Breaking News
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

2 ETFs To Protect Your Portfolio From Earnings Season Volatility 

By Tezcan Gecgil/Investing.com ETFsJul 19, 2022 04:34AM ET
www.investing.com/analysis/2-etfs-to-protect-your-portfolio-from-earnings-season-volatility-200627266
2 ETFs To Protect Your Portfolio From Earnings Season Volatility 
By Tezcan Gecgil/Investing.com   |  Jul 19, 2022 04:34AM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
 
GE
-2.61%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
FTLS
-0.92%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
SCMWY
-1.43%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
RHHBY
-2.23%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
NSRGY
-0.23%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
EFAV
-0.85%
Add to/Remove from Watchlist
Add to Watchlist
Add Position

Position added successfully to:

Please name your holdings portfolio
 
  • Inflation worries continue to weigh on equity markets
  • Earnings season will likely increase volatility
  • ETFs offer investors ability to diversify

Earnings season has started with mixed quarterly reports, fueling more price swings in an already highly volatile year for equities. All against a backdrop of a 41-year-high in the Consumer Price Index and intensifying worries about the Fed's next rate hike.

The fear-gauge or the CBOE Volatility Index is up almost 47% since January at around 25.30.

VIX Daily Chart
VIX Daily Chart

In such a macroeconomic environment, many investors turn to exchange-traded funds (ETFs) to weather the storm. In the first half of 2022, US-listed ETFs saw net inflows of $294 billion, compared to $466 billion a year ago. In addition:

"Equity funds led the industry in June, taking in $34 billion—92% of all flows. US equity ETFs led within equities, taking in $24 billion."

Despite the sell-off on Wall Street, investors are willing to put their capital into ETFs. Financial services firm Brown Brothers Harriman suggests the wide range of asset classes and tactical strategies offered by ETFs make them increasingly popular in times of increased volatility.

Today, we discuss two ETFs to consider during the choppy days ahead of this earnings season.

1. First Trust Long/Short Equity ETF

  • Current Price: $48.17
  • 52-week range: $47.50 - $52.51
  • Expense ratio: 1.36% per year

Actively managed ETFs—in which fund managers make frequent trades to adapt portfolios to changing market conditions—have been gaining popularity amid this year's market rout. For instance, according to Trackinsight's Global ETF Survey 2022, over a third of professional investors who responded could consider allocating more capital to actively managed funds.

First on today's list is the First Trust Long/Short Equity ETF (NYSE:FTLS), an actively managed fund. It invests in long and short positions consisting of US-listed stocks of domestic and foreign companies and equity index futures contracts. In other words, it simultaneously bets on and against stocks to generate an above-average long-term total return.

FTLS Weekly Chart
FTLS Weekly Chart

FTLS started trading in September 2014, and net assets stand at $484.9 million. Currently, the ETF has both long and short exposure in all 11 sectors represented in the S&P 500 index. The net exposure is over 55%.

The fund's top long positions currently include Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Vertex Pharmaceuticals (NASDAQ:VRTX) and Walmart (NYSE:WMT).

Conversely, some of the leading short positions are in Fidelity National Information Services (NYSE:FIS); Verizon Communications (NYSE:VZ) ; and General Electric (NYSE:GE).

So far, in 2022, FTLS has declined around 7.6%. In comparison, the S&P 500 has dropped 19.6%.

However, it is also worth noting that the fund is one of the most expensive actively managed ETFs, with a total annual fee of 1.36%, including management fees, margin interest expense, and short sale fees. Nevertheless, we believe FTLS deserves further due diligence.

2. iShares MSCI EAFE Min Vol Factor ETF

  • Current Price: $62.91
  • 52-week range: $60.90 - $79.65
  • Dividend yield: 3.02%
  • Expense ratio: 0.20% per year

Low or minimum volatility ETFs allow investors to build defensiveness into portfolios and hedge against significant drawdowns. Due to the growing possibility of a US recession, many investors may consider global equities during the US earnings season.

Next up on our list is the iShares MSCI EAFE Min Vol Factor ETF (NYSE:EFAV). It invests in shares of international companies with lower volatility characteristics. The fund was first listed in October 2011.

EFAV Weekly Chart
EFAV Weekly Chart

EFAV, which tracks the MSCI EAFE Minimum Volatility Index, currently has 234 stocks. Health care names have the largest slice, with 18.9%. Then come consumer staples (15.7%), industrials (13.2%), and financials (12.6%).

Geographical allocations include Japan (27.4%), Switzerland (15.1%), the United Kingdom (10.6%), Hong Kong (7.9%), and France (6.1%). Meanwhile, the top 10 holdings account for 14% of $5.7 billion in net assets.

Leading names include the Switzerland-based health care heavyweights Nestle (OTC:NSRGY), Roche (OTC:RHHBY), and Novartis (NYSE:NVS) as well as telephone operator Swisscom (OTC:SCMWY). Next are the Danish diabetes care specialist Novo Nordisk (NYSE:NVO) (CSE:NOVOb) and the UK-based utility name National Grid (LON:NG).

EFAV has dropped roughly 18% since January and hit a 52-week low on June 14. Meanwhile, the current price supports a dividend yield of over 3%.

The fund's trailing price-to-earnings (P/E) and price-to-book (P/B) ratios stand at 16.87x and 1.92x, respectively. Readers looking to add ex-US low-volatility exposure to their portfolios could consider researching the fund further.

Disclaimer: On the date of publication, Tezcan Gecgil, Ph.D., did not have any positions in the securities mentioned in this article.

2 ETFs To Protect Your Portfolio From Earnings Season Volatility 
 

Related Articles

Tim Knight
Stay That Way By Tim Knight - Sep 20, 2022

I’ve mentioned the Health Care Select Sector ETF (NYSE:XLV) as a terrific short (by way of its diamond top). This is unfolding beautifully.

Kalen Houck
SPY: Lower Prices Ahead? By Kalen Houck - Sep 17, 2022

SPY had an interesting week as the sell-off continued. It faked many people out on Sept. 12 as it poked above the minor downtrend line we've had over the last few weeks. It looked...

2 ETFs To Protect Your Portfolio From Earnings Season Volatility 

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (4)
Timoteo Tubos
Timoteo Tubos Jul 19, 2022 11:36PM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Minimum Volatility? Just look at those charts...all over the place. Hahahahahahaaaaaa!
Igor Cendo
Igor Cendo Jul 19, 2022 10:44AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Why mine The wallet's still empty
Igor Cendo
Igor Cendo Jul 19, 2022 10:43AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
Realy 😎
محمد السودانی
محمد السودانی Jul 19, 2022 8:06AM ET
Saved. See Saved Items.
This comment has already been saved in your Saved Items
👍
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email