower.  America’s technology industry is most responsible for our modern superpower status and two tech funds dominate the Quant rankings this morning.   We call it India-Yankee-Whisky, the 1^st place iShares Dow Jones U.S. Technology Index Fund (IYW), and today’s 10 Green Diamond fund.  In 2^nd place is the Vanguard Information Technology Fund (VGT) with a 9.33 Green Diamond Reward Rating, and like IYW, a low Red Diamond Risk Rating below 4.

Both funds rank so high thanks to very strong Fundamental Scores in the 90’s as the technology sector is the rare one where fundamentals have outpaced price gains.  Part of the reason is their price gains have trailed the monster rally this year although both are leading the S&P 500 on the last leg up since April 19^th, as well as the current leg down since May 21^st.  That helps their technical scores which each come in around 70.  Their weakest scores result from the common knowledge that these finest companies in the world are also among the world’s best values, leading to identical but middling sentiment scores of 53.1.

The 2^nd place VGT does better on the Quality Score due to its 82.2 diversification score and a look at its Tear Sheet explains why.  Its 416 constituents with Apple weighted at 13.64% score better than IYW’s 136 with Apple weighing 16.44%.  Beyond that you might be more interested in the Industry Group exposure showing VGT with 52.2% of AUM in software and services and 34% in hardware while IYW has less software and more hardware. The popular ETFG^sm pie charts even give you detail down to the sub-industry exposures.

For those lamenting that America doesn’t make things anymore, these funds remind us that America makes the best technology companies that make the things that make our lives easier and our workers more productive.  Many voices point to Big Data leading the next leg of the world’s industrial development and the companies in either fund will lead that charge.  Mark us as believers as we see the power of quantitative analysis to predict equity outperformance.  69 years since D Day, we thank the greatest generation that made America so powerful and we thank you for recognizing the power of Big Data here at ETF Global.

Buongiorno!  As much of Europe looks like Venice we see the iShares MSCI Italy Index Fund (EWI) in 10^th place, its highest position since last summer and running through the ranks like a Ferrari.  Occupying  deep waters just a couple of weeks ago, the fund has achieved a 70.4 Quant Score today jumping more than 15 points in 10 days thanks to its 80.9 Behavioral Score.  A move like that is usually attributable to a spike in option activity and while its put/call score is very elevated at 95.8, so are its other sentiment indicators.  The technical score on this prima donna has caught our eye though as it has improved from 24.4 last month to today’s 71.1.

You don’t have to know about Fibonacci to appreciate EWI’s chart.  Matching its 2009 low below $10 per share last summer, the fund moved up to almost $15 in January then gave back about 60% of that move to early April’s low of 11.59.  Getting back up to yesterday’s close of 13.46 has boosted its short and intermediate term technical scores into the 70s and its long term score up to a decent 65.8.  Its current price is now above what bears could have seen as a left shoulder from last September.  Quant’s technical scores are its most complex algorithms calculating several different relative strength and momentum indicators in each time frame.  The strength in January also saw good technical scores that turned down quickly in early February as the fund began its 20% correction.  Rallying almost 18% from the April low still leaves plenty of room to run to that January high which is still less than half of its $36 all time high at 2007’s double top.

EWI’s 26 holdings have three quarters of AUM concentrated in financials, industrials and energy companies that combine to give it a respectable 63.2 Fundamental Score contributing to its 8.66 Green Diamond Reward Rating.  It’s 4.18 Red Diamond Risk Rating is higher than most top rankers that average below 4 again but is lower than today’s all equity ETF average of 4.53.  As you paint your masterpiece portfolios, let Quant be your Gondolier through the overly liquefied world markets and consider EWI as a tasty espresso on this lovely primavera day that would inspire Botticelli. Grazie e arrivederci.

Michael Douglas reminds us that risks can lie where we expected safety and come in various forms.  Only ETF Global^sm breaks out Risk and Reward Ratings and while our predictive Green Diamond Reward Ratings are exclusive to equity ETFs, all exchange traded products get ETFG^sm Red Diamond Risk Ratings that you can see on their own page under the Analytics button.  Beyond the composite rating found on our tear sheets, we score all products in six separate risk categories which are each a proprietary composite of industry standard metrics.

Half of the Risk Rating is weighted towards price risks such as volatility, deviation and the home country of a fund’s constituents.  The other half addresses the integrity of a product using metrics relating to its structure, liquidity and efficiency.  The bottom of the page shows that the price risk scores are weighted towards volatility and deviation which include our proprietary ETFG Implied Volatility Score and emphasize downside deviation over standard deviation.  Country Risk is an example of how we break out certain components from our Quant model in our Diamond models.  On the integrity side, structure addresses how a product is comprised, using swaps for example is more risky than futures and concentrated funds carry higher risk than more diversified ones.  The sponsor’s strength is also incorporated in structure risk.  Liquidity comprises various trading metrics like bid/ask spreads and average volume as well as our proprietary Liquidation Watch List.  Lastly, efficiency looks at tracking error and expense ratio.

It being Tuesday, you might want to indulge your more risky proclivities.  Clicking twice to sort the volatility column in descending order will display products to get the best ride out of a rally.  If you are the straight and narrow type, click deviation once to find those products with the lowest deviation risk or click any column once or twice to sort in either order.  Entering a term in the search box will bring up all products that contain it in their name.  In a market where bad news is good it is more important than usual to keep a close eye on the risks in your portfolios.   Quant’s top 10 today have Risk Ratings ranging from Taiwan’s 10^th place EWT on the low end scoring 2.59 to 6^th place GDX carrying the highest risk with 5.41.  As always send any questions to support@etfg.com.

Two European funds have moved into the top 10 to begin the week and both have been here before.  The 7^th place iShares MSCI Switzerland Index Fund (EWL) has seen several trips to the elite ranks in 2013 and has largely kept pace with the S&P 500 until recent weeks.  The 5^th place iShares MSCI France Index Fund (EWQ) has not ranked or performed as well until late April when it broke back into the top 10 and began to outperform.  The closely ranked funds track countries that share a border differentiating two distinct economies.

Switzerland is among the rare European countries with a growing economy which is reflected in EWL’s strong 79.2 Fundamental Score.  On the Behavioral side we see decent mid 60s scores but the fund’s lagging performance since early May has brought down its short term technical score even as its long term has improved.  That suggests the 4% correction since early May could be providing an attractive entry point.  Large companies in the heath care, consumer staples and financial sectors drive the fund’s 9.01 Green Diamond Reward Rating with only 2.11 Red Risk Diamonds.

They speak French in the western Swiss cantons but crossing the border will bring you to the poster child of too big to fail European states where recent efforts to bring fiscal balance to France have not met their objectives.  EWQ’s lagging performance this year reflects that but outperforming the market since mid April has helped the fund achieve a high Behavioral Score of 79.  More than the technicals though, that Behavioral Score is driven by a high 88.7 sentiment score suggesting the French shorts are overly exposed.  EWQ’s constituents are also large recognizable companies with financials and industrials comprising almost 40% of AUM.  It all combines for an also attractive risk reward spread with an 8.94 Reward Rating and a lower than average 3.54 Risk Rating.

Both funds have Total Quant Scores above 70 which we see in 11 funds today.  That number is about half the usual level but twice the recent levels as corrections in recent weeks have improved fundamentals.  Other European funds also saw moves up in their rankings over the weekend which could be a result of Friday’s late day selloff in the US or a more enduring move.  We will monitor the potential shift and thank you for monitoring ETF Global^sm.  Have a good week.