Hi cmg, US equity balance sheets are in relatively good shape.... many companies with Lots of cash on hand and they have also been taking advantage of super inexpensive funding costs through both debt issuance, where the yields they need to offer are historically low, and also with the strength of the market performance companies are also raising capital through secondary offering of equity etc.
In one respect you have a point in that companies that are stockpiling cash are not getting much of an interest rate return on the excess cash..... due to the very low rate environment.
It's a real mega theme we have developing where the super cheap Natural Gas prices here are really helping the US become more globally competive...... with our Natural Gas having a $3 handle and Europe have NG prices of say $14 and Japan being way up in the $18 area....... It gives The Country a huge competive advantage in so many industries.There are also positives in other
important U.S. sectors.
, the energy sector is going through somewhat of a renaissance, with U.S. imports
at 20-year lows and production at 15-year highs. There is also a gradual resurgence in industrials taking place, with many companies moving production to the U.S. for the first
time in decades, based on improving relative labor costs and
low natural gas costs.
I also agree with Jim’s observation on the
domestic industrial revitalization, principally driven by U.S.
energy production. Many people have read about the
breakthroughs and significant production growth coming from
horizontal drilling stimulated with fracking. This has led to an
explosion of U.S. natural gas production. In fact, some now
refer to the U.S. as the Saudi Arabia of natural gas. This has
a positive impact across many industries and has made
American manufacturing much more competitive. As
American and foreign companies start to relocate jobs back
to the U.S., this will have a multiplier effect on the economy
as more people gain employment and start to spend
incremental earnings
By Benzinga.com
A favorite tool of value investors, the price-to-cash-flow is a gauge of the market's beliefs in a company's future financial health. Uses as an indicator of relative value, the price-to-cash-flow ratio is arrived at by dividing the current share price by cash flow per share.
Indeed, stocks with low price-to-cash-flow ratios mean that cash flow is robust relative to the share price and these "stocks having a low ratio outperform those with a high price to cash flow ratio 78% of the time," according to Thomas Bulkowski.
As is the case with other valuation metrics, high and low price-to-cash-flow ratios are not indigenous to just one or two sectors. However, some industry groups are currently home to an impressive number of low price-to-cash-flow stocks, indicating that ETFs can be a useful tool for investors looking to exploit this valuation metric.
Vanguard Information Technology ETF /quotes/zigman/1485075/quotes/nls/vgt VGT +0.01% Not only is VGT now the technology ETF with the lowest expense ratio at just 0.14 percent per year, the fund is home to fair amount of low price-to-cash-flow stocks.
A screen for mega-cap names low price/free cash flow ratios turned up just three names, but two of those were Apple /quotes/zigman/68270/quotes/nls/aapl AAPL -0.02% and Microsoft /quotes/zigman/20493/quotes/nls/msft MSFT +0.02% , which combine for 24.3 percent of VGT's weight.
Other VGT holdings that fit the bill as low P/FCF names include Broadcom /quotes/zigman/66924/quotes/nls/brcm BRCM +0.82% , Symantec /quotes/zigman/78627/quotes/nls/symc SYMC +0.39% , Cisco /quotes/zigman/20039/quotes/nls/csco CSCO -0.58% , Dell /quotes/zigman/27952/quotes/nls/dell DELL -0.14% , Hewlett Packard /quotes/zigman/229301/quotes/nls/hpq HPQ -0.37% and Western Digital /quotes/zigman/10322511/quotes/nls/wdc WDC +0.80% . That is not the entire list of low P/FCF VGT constituents and that tells investors this ETF has ample exposure to companies that should be financially durable going forward.
iShares Dow Jones U.S. Healthcare Providers Index Fund /quotes/zigman/1495985/quotes/nls/ihf IHF +0.25% For the purposes of the screen used to find low price-to-cash-flow stocks, "low" was considered to be a ratio of 15 or lower. A fair amount of health insurance providers popped up. That underscores the notion that low P/FCF stocks outperform. Over the past year, iShares Dow Jones U.S. Healthcare Providers Index Fund, an ETF often overlooked in the health care sector ETF conversation, has gained more than 19 percent.
Dow component and IHF's largest holding UnitedHealth /quotes/zigman/258846/quotes/nls/unh UNH -0.25% , IHF's largest holding, and WellPoint /quotes/zigman/362231/quotes/nls/wlp WLP +1.09% , the ETF's third-largest holding, both popped up in the screen. Those two names combine for over 19 percent of the IHF's weight.
Also appearing in the screen were Express Scripts /quotes/zigman/9438326/quotes/nls/esrx ESRX +0.20% , Cigna /quotes/zigman/151652/quotes/nls/cig CIG -0.31% , Aetna /quotes/zigman/272706/quotes/nls/aet AET +0.43% and Humana /quotes/zigman/229688/quotes/nls/hum HUM +0.44% . That quartet combines for over 27 percent of IHF's weight.
SPDR S&P Insurance ETF /quotes/zigman/478272/quotes/nls/kie KIE +0.53% Health insurance firms are typically viewed as a sub-industry of the health care sector, but even with that, there are plenty of financial services and bank stocks that currently trade with low P/FCF ratios. Excluding the traditional banking names, which include PNC Financial /quotes/zigman/238602/quotes/nls/pnc PNC +0.78% , US Bancorp /quotes/zigman/278238/quotes/nls/usb USB -0.35% and Wells Fargo /quotes/zigman/239557/quotes/nls/wfc WFC +0.30% , we opted for less volatile insurance providers.
By that metric, the SPDR S&P Insurance ETF has a beta of 0.99 against the S&P 500, according to State Street data. That compares favorably with a beta of 1.23 on the Financial Select Sector SPDR /quotes/zigman/246222/quotes/nls/xlf XLF +0.27% .
KIE is nearly an equal-weight ETF and its largest holding receives a weight of just 2.83 percent. However, plenty of the ETF's 46 holdings appeared on our large-cap screen for low P/FCF stocks. That list includes Ace /quotes/zigman/519506/quotes/nls/ace ACE +0.64% , Chubb /quotes/zigman/222187/quotes/nls/cb CB +0.53% , Aflac /quotes/zigman/216779/quotes/nls/afl AFL -0.22% , Hartford Financial /quotes/zigman/180454/quotes/nls/hig HIG +0.39% , MetLife /quotes/zigman/252112/quotes/nls/met MET +1.24% , Prudential Financial /quotes/zigman/294774/quotes/nls/pru PRU -0.30% and Dow component Travelers /quotes/zigman/455344/quotes/nls/trv TRV +0.46% . The result is KIE has surged nearly 29 percent in the past year.
For more on ETFs, click here.
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